2. A contract is said to be discharged or terminated when
the rights and obligations created by it are terminated.
The following are the various modes in which a contract
may be discharged:
Discharge by agreement
Discharge by operation of law
Discharge by breach
Discharge by performance
Discharge by impossibility
Discharge by lapse of time
3. Discharge by Agreement:
A contract is created by the parties to it. Similarily, it
can also come to an end by their mutual
agreement.
The rights and obligations created by an agreement
can be discharged without their performance by
means of another agreement between the parties
which provides for the termination of the of the
earlier rights and obligations.
4. The parties may agree to terminate the existence of the
contract by any of the following ways:-
1) Novation:- (the replacement of one obligation by
another by mutual agreement of both parties)
It means that there being a contract in existence some
new contract is substituted for it, either between the
same parties or between different parties.
Novation may occur in two ways:
1) New parties substituted for the old one.
2) Parties may substitute new contract for the old one.
Eg. A owes money to B under a contract. It is agreed between
A, B and C that B shall accept C as his debtor instead of
A. The old debt of A to B is at an end and a new debt from
C to B has been contracted.
5. Essentials of novation:-
Novation occurs with the consent of all the
parties.
The new contract must be one which is capable of
being enforced at law.
The agreement to substitute the new contract for
the old must be made before the expiry of the
time of the performance of the original contract.
6. 2) Alteration:-
It means a change in one or more of the
terms of a contract.
Alteration is valid if it is done with the consent of all the
parties to the contract.
In alteration, unlike novation, there is change in the
terms of the contract but no change of the parties.
Alteration made with the consent of all the parties
results in the discharge of the original contract.
Eg. A enters into a contract with B for the supply of a
1000 kg of wheat at his warehouse on 1st July 1980.
Later both A and B agree to postpone the date of
delivery to 1st Sept.1980. This change amounts to
alteration of the contract.
7. 3) Rescission:- (cancellation of a contract)
If the parties to a contract agree to rescind it , the
original contract need not be performed.
4) Remission:-
It means acceptance of lesser amount or lesser
degree of performance than what was actually due
under the contract.
It is unilateral act of the promisee discharging at his
will and pleasure of the obligation of another.
Eg. A owed large sums of money to B. C offered to pay
lesser sum in satisfaction of B’s claim on A. B
accepted it. It was held that the acceptance was in
full satisfaction and B can’t claim balance from A
after receiving payment in full satisfaction.{kapur
chand v. Himayat Ali khan }
8. Discharge by Performance
Performance of a contract is one of the most usual ways
of discharge of a contract. The performance of a
contract lies in doing or causing to be done what the
promisor has promised to do.
On the performance of the obligation undertaken by the
parties, the contract is automatically discharged.
9. Discharge by Operation of Law
Insolvency: Upon insolvency, the rights and
liabilities of the insolvent are, with certain exceptions
transferred to an officer of the court , known as official
assignee .Hence insolvent person is discharged from
all his previous liabilities.
Merger : When an inferior right contract is merged
into superior right contract, the former is discharged
automatically.
Eg. When a part time employee is made full time ,
the contract of part-time employment is discharged by
merger.
10. Alteration:-
An alteration of a written contract made without
the consent of the other party has the effect of
discharging the contract provided the alteration is of a
material part.
Death:-
Where performance of a contract is required to be
made in person and the personal qualifications of the
promisor are the considerations for the contract, the
death of the promisor discharges the contract.
In other contracts, the rights and liabilities of a such
person pass to his legal representatives.
11. Discharge by Breach
Parties to a contract are expected to perform their
respective obligations. If any party fails to perform his
obligation, there takes place a breach of contract.
The breach of contract may be:
Actual or
Anticipatory
12. Actual Breach:-
a) Breach of contract when performance is actually due:-
When a person does not perform his part of the
contract at the time it is due, he will be liable for its breach.
b) Breach during the performance of the contract:-
where a party to a contract performs his part of the
contract, but the other party alleges that it is not a proper
performance, according to the terms of the contract.
Anticipatory Breach of Contract:
A refusal by the promisor to perform his part of the contract ,
before the due date of performance is known as
anticipatory breach of contract. It is a breach of contract
occurring before the time fixed for performance has
arrived either by the promisor refusing to perform his
promise or by disabling himself from performing his
promise.
13. Discharge by impossibility of Performance
Impossibility of performance results in the discharge of
the contract. Agreements which are impossible in
itself are void because law does not compel the
impossible.
Thus, a promise by A that he will raise a mango tree in
one hour in B’s garden by the use of mantras is void.
15. Parties to a lawful contract are bound to perform their
respective obligations. But when one of the parties
refuse to perform his obligations , he is said to have
committed a breach of the contract.
In case of breach of contract, the law provides the
following remedies to an injured party:
1) Cancellation or Rescission
2) Restitution
3) Specific performance
4) Injunction
5) Quantum Meruit
6) Damages
16. Cancellation or Rescission:
Rescission is the revocation of a contract. It is the way
by which a contract may be discharged. Where one of the
parties to a contract commits breach, the other party may
treat the contract as rescinded. He is free from all the
obligations under the contract.
Under Section 64, the party rescinding a voidable contract
shall, if he has received any benefit from another party ,
restore such benefits to that person from whom it was
received.
Eg.
A singer contracts with B, the manager of theatre to sing at
his theatre for two nights in every week during the next two
months and B promises to pay him Rs.100 for each night
performance. On the sixth night A wilfully absents himself
from the theatre and B in consequence rescinds the
contract. B is entitled to claim compensation for the
damage which he has sustained through the non-fulfilment
of the contract.
17. Restitution:
It means return of the benefit received by one party to the
contract from the other party under a void contract.
When a contract becomes void it need not be performed by
either party.
Section 65 provides that when an agreement is discovered to
be void or when a contract becomes void, any person who
has received any advantage under such agreement or
contract is bound to restore it or to make compensation for
it.
Eg.
A pays B Rs.1000 in consideration of B’s promising to marry
C, (A’s daughter). C is dead at the time of promise. The
agreement is void (impossibility of performance) but B
must repay A Rs. 1000.
18. Specific Performance:
Under certain circumstances a person aggrieved by the
breach of the contract can file a suit for specific
performance, i.e., for an order by the court upon the
party guilty directing him to perform what he
promised to do.
Specific performance is allowed only in a limited number
of cases.
Some of the cases in which specific performance of
the contract may be enforced are:
Where monetary consideration is not an adequate
remedy for the breach of a contract.
When there exists no standard for ascertaining the
actual damage caused.
