Class lecture on business law

When the obligation created by a contract come to an end, the contract is said to be discharged or
terminated. It may happened by performance, part performance or by nonperformance of the
obligations arises out of contract. Following ways are given below

1. By performance of the promise

By performance of the contract

When the both parties of the contract discharge/perform their due obligation (according to offer and
acceptance), said to contract has been discharged or terminated by performance. Here contract will be
performed in a full suing as to follow all terms and condition of the contract.

Performance by mutual consent of the parties

After the contract has been made, at the time of performance party of that contract may mutually agree
to change any of the terms or condition or parties as necessary. Then the change of (addition or
alteration or substitution of any) may change the nature of contract and create a new contract against
the old one. At the time of change the old contract will be discharged/terminated and a new contract
will take place for performance. Such an amendment are

Novation: By change of parties…When a new contract is substituted for an existing contract (between
same parties or between different parties), so the old contract will be discharged and the new contract
will arise against the old one.

Example: A is indebted to B and B to C. By mutual agreement B’c debt to C and A’s debt to B is
cancelled and C accepts A as his debtor.

Alteration: By change of terms……At the time of performance when one or more of the terms of existing
contract has been changed by mutual consent of the party of contracts.

Example: A made a contract with B to deliver particular quantity of wood to make furniture and at the
time of performance A said to deliver to those furniture extracted from the wood. B agreed accordingly.
This is alteration of the terms and condition of the contract.

Remission: when at the time of performance, by mutual consent parties of the agreement agreed to
accept less than the contracted for ,it will be said to be remitted or remission. As for time may extended
to perform or to payment or give up the claim of any kind amount fixed under contract.

Example: A owes B Rs.5, 000 taka. And afterward B agreed to accept 2000 taka as full and relinquish the
claim of 3000 taka. Then the old agreement has been discharged.
Rescission: when any party of any agreement deny/cancel to perform whole or any part of the
obligation arises out of contract, the contract will be discharged or terminated. It may or may not
happen by mutual consent of the parties.

Waiver: When any of the parties to a contract abandon his or her legal right to claim against the other
party of the contract, it will said to be waived or waiver of contract.

Example: A and B makes a contract to deliver special sweetmeat for A’s son marriage but B delivered
normal sweetmeats and A did not make any objection regarding price at the time of acceptance of
those. A willingly give up his right to claim the amount which B was bound to pay for the special one.

Post Contractual Impossibility/Doctrine of Frustration/supervening Impossibility

When a contract has been done between two parties, it may happen that the contract can’t be
performed (delivery of goods become impossible because sudden the road or bridge has been
destroyed because of flood, damaged or strike). And these events is not the creation of the parties of
the contract. When such supernatural fact which can’t be prevented at the time of performance or can’t
be perceived by the parties at the time of contract made, said the contract is frustrated or supervening
impossibility of contract. Ultimately the contract suffered by supervening impossibility will be void.

But if any party claim the frustration of contract, He shall prove that

1. The event is supernatural (sea storm, current, earthquake, thunder, outbreak of war, change of law,
death of parties)

2. That event can’t be perceived by the parties at the time of contract done and can’t not be prevented
at the time of performance.

3. And that event destroy the material part or heart (goods, service) of contract .Suppose the goods
can’t be marketable or price worthy.

If these three conditions are present then the contract will be frustrated and become void.Section-56 of
Law of Contract.

Exception: The frustrated contract will be voidable in a circumstances where it will be proved that the
supervening event can be perceived or prevented by one party, which can’t be knew or prevented by
the other party. The other party who can’t know he may or may not avoid the contract. (Section 56)

Termination by breach of Contract

A contract can be terminated by breach when any of the parties any time after the contract has been
done denounce or deny to perform his obligation arises out of the contract. A contract can be breached
at any time after the contract made

Anticipatory Breach of Contract

When any of the parties to a contract deny to perform his obligation before the time of performance of
that contract start it will be said anticipatory breach of contract.
Example: A and B made a contract at 13th July 2015 to deliver special flower for February Mourn of the
2016 and will be produced within January 2016 to deliver before that day. B denounce before
September 2015 to deliver according to contract.

Actual Breach of Contract:

When party of contract deny to perform his obligation at the moment of performance or after the time
of Performance, said to be actual breach of Contract.

As for in previous example If B denounce to perform at January or after January, it will be actual breach
of Contract.

Remedies for breach of contract

When a breach of contract occurs, he aggrieved party or the injured can claim or entitled to take
following steps

1. Rescission of contract: The aggrieved party are freed from obligation arises out of contract and
take legal step if any loss arises because of the other party refusal.
2. Suit for damages: when a party to a contract breach the contract, other party may file suit to
pay compensation(amounted to money) for that loss. In the next topics mentioned, how the
amount of compensation will be fixed
3. Suit upon quantum meruit: this compensation or damages only be claimed in case of past
consideration or if any quasi contract is happened .In that regard, the quantity of compensation
will be given according to the quality of service or consideration
4. Suit for specific performance of contract: Where the subject matter of contract is very special in
nature for the parties, the monetary compensation is not sufficient to recover the loss, the
aggrieved party apply to the court to perform the contract specifically by the breached party. It
means the violator shall pay, not by money but by performance as it was in the contract.
5. Injunction: It is a special remedy under specific performance of contract. Here party may get
remedy either by act or omission granted by the court as compensation

By Omission: When the breached party deny to performance his obligation court prohibit that
party not to deny the performance as it was settled in the contract.

By Act: When the breached party very incapable to specific performance, then he court
bound that party not to perform in any contract.

Damages

Damages of a contract means what would be amount of loss suffered and claimed by the aggrieved
party under a breach of contract. Damages may be liquidated (calculated by money) or may be
unliquidated (not calculated by money).Liquidated damages are given where the subject matter (as
instance: Rice) of contract is in such nature which can be recovered from available market with money
compensation. Unliquidated damages are given where the subject matter off contract cannot be
recovered by money (particular art, design or creative performance).

Liquidated Damages:
In a breach of contract court usually allowed the aggrieved party to pay compensation from the
breached party the loss arises from the breach of contract. And the damages identified from considering
the market value and specific amount in nature, which can be said as liquidated damages.

Calculation of damages:

Under section 73 to 75 of Contract Act-1872, two rules are prescribed to calculate damages

1. actual loss
2. Usual or natural loss

Actual loss:

Ordinarily, the aggrieved party is entitled to recovery by way of compensation, only the actual loss
suffered by him.

Natural and Usual Loss

In calculating actual loss, the court will only consider to allow any other loss which may be fairly, or
reasonably arises from the usual course of things from the breach but not any remote incidental loss.

Example:

X, a carrier entrusted to deliver particular machine to Y on a particular date under a contract. But X
delivered at delay and for that Y suffered. Y claimed from X compensation for wages of workers and
depreciation charges which, Y carried for those delayed date and the profit, which may arise if the
factory run. Here Y is entitled for the natural loss only the wages of labor and depreciation charges and
not more, because it arises directly for the late delivery. But the profit is not directly involved or arises
from the late delivery, so it would be a remote loss and cannot be allowed as compensation.

Unlquidated Damages

When the loss arises out of contract is in such nature, which cannot be compensated by money and
both party of contract contemplated (know the essence) of such contract, Court may on satisfaction
allow any kind of amount for such compensation, which is said unliquidated damages for a contract.

Example

A agrees to buy, and B agrees to sell, a picture by a dead painter and two rare china vases. Here it is
difficult to calculate the loss if B failed to specific performance to deliver this order. The damages is
unliquidated in nature.