Contracts: Excuse of Performance Based on Later Events: A later agreement between the parties

• A later agreement between the parties may provide an excuse for non-performance.

• Rescission - an agreement to cancel the contract

• For a rescission to be effective, each party must have some performance remaining otherwise, there would not be any consideration for the rescission agreement.

• Modification – [takes effect now] an agreement replacing an existing contract with a new contract

• Mike borrows $2,000 from Susan and promises to repay her with interest. Later she agrees to discharge the debt now if Mike promises to fix her hot tub. Mike makes the promise. What are Susan’s rights if Mike does not fix her hot tub as promised? She can only sue Mike on the hot tub deal because Mike’s duty to pay her the $2,000 was excused by the modification agreement which takes effect immediately.

• Accord – [takes effect then] (an agreement to accept a stated performance in future satisfaction of an existing duty) and Satisfaction (performance of the accord).

• Same facts, except they agree that if Mike fixes Susan’s hot tub, then she will discharge the debt. What are Susan’s rights if Mike does not fix her hot tub as promised? Then Susan can sue him either on the hot tub deal or the original debt. The original debt is not excused until the accord is satisfied.

• Novation – an agreement substituting a new party for an existing one.

• All parties to the contract will agree to the substitution. The new party, the existing party and the other existing party.

• BAR TIP: Look for questions that distinguish between a Novation and a mere delegation of duties.