DISCHARGE OF CONTRACTS 18. A contract is discharged when the legal relations which it created have ceased to exist.' The ways in which the contractual tie may be loosed and the parties wholly freed from their rights and liabilities under the contract are, by mutual agreement; by operation of law; by performance; or, there may be a breach of contract." BY AGREEMENT OF THE PARTIES WAIVER AND RESCISSION 19. While a contract is still executory, the parties may, by mutual agreement, annul the same or abandon performance thereof; they have the same right to unmake as they had originally to make the agreement. To annul or set aside a contract fairly made requires the consent of both parties to it; there must be the same meeting of minds, the same agreement to modify or abandon it that was necessary to make it." An agreement to abandon or terminate a contract may be evidenced by acts as well as by words. If the conduct of the parties be such as to show a mutual understanding that the contract is dissolved, the contract is destroyed, and all rights under it fall with it." An executory written contract may be rescinded or abandoned by parol, and the agreement to rescind may be inferred from the acts and declarations of the parties, but such acts must be clear and unequivocal.* Generally, where one party to a contract assumes to renounce the contract, that is, by anticipation refuses to perform it, he thereby, so far as he is concerned, declares 1 Am. & Eng. Encyc. Law (1st Ed.), Vol. 3, p. 889. 2 Ans. Cont. (8th Ed.), p. 332. 39 Mass. 78 (1812); 12 Vt. 625 (1839). 4 103 III. 115 (1882); 115 U. S. 29 (1885). 535 S. C. 610 (1891). 694 Mo. 388 (1888). his intention then and there to rescind.' The other party may elect to adopt such renunciation of it by so acting as, in effect, to declare that he, too, treats the contract as at an end; or he may elect to keep it in force and hold the other party to the obligation." While the contract is executory, the mutual agreements of the parties to rescind it constitute a sufficient consideration as to each for the rescission, but where the contract has been executed on one side, the obligation cannot be discharged except by performance, a formal release under seal, or an accord and satisfaction." So far as the contract remains executory and before breach, it may be annulled by agreement of all the parties; but when it has been broken and a right of action has accrued, the debt or damages can only be released for a consideration; and even so far as it remains executory, the agreement to annul on the one side may be taken as the consideration for the agreement to annul on the other side." MODIFICATION 20. The parties to a contract still executory may, by mutual agreement, discharge each other from the reciprocal obligations thereunder, and either modify or qualify the terms of the old agreement or substitute a new and different agreement in the place thereof." The new agreement may expressly provide for an annulment of the original contract, or it may imply an annulment by the introduction of new terms clearly and positively inconsistent with the old." While the contract is wholly executory and not performed in whole or in part by either side, the parties may, without a new consideration other than the mutual acquittance of each other from the old promise, substitute a new agreement." The mutual unexecuted undertakings of the existing contract 7 98 Pa. 541 (1881). 8 107 N. Y. 674 (1887); 157 Mass. 113 (1892); L. R. 16 Q. B. Div. (Eng.) 460 (1886); see subtitle By Breach infra. 9130 N. Y. 354 (1891). 10 115 U. S. 29, 34 (1885); 156 Pa. 276 (1893); 7 Iowa 232 (1858). 11 149 Mass. 271 (1889); 9 R. I. 90 (1868). 12 95 Pa. 483 (1880). 13 119 N. Y. 1 (1890); 8 C. B. N. S. (Eng.) 831 (1860). 14 117 N. C. 287 (1895); 75 Wis. 631 (1890) are a sufficient consideration for the cancelation of such a contract and the substitution of a new one with different terms." It will be immaterial if, for a moment, there be technically a breach by one of the parties, since by the new agreement both treat the old one as an existing contract, and mutually agree to rescind it and waive the breach." Where, however, a contract has been fully executed, a subsequent modification, without a new consideration to support it, is a nudum pactum. Thus, an agreement to extend the time for the payment of a debt must be founded on a sufficient consideration." A contract may also be discharged by the substitution of new parties for the old ones. This generally occurs where several parties, mutually indebted to each other, by agreement among themselves substitute one debt in the place of the other." We have already referred to this subject as constituting a novation." It is only necessary to say here that the agreement of all the parties is absolutely essential to complete the novation;" that the general principles of consideration attach to the whole transaction and the original liability must be wholly extinguished, the new debtor contracting a new debt and the new creditor assuming the risk of the new debtor's solvency." 21. Simple contracts, both written and unwritten, may be modified, changed, and rescinded by parol at any time. after execution;" but where the contract is such as is required by the statute of frauds to be in writing, the majority of the decisions are to the effect that it cannot be varied by parol," although it may be shown to have been discharged by parol." As in most questions arising on this statute the decisions are conflicting. At common law, a specialty could not be discharged or 15 23 Ill. App. 656 (1887). 16 194 Pa. 475 (1900); 156 Mass. 581 (1892). 17 32 N. Y. Supp. 663 (1895). 18 Add. Cont. (9th Ed.), p. 162. 19 See subtitles Persons Not Parties, Novation, supra. 201 Pars. Cont., p. 220. 21 165 Mass. 81 (1895); 53 Vt. 469 (1881). 22 127 Ind. 168 (1890). 23 97 N. Y. 216 (1884); Bro. St. Fr., Sec. 411 et seq. 24 Bro. St. Fr., Sec. 429; 5 B. & Ad. (Eng.) 58 (1833); 13 Abb. N. Cas. (N. Y.) 340 (1883). 1926 modified by parol," the rule being that "every contract ought to be dissolved by matter of as high a nature as that which first made it obligatory.' The rule in equity was different. The form of the new agreement was discharged and, under the recent blending of the jurisdiction of law and equity in England, and the right given by the modern rules of procedure in the United States to interpose equitable defenses in legal actions, the common-law rule has lost its importance, and the ancient technical rule that a contract under seal could not be varied or discharged by a parol agreement is practically superseded." In New York, the technical distinction between a satisfaction before or after breach seems to have been disregarded, and a new agreement by parol followed by actual performance of the substituted agreement, whether made and executed before or after breach, is treated as a good accord and satisfaction of the covenant." So, also, a new agreement, although without performance, if based on a good consideration, will be a satisfaction if accepted as such." SPECIAL PROVISION IN CONTRACT 22. A contract may contain special provisions for its own discharge under such circumstances as may be agreed upon by the parties." Thus, it may be agreed that the nonfulfilment of a condition precedent, or the occurrence of a condition subsequent, or the exercise of an option to determine the contract, shall discharge the parties from all further liability. A common illustration is the case of the purchase of a horse, where the buyer pays the price but stipulates that, after a reasonable trial, if he should not be satisfied with the animal he may return him and receive the price paid." Other illustrations are the case of a bailment of goods with the right to purchase in the bailee," a bailment with the right to retain title to the chattel in the bailor 252 M. & G. (Eng.) 729 (1841). 26 Bro. Leg. Max. (7th Ed.) 884. 27 22 Q. B. Div. (Eng.) 537 (1889). 28 119 N. Y. 1 (1890); 101 U. S. 522 (1879). 29 188 11. 508 (1901). 30 Ans. Cont. (8th Ed.), p. 338. 31 73 Pa. 387 (1873); 155 Pa. 394 (1893). 32 150 U. S. 312 (1893). until certain instalments of money are paid, and with the right in the bailor to retake the chattel if default be made in the payments." So, also, provisions are generally inserted in insurance policies that the policy shall be void if, without the company's consent, the insured shall cause an increase in the risk." The parties may expressly stipulate in advance upon what contingency either party may be absolved from his obligation to perform; for example, in the familiar case of a contract with a strike clause, where there is an express exemption from liability to perform in case of a strike on the part of the employes of one of the contracting parties;" and in the excepted risks of a charter party, where the carrier is exonerated from liability from loss or damage resulting from perils of the sea." RELEASE 37 23. A release is the act or writing by which some claim or interest is surrendered to another person.' The term properly applies to the discharge of a claim, or a right of action arising from a breach of contract by formal consent or dispensation of the promisee." While not strictly applicable to a discharge by agreement before breach, it is considered here for convenience, before treating of the subject of breach of contract itself. 、A technical release, in order to be self-sustaining, should be under seal, and, if it be so, no consideration is necessary, the seal importing a consideration." Where the release is not under seal, then a consideration must be shown to support it, otherwise it will be treated as a mere nudum pactum.*° 24. No particular form of words is necessary to constitute a release;" any words which sufficiently denote the 33 165 Pa. 150 (1894). 34 145 Mass. 426 (1888). 35 10 L. R. A. (Tex.) 419 (1890); 58 N. Y. 573 (1874). 36 L. R. 7 Q. B. (Eng.) 404 (1872); 153 U. S. 199 (1894). 37 Anderson's Law Dict. 870. 38 Beach Cont., Sec. 456; Leake Cont. (3d Ed.), p. 795. 39 See subtitle Form of Contracts supra. 40 See subtitles Authentication. Sealing, supra. L. R. 1 Ch. App. (Eng.) 48 (1865); 29 Kans. 657 (1883). 41 23 Pa. 447 (1854). |