AMITY GLOBAL

BUSINESS SCHOOL Chandigarh

Discharge of contract
Means- termination of the contractual
relationships between the parties.
A contract Is said to be discharged when
ceases to operate.
The various modes of Discharge of
contract
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
DISCHARGE OF CONTRACT
By agreement (sec-62,63)
By breach of contract (section-39)
By impossibility of performance
initial impossibility
subsequent impossibility
By operation of law
By lapse of time


AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
DISCHARGE BY AGREEMENT
Alteration
Novation
Rescission
Remission
Waiver
merger
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Novation (sec 62)
Novation takes place when (1)a new contract is
substituted for an existing one between the
same parties
(2)a contract between 2 parties is rescinded in
consideration of a new contract being entered
into on the same terms between one of the
parties and a third party .
E.g.. where a creditor at the request of a debtor
agrees to take another person as his debtor in
place of the original debtor
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BUSINESS SCHOOL Chandigarh
Rescission
may occur when all or some of the terms of the
contract are cancelled. it may occur-
(1)by mutual consent of the parties
(2)where one party fails in the performance of his
obligation
Ex.-A promises to supply certain goods to B six
months after date. by that time goods go out of
fashion .A and B may rescind the contract
-A induces B to enter into a contract by fraud .in
this case the contract is void able at the option of
B. he may rescind the contract
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BUSINESS SCHOOL Chandigarh
ALTERATION
Takes place when one or more of the terms of
the contract is/are altered by the mutual consent
of the parties to the contract. in such a case the
old contract is discharged.
E.g.. A enters into a contract with B for the
supply of 100 bales of cotton at his godown
NO.1by the first of the next month. A and B may
alter the terms of the contract by mutual consent
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BUSINESS SCHOOL Chandigarh
Remission
It means acceptance of a lesser fulfillment
of the promise made. e.g. acceptance of a
lesser sum than what was contracted for,
in discharge of the whole of the debt. It is
not necessary that there must be some
consideration for the remission of the part
of the debt
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Waiver
Waiver takes place when the parties to a
contract agree that they shall no longer be
bound by the contract .
Merger takes place when an inferior right
accruing to a party under contract merges
into a superior right accruing to the same
party under the same or some other
contract
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BUSINESS SCHOOL Chandigarh
DISCHARGE BY OPERATION
OF LAW
INSOLVENCY-when a person is adjudged insolvent ,he is
discharged from all liabilities incurred prior to his adjudication
MERGER
ALTERATION-where one party makes any alteration into the
contract without the consent of other party the ,other party can avoid
the contract
DEATH-in contracts involving personal skill or ability ,the contract is
terminated on death of the promisor. in other contracts ,the rights
and abilities o a deceased person pass on to the legal
representatives of the deceased person
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BUSINESS SCHOOL Chandigarh
DISCHARGE BY IMPOSSIBILITY
OF PERFORMANCE
If an agreement contains an undertaking
to perform an impossibility ,it is void ab
initio. this rule is based on the following
maxims:
1)law does not recognizes what is
impossible
2)What is impossible does not create an
obligation
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
U/S 56 impossibility of performance
may fall into either of the following
categories
1.Impossibility existing at the time of
agreement known as pre-contractual
impossibility. the fact of impossibility may
be
(i) Known to the parties
(ii) Unknown to the parties
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BUSINESS SCHOOL Chandigarh
Post contractual /supervening
impossibility
Impossibility which arises subsequent to
the formation of a contract.
The contract becomes void when the act
becomes impossible or unlawful
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BUSINESS SCHOOL Chandigarh
Discharge by supervening
impossibility
Destruction of the subject matter
Death or personal incapacity
Change of law
Non existence or non-occurring of a
particular state of things
Declaration of war
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
E.GS
SUBJ ECT MATTER- A contracted to sell a specified
quantity of potatoes to be grown on his farms. the crop
largely failed. held, the contract was discharged (Howell
v. Coupland)
Death or personal incapacity -A contracts to act at a
theatre for six months in consideration of a sum paid in
advance by B .on several occasions A is too ill to act. the
contract to act on those occasions is void.
Change of law -D enters into a contract with P on 1
st

march for the supply of certain imported goods in the
month of September of the same year .in June by an act
of parliament, the import of such goods is banned .the
contract is discharged
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BUSINESS SCHOOL Chandigarh
Declaration of war -A contracts to take cargo
for B at a foreign port .As govt. afterwards
declare war against the country in which the port
is situated .the contract becomes void when war
is declared
Non existence or non-occurring of a
particular state of things -A and B contract to
marry each other .before the time fixed for the
marriage A goes mad ,the contract becomes
void.
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BUSINESS SCHOOL Chandigarh
Impossibility of performance-not an
excuse
In the following cases, a contract is not discharged
on the ground of supervening impossibility:
1.difficulity of performance
2.commercial impossibility-a contract is not
discharged merely because expectation of
higher profits is not realized, or the necessary
raw material is available at a higher price
because of the outbreak of war ,or sudden
depreciation of currency
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Strikes, lockouts and civil disturbance -
unless the parties agreed in this regard at
the time of formation of the contract theses
events do not discharge contract.
Failure of one of the objects- when a
contract is entered into for several objects,
the failure of one of them does not
discharge the contract
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BUSINESS SCHOOL Chandigarh
By lapse of time
The limitation act ,1963 lays down that a
contract should be performed within a
specified period ,called period of limitation.
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BUSINESS SCHOOL Chandigarh
Discharge by breach of contract
Breach of contract means a breaking of
obligation which a contract imposes. it occurs
when a party to the contract without lawful
excuse does not fulfill his contractual obligation
or by his own act makes it impossible that he
should perform his obligation under it.
It confers a right of action for damages on the
injured party
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Breach of contract may be

1.Actual breach of contract
2.Anticipatory or constructive breach of
contract
1.Actual breach of contract
-at the time when performance is due
-during the performance of the contract (half
consignment delivered and half not given)
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BUSINESS SCHOOL Chandigarh
Anticipatory breach of contract
It occurs when a party to an executory contract
declares his intention of not performing the
contract before the performance is due. he may
do so
-by expressly renouncing his obligation under the
contract
e.g. A undertakes to supply certain goods to B on
1
st
January .before this date ,he informs B that
he is not going to supply the goods .
-by doing some act so that performance of his
promise becomes impossible.
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BUSINESS SCHOOL Chandigarh
The rights of the promisee in case of
anticipatory breach are as following;
-he can treat the contract as discharged
-he can immediately take a legal action
ANTICIPATORY BREACH DOES NOT NECESSARILY
DISCHARGE THE CONTRACT ,UNLESS THE
PROMISEE SO CHOOSES
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
REMEDIES FOR BREACH OF
CONTRACT
Rescission
Specific performance
Injunction
Quantum Meruit
Damages ;- general or ordinary
damages,special damages,vindictive or
exemplary damages,nominal damages
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BUSINESS SCHOOL Chandigarh
rescission
When a contract is broken by one party the other
party may sue to treat the contract as rescinded
and refuse further performance. in such a case
,he is absolved of all his obligations under the
contract.
Ex. A promises B to supply 10 bags of cement
on a certain day. B agrees to pay the price after
the receipt of the goods. A does not supply the
goods. B is discharged from liability to pay the
price.
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Party rightfully rescinding contract entitled to
compensation(section-75)
A, a singer ,contracts with B, the manager of a
theatre ,to sing at his theatre for 2 nights in
every week during the next 2 months ,and B
engages to pay her rs.100 for each nights
performance. on the sixth night, A willfully
absents herself and B in consequences rescinds
the contract. B is entitled o claim compensation
for the damage which he has sustained through
the non-fulfillment of the contract.
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Specific performance
In certain cases the court may direct the party in
breach to carry out his performance according to
the terms of the contract .this is a discretion by
the court for specific performance of the contract
at the suit of the party not in breach.
Some of the cases specific performance be
enforced are as follows:
-when the act agreed to be done is such that
compensation in money for its non-performance
is not an adequate relief.
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BUSINESS SCHOOL Chandigarh
- When there exists no standard for
ascertaining the actual damage caused by
the non-performance of the act agreed to
be done
- When it is probable that the compensation
in money cannot be got for the non-
performance of the act agreed to be done
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BUSINESS SCHOOL Chandigarh
Injunction
Where a party is in breach of a negative term of
a contract (i.e. where he is doing something
which he promised not to do), the court may by
issuing an order ,restrain him from doing what
he promised not to do ,such an order of the court
is known as injunction
Ex. N, a film actress ,agreed to act exclusively
for W for a year and for no one else. during the
year she contracted to act for Z .held she could
be restrained by injunction from doing so.
[Warner bros. v.nelson (1937)]
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Quantum Meruit
This phrase literally means as much as earned'. this
right arises where a contract partly performed by one
party, has become discharged by the breach of the
contract by the other party.
In other words unless a party has performed his promise
in its entirely ,it cannot claim performance from the
other.
But in certain cases ,when a person has done some
work under the contract and the other party repudiated
the contract ,or some events happen which makes the
further performance of the contract impossible,then the
party who has performed the contract can claim
remuneration for the work he has already done.
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
The claim on quantum
meruitarises in the foll.cases
When the contract is discovered unenforceable (sec 65)
Eg. A pays B rs 1000 in consideration of Bs promising
marry C, As daughter .C is dead at the time of promise.
the agreement is void ,but B must repay A the 1000 rs.
Where one party abandons or refuses to perform the
contract
When a contract is completely performed but badly
Eg. Decorating a house badly
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BUSINESS SCHOOL Chandigarh
Damages
-Damages are a monetory compensation
allowed to the injured party by the court for
the loss or injury suffered by him by
breach of a contract
The object of awarding damges for the
breach of a contract is to put the injured
party in the same position ,so far as
money can do it,as if he had not been
injured
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
Rules relating to damages
-Damages arising naturally-ordinary damages
-special damages-e.g.. specimen of goods to be sent at
exhibition and a note written on the consignment must
be at new castle Monday certain
-vindictive or exemplary damages-given for a wrong doing
eg.cheque bounce, breach of a promise to marry
-Nominal damages-small damages
-damages for loss of reputation
-cost of decree-the suit for damages is in discreation of the
court
-damages agreed upon in advance in case of breach
AMITY GLOBAL
BUSINESS SCHOOL Chandigarh
EXERCISE

1.A contracts to supply a specific car to B a month after the
date o the contract. within the month A sells the car to C.
thereupon B sues A for breach of contract. A contends
that he could still perform the contract by repurchasing
the car from C .Is Cs contention valid?
2.A owned a room in hotel which was hired to B for
watching the coronation procession of King Edward II at
$141payable at the time of the contract.$100 were paid
in cash .but before the balance was paid, the procession
was cancelled. B filed a suit for the recovery of the
amount he had paid. Decide.
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BUSINESS SCHOOL Chandigarh
3.A enters into a contract with B for singing
at his theatre for three nights for a fee of
rs.100 for every night. she sings for two
nights and is taken ill.
(a) Can B ask for damages for loss of profit
from A?
(b) Would your answer be different if A sings
for the theatre another night?