Contracts and Sales Multistate Bar Practice Exam

How can a party seek to discharge a debt through modification?

1. By agreeing to partial payments only

2. By establishing a new contract with altered terms

3. By terminating the original contract

4. By notifying the other party of a breach

The correct answer is: By establishing a new contract with altered terms

A party can seek to discharge a debt through modification by establishing a new contract with altered terms. This is because modifications to a contract involve changing certain aspects of the original agreement, such as adjusting payment amounts, extending deadlines, or changing specific responsibilities. When both parties agree to these modifications, a new contractual agreement is formed, which can effectively discharge the original obligation. The validity of this approach hinges on mutual consent and consideration; both parties must agree to the modifications, and typically, there needs to be some form of consideration that supports the changes to make them enforceable. This pathway allows parties to adapt to changing circumstances, making it a practical way to resolve issues related to performance under the original contract without having to go through the more drastic step of termination. Partial payments alone do not constitute a full discharge of the original debt; they may just reflect an effort toward performance. Simply terminating the contract does not discharge the debt unless both parties agree, especially if one party still has vested rights or obligations under the original agreement. Notifying the other party of a breach may lead to remedies or damages but does not result in a discharge of the underlying debt itself. Thus, establishing a new contract with altered terms is the most effective way to seek discharge through modification.