In a contract scenario, what term describes when one party is legally allowed to choose not to fulfill the contract?

The term that describes when one party is legally allowed to choose not to fulfill the contract is "repudiation." This occurs when one party clearly indicates that they will not perform their contractual duties. This can happen either explicitly, through direct communication of intent not to perform, or implicitly, through actions that demonstrate that they cannot or will not meet their obligations under the contract.

In the context of contract law, repudiation is significant because it allows the non-breaching party to either accept the repudiation and terminate the contract or continue to hold the other party accountable. The concept emphasizes the importance of communication and intent in contractual relationships, providing a mechanism for parties to manage their expectations and remedies in the face of potential breaches.

The other terms, such as discharge by complete performance and discharge by substantial performance, refer to situations where the obligations of the contract are fulfilled, whether fully or significantly, rather than the scenario where one party opts out of their contractual responsibilities. Termination generally refers to ending the contract by mutual agreement or by one party breaching the contract, which is not the specific situation described in this question.