Other Contract Discharge Options: Rescission, Novation & Accord

An error occurred trying to load this video.

Try refreshing the page, or contact customer support.

Coming up next: Contractual Illegality & Public Policy: Definition, Examples & Issues

You're on a roll. Keep up the good work!

Take Quiz Watch Next Lesson
Your next lesson will play in 10 seconds
  • 0:01 What Makes a Contract…
  • 1:27 Rescission
  • 3:38 Novation
  • 4:15 Accord
  • 4:52 Lesson Summary
Save Save Save

Want to watch this again later?

Log in or sign up to add this lesson to a Custom Course.

Log in or Sign up

Speed Speed

Recommended Lessons and Courses for You

Lesson Transcript
Instructor: Kat Kadian-Baumeyer

Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.

In general, a contract is a legally binding agreement in which two or more parties make and agree to certain promises. Although the parties are bound to the terms, the parties may agree to discharge the contract through rescission, novation or accord.

What Makes a Contract Legally Binding?

A contract is a legal agreement that binds the parties to certain promises that each makes. There are a few elements that make this agreement legal and the terms enforceable:

  • The parties
  • Mutual consent
  • Legal object
  • Consideration

Let's break it down. The parties to a contract must be of legal age, free of mental illness and addiction, and not under the influence of alcohol or drugs. All parties to a contract must also express mutual consent, meaning each party agrees to their promises of their own free will. In other words, a contract is invalid if one or more of the parties entered into the agreement under duress, as a result of a threat, or did not completely understand the terms.

The object of the contract must contain terms that are legal and do not violate any laws or statutes or Constitutional rights. For example, one cannot engage in a contract for murder. Lastly, for a contract to be valid and enforceable, consideration must be given. This is an exchange of something of value, like money, for performance.

Once all of the binding elements have been met, the contract stands and is enforceable by law. And getting out of a contract can be difficult, but not impossible! Let's explore a few ways in which a contract can be broken.


To discharge a contract means to legally terminate a contract under specific situations. One way to discharge a contract is through rescission. This means a contract can be legally terminated by mutual agreement, by law or court action, or by one party for a reasonable cause. Here are a few examples where rescission may be the right option:

  • One or more parties were under duress at the time the contract was written.
  • All or some of the parties were not of legal age to enter into the contract.
  • One or more of the parties misrepresented the promises.
  • The contract contained mistakes.

Contract basics remind us that all parties must be of legal age and of free will to enter into a legally binding agreement. The agreement must also contain accurate and factual information. Otherwise, it can be considered fraudulent.

For example, when Captain Jack decided he wanted to sell his fishing boat, he knew there would be tough competition. Many of the local fishermen were selling similar models. So, Jack thought long and hard about the best way to market the vessel. In a rare moment of genius, it came to him! He would post photos of a much larger and more beautiful boat in the online ad. He thought this would attract more potential buyers.

Sight unseen, Alfredo Romano, a buyer from Italy, made an offer and signed the contract for the purchase. In the contract, Jack included a description of a completely different boat. In fact, he increased the size and lowered its age. When the boat arrived in Rome, Alfredo was hotter than a bowl of his mamma's spicy meatballs. It was half the size and twice the age of the boat featured in the ad!

In this case, Alfredo had every right to rescind the offer to buy Jack's boat. The contract contained fraudulent and misleading information, including the size and age of the boat. Once Alfredo terminates the contract, it's irrevocable. The terminating action cannot be reversed regardless of whether Jack fesses up or changed the boat description. It was like the contract never existed.

To unlock this lesson you must be a Study.com Member.
Create your account

Register to view this lesson

Are you a student or a teacher?

Unlock Your Education

See for yourself why 30 million people use Study.com

Become a Study.com member and start learning now.
Become a Member  Back
What teachers are saying about Study.com
Try it risk-free for 30 days

Earning College Credit

Did you know… We have over 200 college courses that prepare you to earn credit by exam that is accepted by over 1,500 colleges and universities. You can test out of the first two years of college and save thousands off your degree. Anyone can earn credit-by-exam regardless of age or education level.

To learn more, visit our Earning Credit Page

Transferring credit to the school of your choice

Not sure what college you want to attend yet? Study.com has thousands of articles about every imaginable degree, area of study and career path that can help you find the school that's right for you.

Create an account to start this course today
Try it risk-free for 30 days!
Create an account