In this paper, we introduce a novel approach for active contours with free endpoints. A scheme is presented for image segmentation and restoration based on a discrete version of the Mumford-Shah functional where the contours can be both closed and open curves. Additional to a flow of the curves in normal direction, evolution laws for the tangential flow of the endpoints are derived. Using a parametric approach to describe the evolving contours together with an edge-preserving denoising, we obtain a fast method for image segmentation and restoration. The analytical and numerical schemes are presented followed by numerical experiments with artificial test images and with a real medical image.