Hi I will try to explain this concept, so When Party A modifies the state with Party B
Party C is no longer a participant /extraReceipient of the transaction.
The contract doesn't require the previous participant (Party C) to sign for the new outputs of the transaction.
Then Party C
Will only record the transaction that removed C as a participant to mark the state as consumed.
Will record the consumed states but not the unconsumed states See here on consumed/produced states
Will notrecordnew unconsumed state if any more changes are made thereafter.
I hope I made sense