In determining whether a new agreement discharges the old one, the question always is whether the subsequent agreement, whatever it may be, and in whatever form it may be, is, as a matter of intention, expressed or implied, a superseder of, or substitution for, the old agreement or dispute; or whether it is merely an agreement to accept performance, in futuro, as future satisfaction of the old agreement or dispute.
The parties entered into an agreement for the sale of life insurance. The plaintiff insured argued that the defendant insurer offered to settle the claim but the plaintiff never accepted. The defendant argues that the plaintiff accepted a settlement, and thus his recovery should be limited to the settlement amount. The defendant wished to admit extraneous evidence to support a substituted agreement. The trial court held the settlement was not agreed upon, and the plaintiff is not limited in his recovery. The appellate court reversed, and the plaintiff appealed.
Did the parties validly substitute their agreement?
No, the court reversed the lower court’s order.
The court found that the extraneous evidence (telephone conversations, meetings etc.) did not result in a substituted agreement. It held that the conversations were informal and served a bargaining purpose. The parties never decided on terms. It further reasoned that whatever agreement the parties may have come to, it was not enforceable because it was not in writing and signed by the parties. Thus, the court reversed and held that the plaintiff was not limited in his recovery of damages.