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9 Discharge of Contract

A contract can be discharged in several ways: 1. By performance when both parties fulfill their obligations. 2. By agreement if the parties mutually consent to alter, cancel, or replace the contract. 3. By supervening impossibility if an unexpected event occurs that makes performance impossible. 4. By lapse of time if a statute of limitations expires making the contract no longer enforceable.

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126 views3 pages

9 Discharge of Contract

A contract can be discharged in several ways: 1. By performance when both parties fulfill their obligations. 2. By agreement if the parties mutually consent to alter, cancel, or replace the contract. 3. By supervening impossibility if an unexpected event occurs that makes performance impossible. 4. By lapse of time if a statute of limitations expires making the contract no longer enforceable.

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9 DISCHARGE OF CONTRACT

A contract is said to be discharged or terminated when the rights and duties created by it come to an end.
A contact may be discharged in any of the following ways.

1. DISCHARGE BY PERFORMANCE
When the parties to a contract perform their respective promises the contract is discharged. The
performance may be
 Actual or
 Offer to perform
Actual Performance
When both of the parties to a contract perform their respective promises the contract is
discharged by a actual performance.
Example: A delivers the goods to B and B pay the price. The contract is discharged by actual
performance
Offer to perform
When the promisor offers to perform the promise but the promisee does not accept the
performance. It is called offer to perform.
Example: A agrees to sell his book to B for Rs. 400. „A‟ offers to deliver the book but „B‟ does
not accept it, there is offer of performance
2. DISCHARGE BY AGREEMENT
A contract is discharged by agreement in the following ways:
(a) Novation: Novation of contract means replacement of an existing contract by a new contract.
The new contract may be between same parties or between new parties.
Example: A owed to B and Bowed to C. All parties agreed that A would pay to C. It is a novation.
(b) Alteration: In case of an alteration, the parties remain the same and only the terms of contract
are changed.
Example: A agrees to supply goods on 1st Jan. Later A and B agree to change the date of delivery to
1st Feb. It is alteration of contract.
(c) Rescission: The rescission means cancellation of contract by all parties with mutual consent.
Example: “A” promises to deliver certain goods to B on a certain date. Before the date of
performance, A and B mutually agree that the contract will not be performed. The contract is
rescinded.
(d) Remission: When promisee accept lesser amount or extend the time for performance, it is
called remission of contract.
Example: A owes B Rs. 5000. B agrees to accept Rs. 3000 in full satisfaction of his claim. The whole
debt is discharged.
(e) Waiver: When a party gives up his right to the contract, the other party is released from his part
of obligation. It is called waiver.
Example: A employ B to construct a building for him. Later on A forbids him from doing so. The
contract is terminated by waiver.
3. DISCHARGE BY SUBSEQUENT IMPOSSIBILITY
Sometimes, the performance of a contract is possible at the time of formation but afterward its
performance becomes impossible or unlawful and as a result void. It is also called the doctrine of
frustration or doctrine of supervening impossibility. Such impossibility may be due to:
 Destruction of subject matter
 Death or personal incapacity
 Change of law
 Declaration of war
 Change in circumstances
4. DISCHARGE BY LAPSE OF TIME
The Limitation Act 1908 prescribes time limits during which the contracts must be enforced. At the
expiry of that time contract becomes unenforceable and as such it terminates.
Example: A took loan from B. The last date for the repayment of loan has expired but no suit was
filed by B for 3 years. A is discharged from his liability.
5. DISCHARGE BY OPERATION OF LAW
A contract may be discharged by the operation of law in one of the following ways.
 By Insolvency: Where a court declares a person as insolvent, such person is discharged from
his liabilities incurred before his insolvency.
 By Unauthorized alteration: If a party makes an unauthorized alteration without the
knowledge and consent of the other party, the contract can be avoided by the other party.
 By merger: Where the parties merge the inferior contract into a superior contract, the
original contract (old contract) needs not to be performed.

EXAMPLE: A part time accountant is made a full time accountant; the contract of part time is
discharged by merger.

6. DISCHARGE BY BREACH OF CONTRACT


When a party fails to perform the contract, there is a breach of contract. It may be
 Actual breach
 Anticipatory breach
(a) Actual Breach: It occurs when a party fails to perform a contract when the performance is due.
Example: A agrees to deliver 100 kg sugar to B on March 10. But he does not deliver the sugar on
that day. This is a actual breach of contract.
(b) Anticipatory Breach: An anticipatory breach of contract occurs before the time fixed for
performance has arrived. It may happen in two ways.
(i) Expressed Breach: When a party expresses his intention not to perform the contract before the
due date of performance has arrived, it is called express breach.
Example: A agrees to sell his Car to B on 30 June. But before that date A inform B that he will not
sell the Car to him.
(ii) Implied Breach: When a party does such act which makes the performance of the contract
impossible is called implied breach.
Example: A promises to sell his Car to B on 30th June. But before that date A sell his Car to C.

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