This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Whether a new contract discharges all right which have arisen under the original contract, or whether such new contract is intended to leave intact the rights which had already vested under the prior contract, is a question which depends upon the intention of the parties. If such intention is clear, full effect must be given to it, whether the parties agree that all claims under the prior contract shall be discharged,1 or whether they agree that all claims arising under the prior contract shall remain in effect, notwithstanding the making of the new contract. If the new contract provides in express terms for the ending of all rights under a prior contract, full effect must be given to such provision, although the new contract also recites the termination of the former contract by a notice, and such notice was not legally sufficient therefor.2
The practical difficulty arises in cases in which no express provision has been made, either for the discharge of such claims or for their continuation. There is a conflict of authority as to the rights of the parties in such a case, whether their rights are to be explained as proceeding out of their presumed intention, or whether they are to be explained on the theory of the legal consequences of their act. In some jurisdictions it is held that in the absence of a provision to the contrary, a new contract discharges all rights of action arising under the first contract,3 including claims for damages and quasi-contractual rights arising out of the original contract.4 If the original contract is broken by one of the parties and a new contract is then made, which is performed by the party who broke the first contract, it is held under this theory that no right of action survives against the party who broke the original contract.5 If A agreed to sell to B articles at a certain price, and on his refusal to deliver them A and B enter into a new contract for the purchase of the same article at an increased price, it is held that B has no right of action against A for breach of the original contract.6
1Swarts v. Narragansett Electric Lighting Co., 26 R. J. 388, 59 Atl. 77 [rehearing denied, 26 R. I. 436, 59 Atl. 111].
See also, ch. LXXXVIII.
2Swarts v. Narragansett Electric Lighting Co., 26 R. I. 388, 59 Atl. 77 [rehearing denied, 26 R. T. 436, 59 Atl. 111].
3Badger Manufacturing Co. v. United States, 49 Ct. Cl. 538; Swarts v. Narragansett Electric Lighting Co., 26 R. I. 388, 59 Atl. 77 [rehearing denied, 26 R. I. 436, 69 Atl. 1ll]; Agel v. F. R. Patch Mfg. Co., 77 Vt. 13, 58 Atl. 792.
4Earnes Vacuum Brake Co. v. Pros-ser, 157 N. Y. 289, 51 N. E. 986.
5 Goebel v. Linn, 47 Mich. 489, 41 Am. Rep. 723, 11 N. W. 284; Agel v. F. R. Patch Mfg. Co., 77 Vt. 13, 58 Atl. 792.
In other jurisdictions it is held that in the absence of specific agreement the termination of the prior contract by a subsequent agreement does not discharge existing rights of action for breach,7 or quasi-contractual rights growing out of the original contract.8 If A had agreed to deliver certain goods to B in certain installments. and A fails to make such deliveries, it is held that B's right of action for such breach is not discharged by a subsequent contract between A and B, whereby B agrees to accept such articles if they are delivered.9 If A has advanced money,10 or has rendered services,11 to B, in part performance of a contract which has subsequently been abandoned by mutual agreement, A may recover the reasonable value of such performance.12 Termination of a contract by mutual agreement may leave one of the parties free to recover reasonable compensation for services or property furnished thereunder, although but for such termination by mutual agreement he would have been unable to recover without showing performance.