Contracts

The duties under a contract are discharged when there is a legally binding termination of such duty by a VOLUNTARY ACT of the parties or by operation of law. Among the ways to discharge a contractual duty are impossibility or impracticability to perform personal services because of death or illness; or impossibility caused by the other party.

The two most significant methods of voluntary discharge are ACCORD AND SATISFACTION and novation. An accord is an agreement to accept some performance other than that which was previously owed under a prior contract. Satisfaction is the performance of the terms of that accord. Both elements must occur in order for there to be discharge by these means.

A novation involves the substitution of a new party while discharging one of the original parties to a contract by agreement of all three parties. A new contract is created with the same terms as the original one, but the parties are different.

Contractual liability may be voluntarily discharged by the agreement of the parties, by estoppel, and by the cancellation, intentional destruction, or surrender of a contract under seal with intent to discharge the duty.

The discharge of a contractual duty may also occur by operation of law through illegality, merger, statutory release, such as a discharge in bankruptcy, and objective impossibility. Merger takes place when one contract is extinguished because it is absorbed into another.

There are two types of impossibility of performance that discharge the duty of performance under a contract. Subjective impossibility is due to the inability of the individual promisor to perform, such as by illness or death. Objective impossibility means that no one can render the performance. The destruction of the subject matter of the contract, the frustration of its purpose, or supervening impossibility after the contract is formed are types of objective impossibility. "Impracticability" because of extreme and unreasonable difficulty, expense, injury, or loss involved is considered part of impossibility.