Bar Exam — MBE (Multistate Bar Exam)ContractsEasy
A landlord and a tenant entered into a one-year lease agreement for an apartment at $1,200 per month. After three months, the tenant lost his job and could no longer afford the rent. The tenant approached the landlord, explaining his situation and asking to be released from the lease. The landlord agreed, and both parties signed a document stating the lease was terminated immediately, with no further obligations. Later, the landlord found a new tenant at $1,100 per month and sued the original tenant for the difference in rent for the remaining nine months. What is the likely outcome?
- AThe landlord will recover $1,200 from the original tenant, representing one month's rent.
- BThe landlord will recover the full remaining rent of $10,800 from the original tenant.
- CThe landlord will recover $900 from the original tenant.
- DThe landlord will recover nothing from the original tenant.
Show answer & explanationAnswer & explanation
Correct answer: D. The landlord will recover nothing from the original tenant.
Mutual rescission occurs when both parties agree to terminate a contract, releasing each other from their remaining obligations. Since the landlord and tenant mutually agreed to terminate the lease with no further obligations, the original tenant is not liable for future rent.
Why the other options are wrong
- A. There is no basis for recovering one month's rent after a mutual rescission that terminated all future obligations.
- B. The full remaining rent would only be recoverable if the lease had not been mutually rescinded.
- C. This calculation would imply a partial recovery, which is incorrect given the mutual rescission.
Mutual Rescission
An agreement between both parties to a contract to terminate it, thereby discharging both from their remaining duties of performance.
- Requires mutual assent (offer and acceptance) to terminate.
- Must be supported by consideration (relinquishing rights under the original contract).
- Discharges both parties from all remaining executory duties.
- Can be oral unless the original contract was required to be in writing by the Statute of Frauds.
Memory trick: Discharge a contract? Think 'A' for agreement, 'P' for performance, or 'I' for impossibility.