Part 1: Agreement

Question 1

How can a contract be discharged by agreement?

Answer 1

The contract will contain termination or break clauses that outline precisely when and how parties can discharge agreement.

Common for commercial contracts.

If not termination clauses - parties can instead create binding agreement that allowed them to terminate contract.

This is usually called Deed of Release - where the party who has completed all obligations agrees to release other party.

Another way, is a contractual termination.

Question 2

In relation to discharge by agreement, how can a contract be discharged by contractual termination?

Answer 2

If there is no break clause or parties do not execute a deed - the contract can be terminate by creating a contractual agreement.

The parties will make a new contract that is related but different to the original (legally binding and must have consideration).

CASE: British Russian Gazette v Newspaper
The accord and satisfaction principles established created.
An agreed contractual termination is valid if there is accord and satisfaction

Accord - new agreement
- must be complete and certain in terms
- must be true accord: parties must both genuinely intend to discharge contract by mutual agreement
- good practise to be in writing but not legal requirement

Satisfaction - consideration
- depends on outstanding obligations
- if both parties have outstanding obligations - the promise of each party not to enforce these is good consideration for discharge agreement.
- if only one party has outstanding obligations - fresh obligations required (either executory or executed)

CASE: Outstanding payment of £500. £300 was offered as “take it or leave it”.
Held that the remainder must be paid as they were already entitled to it. Different outcome if something new had been offered (in addition or different form)

All rights to sue under original agreement are lost (unless termination agreement reserves them but this is rare)