Discharge of Performance by Agreement

Discharge of Performance by Agreement: An Overview for Business Owners

Discharge by performance is the act of fulfilling a contractual obligation, but what happens when the parties agree to discharge performance without fulfilling the terms outlined in the contract? This is known as discharge by agreement. This article will examine the concept of discharge by agreement, its types, and how it affects business owners.

Discharge by agreement occurs when both parties agree to end the contract and release each other from their obligations with no consequences. This act is done without necessitating the need for performance of the obligations stipulated in the contract. Generally, both parties enter into an agreement to end the contract, either orally or in writing.

There are types of discharge through agreement:

1. Mutual Rescission: This occurs when both parties agree to terminate the contract. The mutual rescission agreement is an express way of ending the contract without a court intervention.

2. Accord and Satisfaction: This occurs when one party agrees to perform in a different way as specified in the contract. Accord and satisfaction discharge is more common in situations where non-performance would lead to a lawsuit.

3. Novation: This occurs when one party substitutes another party for their obligations under the contract. Novation is a form of agreement where the outgoing party is released from their obligations, replaced by a new party who agrees to take over those responsibilities.

To effectively discharge performance by agreement, the parties must agree on the terms and conditions of the new agreement. The agreement should be written and signed, and all parties involved should have a copy for their records. This ensures that all parties have a clear understanding of the new agreement.

For business owners, discharge by agreement is a useful tool that can be utilized when a contract is no longer beneficial. For example, a business may decide to end a contract with a supplier who is no longer providing quality products or services, or a business may find a better deal with a new supplier. In such cases, discharge by agreement would come in handy.

However, business owners should exercise caution when using discharge by agreement. They should ensure that the agreement meets the legal requirements of the state in which they operate. If not, the agreement may be deemed invalid, and the business owner could face legal liability.

In conclusion, discharge by agreement is a useful tool that allows parties to end a contract without fulfilling the obligations specified in the contract. Business owners should exercise caution when using discharge by agreement and ensure that the agreement meets the legal requirements of their state. By doing so, they can effectively discharge performance by agreement, save time and resources, and avoid legal entanglements.