Strategic Planning Process of developing and maintaining a strategic fit between the organization's goals and capabilities and its changing marketing opportunities

1. Legal Environment of
Business
Lecture 6 Discharge of Contract &
Remedies
by
Dr Nazrul Islam, LLB, MBA, PhD

2. 1–2
AFTER STUDYING THIS CHAPTER,
YOU SHOULD BE ABLE TO LEARN:
AFTER STUDYING THIS CHAPTER,
YOU SHOULD BE ABLE TO LEARN:
 Definition of Discharge
 Modes of Discharge of Contract
 Remedies of Breach of Contract
LEARNINGOBJECTIVES

3. 1–3
Definition of DischargeDefinition of Discharge
Discharge of a contract means termination of
the contractual relations between the parties
to a contract.
A contract is said to be discharged when the
rights and obligations of the parties under the
contract come to an end.

4. 1–4
Modes of DischargeModes of Discharge
1. By Performance
2. By Mutual Agreement
3. By Operation of Law
4. By Impossibility of Performance
5. By Lapse of Time
6. By Breach of Contract

5. 1–5
Modes of DischargeModes of Discharge
1. Discharge by Performance
(i) By actual performance
A contract is said to be discharged by
actual performance when the parties to
the contract perform their promises in
accordance with the terms of the
contract.

6. 1–6
Modes of DischargeModes of Discharge
1. Discharge by Performance
(ii) By attempted performance or tender
So far as the tenderer of performance is
concerned, a contract is said to be
discharged by attempted performance
when the promisor has made an offer of
performance to the promisee but it has not
been accepted by the promisee.

7. 1–7
Modes of DischargeModes of Discharge
2. Discharge By Mutual Agreement
(i) Novation: Novation means the
substitution of a new contract for the
original contract. Such a new contract
may be either between the same parties
or between different parties. The
consideration for the new contract is the
discharge of the original contract.

8. 1–8
Modes of DischargeModes of Discharge
(i). Novation, Example,
A owes money to B under a contract. It is
agreed between A, B, & C that B shall
henceforth accept C as his debtor, instead of
A. The old debt of A to B no longer exists and
a new debt from C to B has been contracted.

9. 1–9
Modes of DischargeModes of Discharge
2. Discharge By Mutual Agreement
(ii) Rescission: Cancellation of the
contract.
Example: X promises Y to sell and deliver 100
bales of cotton on 1st
October at his godown and
Y promises to pay for goods on 1st
November. X
does not supply the goods. Y may rescind/cancel
the contract.

10. 1–10
Modes of DischargeModes of Discharge
2. Discharge By Mutual Agreement
(iii) Alteration
Alteration means a change in the terms of
a contract with mutual consent of the
parties. Alteration discharges the original
contract and creates a new contract.
However,, parties to the new contract
must not change.

11. 1–11
Modes of DischargeModes of Discharge
(iii) Alteration, Example
X promises to sell and deliver 100 bales of
cotton on 1st
Oct. and Y promises to pay for
goods on 1st
Nov. Afterwards, X and Y mutually
decided that the goods shall be delivered in five
equal installments at Z’s godown. Here, original
contract has been discharged and a new contract
has come into effect.

12. 1–12
Modes of DischargeModes of Discharge
2. Discharge By Mutual Agreement
(iv) Remission
Remission means acceptance by the promisee
of a lesser fulfillment of the promise made.
Example: A promises to paint a picture for
B, B afterwards forbids him to do so. A is no
longer bound to perform the promise.

13. 1–13
Modes of DischargeModes of Discharge
2. Discharge By Mutual Agreement
(v) Waiver
Waiver means intentional relinquishment
of a right under the contract. Thus, it
amounts to releasing a person of certain
legal obligation under a contract.

14. 1–14
Modes of DischargeModes of Discharge
(v) Waiver, Example
A promises to supply goods to Y. Subsequently,
Y exempts X from carrying out the promise.
This amounts to waiving the right of
performance on the part of Y.

15. 1–15
Modes of DischargeModes of Discharge
3. Discharge by Operation of Law
(i) By death of the promisor
(ii) By Insolvency
(iii) By the unauthorized material
alteration
(iv) By the identify of promisor and
promisee

16. 1–16
Modes of DischargeModes of Discharge
3. Discharge by Operation of Law
(i) By death of the promisor
A contract involving the personal skill or
ability of the promisor is discharged on the
death of the promisor.

17. 1–17
Modes of DischargeModes of Discharge
3. Discharge by Operation of Law
(ii) By Insolvency
When a person is declared insolvent, he is
discharged from his liability up to the date
of his insolvency.

18. 1–18
Modes of DischargeModes of Discharge
3. Discharge by Operation of Law
(iii) By Unauthorized Material Alteration
If any party makes any material alteration
in the terms of the contract without the
approval of the other party, the contract
comes to an end.

19. 1–19
Modes of DischargeModes of Discharge
3. Discharge by Operation of Law
(iv) By the Identity of Promisor and
Promisee
When the promisor becomes the promisee,
the other parties are discharged.

20. 1–20
Modes of DischargeModes of Discharge
3. Discharge by Operation of Law
(iv) By the Identity of Promisor and
Promisee, Example
X draws a bill receivable on Y who accepts the
same. X endorses the bill in favor of Z who in
turn endorses in favor of Y. Here, Y is both
promisor and promisee and hence the other
parties are discharged.

21. 1–21
Modes of DischargeModes of Discharge
4. Discharge By Impossibility of
Performance
(i) Effects of initial impossibility
Initial impossibility means the impossibility
existing at the time of making the contract.
Example, X agrees to sell his horse to Y.
Unknown to both the parties, the hose was dead
at the time of making the agreement. The
agreement is void.

22. 1–22
Modes of DischargeModes of Discharge
4. Discharge By Impossibility of
Performance
(ii) Effects of supervening impossibility
Example, X contracts to sing for Y at a
concert for Tk. 1,000 which is paid in
advance. X is too ill to sing. X must
refund Tk. 1,000 to Y.

23. 1–23
Modes of DischargeModes of Discharge
5. Discharge by Lapse of Time
A contract is discharged if it is not performed or
enforced within a specified period called period
of limitation. The Limitation Act 1963, has
prescribed that exercising right to recover debt
is 3 years and for immovable property it is 12
years.

24. 1–24
Modes of DischargeModes of Discharge
6. Discharge by Breach of Contract
(i) Anticipatory breach of contract
(ii) Actual breach of contract

25. 1–25
Modes of DischargeModes of Discharge
6. Discharge by Breach of Contract
(i) Anticipatory breach of contract
Anticipatory breach of contract occurs
when the party declares his intention of
not performing the contract before the
performance is due.

26. 1–26
Modes of DischargeModes of Discharge
6. Discharge by Breach of Contract
(ii) Actual breach of contract
Actual breach of contract occurs in the
following two ways.
(a)On due date of performance
(b) During the course of performance

27. 1–27
Modes of DischargeModes of Discharge
6. Discharge by Breach of Contract
(a) On due date of performance
If any party to a contract refuses or
fails to perform his part of the contract
at the time fixed for performance , it is
called an actual breach of contract on
due date of performance.

28. 1–28
Modes of DischargeModes of Discharge
6. Discharge by Breach of Contract
(b) During course of performance
If any party has performed a part of the
contract and then refuses of fails to
perform the remaining part of the
contract, it is called an actual breach of
contract during the course of
performance..

29. 1–29
Consequences of Breach of ContractConsequences of Breach of Contract
The aggrieved party is discharged from
his obligation and gets rights to
proceed against the party at fault.

30. 1–30
Any Questions?Any Questions?