Contracts and Sales Multistate Bar Practice Exam

What effect does a valid modification have on a contract's terms?

1. It creates a new contract entirely

2. It maintains the original terms still in effect

3. It discharges the modified terms immediately

4. It must be renegotiated at a later date

The correct answer is: It discharges the modified terms immediately

A valid modification alters the existing terms of a contract rather than creating a completely new contract. When the parties agree to modify a contract, the original terms remain in effect except where specifically changed. The modification becomes effective as per the agreement between the parties involved at the time of the change. In this context, option C, which suggests that the modified terms are discharged immediately, indicates that the changes take effect right away, which aligns with the general principle of contract modifications. When a valid modification is agreed upon, it supersedes the previous conflicting terms in the original contract, creating a blend of old and new conditions but maintaining the overall contractual relationship. By contrast, a whole new contract is not required because the existing agreement remains, with the modification serving as an adjustment to specific clauses rather than a complete replacement. Therefore, while the modification does have immediate effects, those effects are to the terms being modified, not to the discharge of the entire contract. The insight here is that contract modifications are to be viewed as amendments to existing agreements where the modified terms are effective as agreed, rather than as new standalone contracts requiring renegotiation or leaving the original terms intact.