Contract - Discharge by Agreement

Question 1

What is discharge by agreement?

Answer 1

• Parties to the agreement select to discharge the agreement.

Question 2

What difficulties arise with discharge by agreement?

Answer 2

• Consideration must apply as it does in formation of contract.
• In executory contracts, the release of both parties from their obligations is consideration.
• In partially executed contracts, discharge must be under seal or with “accord and satisfaction” consideration on the part of the person seeking to be released.
• Complex rules for contracts required to be in writing create fine lines to create valid variations, rescissions, and waiver.

Question 3

What forms of can discharge take?

Answer 3

• release
• accord and satisfaction
• rescission
• variation
• waiver
• provisions within the contract

Question 4

Release

Answer 4

• either under seal (no consideration) or under ‘accord and satisfaction’.
• general release only covers known facts at the time of release.

Question 5

Accord and Satisfaction

Answer 5

• discharge for consideration other than performance of the contract.
• accord is the agreement for discharge.
• satisfaction is the consideration which makes the agreement operative.

Question 6

Accord and Satisfaction - Promissory Estoppel

Answer 6

• currently seem to suspend but not totally extinguish existing rights.
• in particular this applies to debts.

Question 7

Accord and Satisfaction - Executory Satisfaction

Answer 7

• executory satisfaction discharges the prior obligations.

- exceptions are Pinnel’s case, agreements with creditors, and payments by a third party.

Question 8

Rescission Forms

Answer 8

• Agreement: parties abandon rights under contract thereby creating consideration.
• Abandonment
• Subsequent agreement superceding the prior agreement.
• • Must be differentiated from variation or waiver.

Question 9

Variation

Answer 9

• must be a variation of terms rather than an abrogation of an existing contract (rescission).
• consideration must be present for variation to be effective.

Question 10

Waiver

Answer 10

• the party, who by conduct or agreement, agrees to forbear from enforcing the mode or time of performance.
• a means to avoid the obligation to provide consideration for variations in contract.
• can result in promissory estoppel against the forbearing party if a time period is not specified or notice not given for expected performance of the contract.
• when waiver represents an election under the contract, it cannot be altered in the future.

Question 11

Variation v Waiver

Answer 11

• variation represents a permanent willingness of the parties to alter the contract.
• waiver represents a willingness to forbear but reserves the rights stated in the contract.