Future Business Leaders of America (FBLA) Business Law Practice Exam

What is discharge by agreement?

1. The act of ending contracts by mutual agreement

2. The resolution of a contract through completion

3. The unilaterally imposed end of a contract

4. The alteration of contract terms

The correct answer is: The act of ending contracts by mutual agreement

Discharge by agreement refers to the act of ending contracts through mutual consent of the involved parties. This occurs when both parties agree to terminate their contractual obligations before they have been fulfilled. The mutual agreement can take various forms, such as a formal release or simply a verbal agreement, depending on the nature of the contract and the parties' preferences. In this context, an agreement to discharge a contract can be beneficial because it allows parties to resolve their contractual relationship without needing to perform all the obligations initially contracted. This is particularly useful when circumstances have changed or when it is in the best interest of both parties to agree on a different outcome. The other suggestions point to different concepts entirely. Completion of a contract is associated with fulfilling all terms, which does not end the agreement by mutual consent but rather accomplishes its purpose. A unilaterally imposed end of a contract is typically associated with a breach or termination by one party, which does not involve mutual consent. Lastly, altering contract terms does not equate to discharging the agreement but rather modifying the existing obligations. Understanding the nuances of these concepts is essential in comprehending the principles of contract law.