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7.6 Discharge by Agreement: Rescission, Novation & Accord and Satisfaction

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1 Introduction & FYLSE Examination Guide

1.1 FYLSE Exam Structure, Passing Standard & Administration 1.2 Study Method, Pacing & MBE-Style Technique

2 Contracts: Mutual Assent, Capacity & Contract Formation

2.1 The Offer & Objective Theory of Assent 2.2 Termination & Irrevocability of Offers 2.3 Acceptance & the Mailbox Rule 2.4 Mirror Image Rule & UCC 2-207 Battle of the Forms 2.5 Mistake in Contract Formation 2.6 Fraud, Duress, Undue Influence & Illegality 2.7 Capacity to Contract

3 Contracts: Consideration, Estoppel & Implied Obligations

3.1 Consideration & the Bargained-For Exchange 3.2 Past & Moral Consideration, Pre-Existing Duty & Modification 3.3 Promissory Estoppel & Detrimental Reliance 3.4 Implied-in-Fact Contracts & Quasi-Contract 3.5 Implied Covenant of Good Faith, Fair Dealing & Indefinite Terms

4 Contracts: Third-Party Beneficiaries, Assignment & Delegation

4.1 Third-Party Beneficiary Contracts 4.2 Assignment of Rights 4.3 Delegation of Duties

5 Contracts: Statute of Frauds, Parol Evidence & Interpretation

5.1 Statute of Frauds: Contracts Within the Statute 5.2 Satisfying the Statute: Writing, Signature & Exceptions 5.3 The Parol Evidence Rule 5.4 Contract Interpretation & Canons of Construction

6 Contracts: Performance, Conditions, UCC Warranties & Breach

6.1 Conditions: Express, Constructive & Excuse 6.2 Substantial Performance vs. Perfect Tender 6.3 Cure, Rejection, Revocation & Installment Contracts 6.4 UCC Article 2 Warranties & Risk of Loss 6.5 Anticipatory Repudiation & Insecurity

7 Contracts: Remedies, Discharge & Changed Circumstances

7.1 Expectation Damages & Their Limitations 7.2 Reliance, Restitution & Liquidated Damages 7.3 Specific Performance & Injunctive Relief 7.4 UCC Article 2 Buyer's and Seller's Remedies 7.5 Impossibility, Impracticability & Frustration of Purpose 7.6 Discharge by Agreement: Rescission, Novation & Accord and Satisfaction

8 Criminal Law: Principles of Criminal Liability & Mens Rea

8.1 Actus Reus, Voluntary Acts & Omissions 8.2 Criminal Causation & Intervening Causes 8.3 Common Law & Model Penal Code Mens Rea 8.4 Mistake of Fact, Mistake of Law & Concurrence

9 Criminal Law: Inchoate Offenses & Accomplice Liability

9.1 Criminal Attempt & Impossibility 9.2 Solicitation & the Merger Doctrine 9.3 Conspiracy & Merger Doctrine 9.4 Accomplice Liability: Actus Reus & Mens Rea 9.5 Scope of Accomplice Liability, Withdrawal & Parties to Crime

10 Criminal Law: Homicide & Crimes Against the Person

10.1 Common Law Murder & Malice Aforethought 10.2 Degrees of Murder, Premeditation & Deliberation 10.3 The Felony Murder Rule & Its Limitations 10.4 Voluntary & Involuntary Manslaughter 10.5 Non-Homicide Crimes Against the Person

11 Criminal Law: Property Crimes, Theft & Habitation

11.1 Common Law Larceny 11.2 Embezzlement & False Pretenses 11.3 Robbery & Extortion 11.4 Receiving Stolen Property 11.5 Burglary 11.6 Arson

12 Criminal Law: Defenses: Capacity, Justification & Excuse

12.1 Insanity: The Four Legal Tests 12.2 Intoxication, Diminished Capacity & Infancy 12.3 Self-Defense & Defense of Others 12.4 Defense of Property, Habitation & Law Enforcement Privileges 12.5 Duress & Necessity 12.6 Entrapment & Mistake as an Excuse

13 Torts: Intentional Torts to Persons & Property

13.1 Intent, Motive & Incapacity in Intentional Torts 13.2 Transferred Intent 13.3 Battery & Assault 13.4 False Imprisonment 13.5 Trespass to Land 13.6 Trespass to Chattels & Conversion

14 Torts: Privileges & Defenses to Intentional Torts

14.1 Consent: Express, Implied & Capacity 14.2 Exceeding & Vitiating Consent 14.3 Self-Defense & Defense of Others (Tort) 14.4 Defense of Property & Recapture of Chattels 14.5 Public & Private Necessity 14.6 The Shopkeeper's Privilege

15 Torts: Negligence — Duty of Care & Breach

15.1 Duty of Care & the Foreseeable Plaintiff 15.2 Affirmative Duties to Act & Special Relationships 15.3 Standard of Care: The Reasonable Person & Children 15.4 Professional Negligence, Informed Consent & Negligence Per Se 15.5 Land Possessor Liability & Premises Duties 15.6 Breach of Duty & Res Ipsa Loquitur

16 Torts: Causation, Defenses, Multiple Tortfeasors, Wrongful Death & Damages

16.1 Cause in Fact & Multiple Actors 16.2 Proximate Cause & Intervening Forces 16.3 Contributory, Comparative Negligence & Assumption of Risk 16.4 Joint and Several Liability, Contribution & Indemnity 16.5 Vicarious Liability & Non-Delegable Duties 16.6 Wrongful Death & Survival Actions 16.7 Statute of Limitations & Claim Accrual 16.8 Tort Damages: Compensatory, Nominal, Punitive & Mitigation

17 Torts: Strict Liability & Products Liability

17.1 Strict Liability for Animals 17.2 Abnormally Dangerous Activities & Scope of Risk 17.3 Strict Products Liability & Defect Categories 17.4 Products Liability Under Negligence, Warranty & Misrepresentation 17.5 Defenses to Products Liability

18 Torts: Emotional Distress, Defamation, Privacy & Economic Torts

18.1 Intentional Infliction of Emotional Distress 18.2 Negligent Infliction of Emotional Distress 18.3 Common Law Defamation: Elements, Libel & Slander 18.4 Constitutional Limits, Privileges & Defenses to Defamation 18.5 Invasion of Privacy 18.6 Nuisance & Economic Torts

7.6 Discharge by Agreement: Rescission, Novation & Accord and Satisfaction

Key Takeaways Explain This Topic AI

Mutual rescission discharges both parties where each still has duties outstanding, with each party's surrender of rights supplying consideration for the other's.

A novation substitutes a new party for an original one and requires the consent of all three parties, discharging the original obligor entirely.

An accord is an agreement to accept a different performance in satisfaction of an existing duty, and the original duty is suspended rather than discharged until satisfaction occurs.

If the accord is breached, the injured party may sue on either the original duty or the accord, which is the key distinction from a substituted contract that discharges immediately.

A release discharges a duty without performance and at common law required a writing or a seal, with modern statutes often requiring consideration or a signed writing.

Last updated: September 2026

  • Discharge by Agreement: Rescission, Novation & Accord and Satisfaction
  • I. Methods of Consensual Discharge of Contractual Obligations

Parties may extinguish, modify, or discharge their contractual duties through mutual agreements. Mastery of the distinctions among these mechanisms is essential for the FYLSE: ┌─────────────────────────────┐

  • │ Methods of Consensual │
  • │ Discharge │
  • └──────────────┬──────────────┘
  • │
  • ┌────────────────────────────────────┼────────────────────────────────────┐
  • ▼ ▼ ▼
  • [Accord & Satisfaction] [Novation] [Mutual Rescission]
  • Agreement for substitute perf. - 4-party mutual agreement - Mutual agreement to cancel
  • Suspends original duty - Substitutes new obligor executory contract
  • Satisfaction discharges all - Immediately discharges delegator - Requires unperformed duties
  • Breach: Sue on original OR accord - Distinguish from mere delegation on both sides (consideration)
  • 1. Accord and Satisfaction

The Accord (Restatement (Second) of Contracts § 281): A contract between an obligee and an obligor under which the obligee agrees to accept a different, substitute performance in full satisfaction of the obligor's existing contractual duty.

Consideration Required: An accord requires consideration. For a liquidated (undisputed, sum certain) debt, agreeing to accept a lesser cash amount is unenforceable under the pre-existing duty rule unless the debtor tenders a different performance (e.g., paying earlier, paying in goods, or paying at a different location).

Suspension of Original Duty: An accord does not immediately extinguish the original obligation. The accord merely suspends the obligee's right to enforce the original contract until the date scheduled for performance of the accord.

The Satisfaction: The actual execution or tender of the agreed performance under the accord. Once satisfaction occurs, both the accord and the original contractual duty are completely discharged .

Remedies Upon Breach of an Accord:

If Debtor Breaches the Accord: The obligee may sue EITHER on the original contract OR on the accord.

If Creditor Breaches the Accord (sues on the original contract before debtor defaults on the accord): The debtor may assert the accord as an equitable defense or enjoin the action.

Check Cashing Rules / "Payment in Full" (UCC § 3-311): If a debtor sends a check conspicuously marked "payment in full" for an amount less than claimed, cashing the check operates as an accord and satisfaction ONLY IF : (1) the debt is unliquidated or subject to a bona fide, good-faith dispute; and (2) the check was tendered in good faith. If the debt is liquidated and undisputed, writing "payment in full" has no legal effect, and the creditor may cash the check and sue for the remaining balance.

2. Novation (Restatement (Second) of Contracts § 280)

A novation is a new contract that substitutes a new party into an existing contract, discharging the original party.

Important

The Novation vs. Delegation Distinction on the FYLSE: On the FYLSE, examiners constantly test whether a transfer of duties is a delegation or a novation :

Delegation: Obligor assigns duties to Delegate. Obligee accepts performance from Delegate. Obligor remains personally, secondarily liable as a surety if Delegate fails to perform. Obligee's mere consent to the delegation does not release the obligor!

Novation: Requires the express or clear implied agreement of all parties (Obligor, Obligee, and Delegate) to completely release and discharge the original obligor from all further liability and substitute the Delegate as the sole obligor.

3. Mutual Rescission (Restatement (Second) of Contracts § 283)

Rule: A mutual agreement between contracting parties to terminate and discharge an executory bilateral contract.

Requirement of Mutual Consideration: Mutual rescission requires consideration. In an executory bilateral contract , consideration is readily present because each party surrenders their legal right to compel the other party's return performance.

The Unilateral Performance Trap: If one party has already fully performed , an oral or written agreement to "rescind" the contract is void for lack of consideration . The performing party gives up a right to receive performance, but receives nothing in return. To discharge a contract where one party has fully performed, the parties must execute a formal release supported by new consideration or a writing under seal/statute.

4. Account Stated, Release, and Merger

Account Stated: An agreement between parties who have had previous monetary transactions fixing the final net balance due between them and promising payment. It creates an independent cause of action on the balance.

Release (Restatement § 284): A formal written manifestation by an obligee discharging an obligor's immediate or future duty. Requires consideration at common law unless modified by statutory writing rules (e.g., UCC § 1-306 waiver after breach without consideration in signed writing).

Merger: A contractual duty is discharged by merger when the identical duty is superseded by and embodied into a higher form of legal obligation (e.g., when a contract claim merges into a final court judgment, or an executory real estate contract merges into a deed upon closing under the merger doctrine).

II. Comparative Overview of Discharge Mechanisms

Mechanism Core Legal Definition Requirement of Consideration Legal Status of Original Obligation

Accord & Satisfaction Agreement to accept a substitute performance; satisfaction is the execution. Consideration required (unliquidated dispute, alternate performance, or timing change). Original duty suspended during accord; discharged only upon satisfaction; revived upon debtor's breach.

Novation Mutual four-party agreement substituting a new obligor for an original obligor. Mutual releases and assumption of duties constitute valid consideration. Original obligor's duty is immediately and permanently discharged .

Mutual Rescission Mutual agreement to cancel an executory bilateral contract. Unperformed mutual duties provide reciprocal consideration. Original contract is completely extinguished ; parties restored to pre-contract status.

Delegation Promisor assigns the duty of performance to a third party. Agreement between delegator and delegate. Original obligor remains personally and fully liable as a surety.