If a buyer and seller agree to terminate an agreement of purchase and sale due to the seller's health issues, this termination is:

The correct choice is that the termination is by mutual agreement. In situations where both parties consent to end the agreement, it indicates that they have come to an understanding based on certain circumstances—in this case, the seller's health issues. This mutual agreement reflects the voluntary action of both the buyer and the seller, where they decide together to terminate the contract rather than one party being forced to do so by external factors or legal implications.

In this context, the other options focus on different conditions under which a contract might end. For example, impossibility of performance refers to situations where one party cannot fulfill their obligations due to circumstances beyond their control, which isn't the case here since both parties agreed to terminate. Operation of law suggests that the termination occurs due to a legal principle, while performance indicates that the contract has been fulfilled rather than ended. Default and breach of contract imply one party's failure to meet their contractual obligations, which does not apply in this scenario where there was mutual consent to terminate.