Discharge of Contract

When the rights and obligations arising

out of contract are extinguished the
contract is said to be discharged or
terminated. A contract may be
discharged in any of the way:-
1. By Performance of the Contract.
2. By mutual consent or Agreement.
3. By Lapse of Time.
4. By operation of Law.
5. By Material Alteration.
6. By subsequent or supervening
impossibility or illegality.
7. By breach of Contract.
 1. Discharge by Performance

Performance of Contract is the principal and most

usual mode of discharge of a contract.
Performance may be:-

Actual Performance Attempted Performance

Actual Performance:-

A party to a contract is said to have

actually performed his promise when he has
done what he had undertaken to do. He
must have fulfilled all his obligation under
the contract. But if only one party fulfill
his obligation he has right to take action
against other party for the non fulfillment
of the promise as the reasonable time.
 Attempted Performance or Offer to
Perform:-

An offer to perform ones obligations

under a contract is called tender.

It is also called attempted performance

because though the promisor has offered
to fulfill his obligation under the contract,
the performance is not complete unless the
offer of performance is accepted by the
promisee.
 Essentials of Valid Tender
1. It should be unconditional.

2. It should be and offer to perform in

full.

3. Tender for the performance of the

contract must be made at the fixed
time and place or at a proper time
and place.
4. Tender should be made to the
proper person.

5. It should be made by a person

who is in a position, and willing to
perform the promise.

6. It may be made to one of the

several joint promisee.
7. Tender for the delivery of goods
must be for the quantity and
quality agreed upon.

8. Reasonable opportunity must be

provided to the promisee to
inspect and satisfy himself about
the quality of the product.
Effect of refusal of a party to perform
promise wholly:-

When a party to a contract refuses to

perform, or disables himself from performing,
his promise entirety, the promisee may put an
end to the contract.

But if the promisee has signified by words or

conduct his acquiescence in the continuance
of the contract, he cannot repudiate it.
2. Discharge by Mutual Consent
or Agreement

Since a contract is created by means of

an agreement it may also be discharge
by another agreement between the
same parties. Following are the methods
of discharging the contract on mutual
consent basis:-
Novation

Alteration

Rescission

Remission

Waiver.
 Novation
Novation occurs when a new contract is
substituted for an existing contract, either
between the same parties or between
different parties, the consideration mutually
being the discharge of the old contract.

Note;- When both the parties go for novation

the old contract need not to be perform.
 The following points should be
remembered in connection with novation:-
1. Novation is not compulsory it is based
upon mutual consent of all the parties.

2. The new contract must be valid and

enforceable. If it suffers from any legal
flaw e.g. want a proper stamp or
registration than the old contract revives.
( Mahabir vs satya narayan).
 Alteration
Alteration of contract means change in
one or the other material term of the
contract.
Even a small change in written can cause
and alteration.
Again alteration is done on mutual
consent.
In case of absences of mutual consent,
any change in material of contract can
result as a void and will be discharge by
operation of law.
 Rescission
A contract may be discharged, before the
date of performance by the agreement
between the parties this is known as
Discharging the contract through Rescission.
The parties can also treat silent or implied
rescission a ground to discharge the contract
A law here cannot compel the party to take
action against each other due to non-
performance.
In the case of Rescission the existing
contract is cancelled or discharge and no new
contract is formed.
 Remission
Remission means the acceptance of a lesser
sum as mentioned in contract in favor of
whole amt of the contract without any
consideration invokv

The agreement to extend the time for the

performance of a promise also does not
require consideration to support it on the
ground that it is a partial remission of
performance.
 Waiver
Wavier means the deliberate
abandonment or giving up a right which a
party is entitled to under a contract,
whereupon the other party to the
contract is freed from his obligation.

Again there must be mutual consent for

discharging the contract.
3.Discharge by Subsequent or
supervening Impossibility

This section deals with those impossible

act which we come across during the
performance of the contract.

Any contract containing any act which the

party know is impossible right in the
beginning it will be termed as void-ab-initio
But if the impossibility is came to be known after
getting into the contract than the promisee can
claim for the compensation and discharge the
contract.

Discharge of contract in case of subsequent

Impossibility:-
A contract to do an act which, after the contract is
made become impossible, or , by reason of some
event which the promisor could not prevent,
unlawful, becomes void when the act become
unlawful or impossible is the reason of discharging
a contract.
This is known as Doctraine of supervening
impossibility.
 This section has following conditions to be
fulfilled:-

1. The act should have become impossible.

2. That impossibility should be by reason of

some event which the promisor could not
prevent.

3. The impossibility should not be self

inducement by the promisor or due to its
negligence.
 Cases where the doctrine of Supervening
impossibility applies

A contract will be discharged in the following

cases:-
1. Destruction of Subject-matter:-
When the subject-matter of a contract,
subsequent to its formation, is destroyed
without the fault of the promisor or
promisee, the contract is discharge. It is
applicable only when the good is damaged
that can not be regained.
 E.g.- If a factory premises on which a
machinery is to be installed are destroyed
by fire, or a ship under a charter party is
seized by the foreign govt than the
contract will be .
(Tatem Ltd. Gamboa)
2. Failure for ultimate purpose:-
Where the purpose for which the contract
was done fails the contract is discharged.
Although here there is no destruction of the
property.

E.g.- H hired a room in London from K with the object

as both the parties well knew of using the room to
view the intended coronation procession of King
Edward VII on a particular date. By reason of Kings
illness the procession was not done thus H was not
able to use the room for the purpose so it was
decided that he has no obligation to pay the rent to
k as K also knew the fact.
(Krell vs Henry)
3. Death of Personal incapacity of
Promisor:-

Where the performance of a contract

depends upon the personal skill or
qualification or the existence of a given
person, the contract is discharge on the
illness or incapacity or death of that person.
4. Change of Law:-

A subsequent change in law may render the

contract illegal and in such case the contract
is deemed discharged.

5. Outbreak of War:-
All contract entered into with an alien enemy
during the war is illegal and void ab-initio.
Contracts entered before the war are
usually suspended during the war time.
 Cases where the doctrine of Supervening
impossibility do not applies

A contract when entered has to be either

perform or ready to pay compensation due
to non performance . Below are the cases
where the doctrine of supervening will not
be considered for the discharge under this
head.

1. Difficulty of Performance:-
Increased and unexpected difficulty in performing
the act is not considered a reason for discharging
contract.
2. Commercial Impossibility
When in a transaction the level of profit dwindle
down to very low or even the loss is confirm due to
expensive raw material ,etc it is said as
commercial Impossibility under which a contract
cannot be discharge.
3. Impossibility due to the default of third
Party:- Third person on which either party was
relies and due to whose default the contract is
not performed impossibility under this is not
taken into the consideration.
4. Strikes and Lock out:-
A non performance due to strikes
of the employees is something which can
be managed it self hence it can not be
treated as a n excuse.

5. Failure of one of the object:-

When a contract is entered into for the
several objects, the failure of one of them
does not discharge the contract.
3. Discharge due to lapse of time

Every contract must be performed within a

fixed period of time as specified in the
contract or within a reasonable time. Delay
in which entitle the party not at fault to
discharge it and claim for the loss incurred.

The Limitation Act here says that action

against the faulty must be taken with in
specified period, called Period of limitation.
4. Discharge due to Operation
of Law
A contract is terminated by operation
of law in the following cases:-

Death:-
Where the contract is of a personal
nature the death of the person leads to
discharging of the contract. It can not be
passed on to its legal representative.
2. Insolvency :-
A contract is discharged by the insolvency of one of
the parties to it when an Insolvency Court passes a
judgment regarding discharge of contract and make
the person insolvent free from all kind of obligations.
3. Merger :-
where an inferior right contract merges with the
superior right contract, the former stands discharge
automatically.
4. Loss of evidence :-
In case there is destruction of evidence proving the
existence of the contract it is discharged.
5. Material Alteration:-

Any material alteration made intentionally

with out the consent of other party direct
contracts discharge. A single alteration in
material will make the contract void and
hence can not be enforced.
7. Discharge By Breach of
Contract

Breach means Failure of a Party to

Perform his or her obligation under a
contract. It can be classified as:-
Breach

Actual Anticipatory
1. Actual Breach :-
Actual breach is when the party fails to
perform his obligation at the specified time
mentioned in the contract or agreed upon.

2. Anticipatory Breach :-
An anticipatory breach of contract is a
breach of contract occurring before the
time fixed for performance is arrived. It
may take place in 2 ways :-
(a) Expressly by words: In this a party either
in written or verbally express his desire
for the non- performance of act before
the time of its completion mentioned.
(b) Expressly by words: In this a party by his
voluntary act disables himself from
performing the contract. In this case also
the contra ct is put to an end.
Effects of Anticipatory Breach:
When there is an anticipatory breach of
contract, the promisee is excused from
performance or from further performance
and as an option whereby:-
(i) He may either treat the contract as
rescinded and sue the other party for
damages for breach of contract
immediately without waiting until the due
date of performance.
(ii) He may elect not to rescind but to treat
the contract as still operative and wait till
the time of performance and hold the
party responsible for the consequences of
non-performance.