Discharge by Agreement Flashcards
What are the two ways in which a contract can be discharged by agreement?
(a) By a subsequent binding contract between the parties; or
(b) by operation of a term of the original contract.
What 2 elements are required for a valid subsequent binding contract?
1) accord; +
2) satisfaction
agreement that obligation will be released (‘accord’)
consideration for the promise to release a party from the obligation (‘satisfaction’).
Example:
where both parties have obligations which remain unperformed, contract may be discharged by mutual waiver - a new contract which each party agrees to waive their rights under the old contract in consideration for being released from their obligations under the old contract
How can the party to whom obligation is owed avoid any difficulties by the other party claiming no consideration has been made?
party to whom the obligation is owed may release other party by subsequent agreement under deed
= avoids need for consideration altogether bc a gratuitous promise (one without any consideration) is enforceable if made in a contract in the form of a deed. (it removes need for both accord + satisfaction)
What is another way of avoiding difficulties by the other party claiming no consideration has been made?
party to whom the obligation is owed may provide consideration by agreeing w other party to accept something different in place of the former obligation - eg accelerated payment of a sum payable in instalments
What happens if there is both accord + consideration?
Former obligation = discharged
What are the two types of terms that provide for the discharge of obligations arising from the contract?
1) condition precedent
2) condition subsequent.
What is a condition precedent?
= a condition which must be satisfied before any rights come into existence.
contract is suspended until condition is satisfied.
What happens if a condition precedent is not fulfilled?
= no true discharge because the rights + obligations under the contract were contingent upon an event which did not occur
What is a condition subsequent?
= a term providing for the termination of the contract + discharge of obligations outstanding under the contract, in the event of a specified occurrence.
Can you provide an example of how a condition subsequent works?
a term which provides the right for one or both parties to end the agreement by giving notice to the other party. If the condition transpires (the giving of notice), then the contract comes to an end.
A more sophisticated version of the same idea would be a clause which entitles a party to give notice to terminate the contract if the other party commits a breach of contract of a specified seriousness.
Another common example is the inclusion of a termination clause specifying that the contract will come to an end upon the occurrence of specified events, such when a particular date occurs.
In appropriate cases the court will even imply a term to empower a party to determine the contract on giving reasonable notice to the other party.
