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“both as a rescission and a discharge by substitution” of their
earlier piggyback agreements. 13 Corbin on Contracts, sec.
67.8(6), at 68 (Rev. ed. 2003). At the time of their settlement,
the parties had a genuine dispute, which they resolved under
conventional contract principles: respondent maintained that
petitioners owed deficiencies totaling $7,202, plus additions and
interest, and petitioners maintained they owed nothing. When
petitioners settled, respondent’s consideration to petitioners
took the form of respondent’s promises to accept 7 percent less
than the deficiencies originally determined and to forgo the
additions. Petitioners’ consideration in return was their
promise to pay the reduced deficiencies, plus their agreement,
set forth explicitly in respondent’s offering letter, that the
settlement would “preclude any further challenge or appeal with
respect to the Kersting programs or the merits of the Dixon
opinion”. The legal effect of their dealings “in substance, was
a mutual surrender, by the parties, of their antithetical
positions, in exchange for a new, formally executed, complete and
binding contract.” Richards Constr. Co. v. Air Conditioning Co.,
318 F.2d 410, 414 (9th Cir. 1963). As the Court of Appeals for
the Ninth Circuit added in Richards: “Generally speaking, a
contract to settle a genuine dispute is binding; the law favors
such contracts; this was such a contract.” Id. For the reasons
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