Usefull to LLB, BBA, MBA,IMBA students.

2. DISCHARGE/ TERMINATION
DISCHARGE OF CONTRACT MEANS TERMINATION OF
CONTRACTUAL OBLIGATIONS BETWEEN PARTIES.

3. DISCHARGE OF CONTRACT
• A contract is said to be discharged ,when it
ceases to exist.
• A contract may be discharged in two ways-
 positive (by performance)
or
 negative (by breach/failure to perform)

4. Modes of discharge
1. By performance of contractual obligation.
2. By impossibility of performance.(Doctrine of
frustration)
3. By subsequent agreement.
(Novation, Remission/Waiver, Recession,
Accord And Satisfaction.
4. By Breach of Contract.
5. By lapse of Time.
6. By operation of Law.

5. 1. Discharge by performance of contractual
obligation
• A) Tender /Offer of performance- starting point
of performance of contract is called tender or
offer of performance.
• B) Performance by Joint Promisor’s.
 Devolution of Joint Liability, sec42
 Promisee may compel one or more, sec43
para1
Contribution between /among joint promisor’s
,sec43 para2
If one of them is defaulter, sec43 para3
Release of joint promisor’s, sec44

6. • C) Appropriation of Payments. (Sec59-61)
(The rule in Claytons Case)
When the debtor informs the creditor as to
appropriation ,sec59
implied appropriation, sec 59
Where the debt to be discharged is not indicated,
sec 60
Where neither party appropriates, sec61

7. 2. Discharge by impossibility of performance (sec 56)
• “An agreement to do an act impossible in itself
is void”
• Doctrine of frustration evolved from the case:
“Paradine vs Jane,1647( sue for rent due,
cause shown for non payment is German
prince invaded the realm n occupied the
property…)
• The above doctrine was overruled in the case:
Taylor vs caldwell,1863( music hall destroyed
by fire)

8. • According to sec 56, impossibility takes place
under following circumstances:-
• Impossibility existing at the time of
agreement.
Initial impossibility known to the parties
Initial impossibility unknown to the parties
• Impossibility after formation of the contract.
• Destruction of the subject matter.
• By death or incapacity of either parties
• By an act of legislature
• By non occurrence of contemplated event.

9. 3. Discharge by subsequent agreement:
• Novation/ Doctrine Of Novation (sec62):- Novation
is substitution of a new contract in place of the
existing one.
It may take place in any of the following ways:-
a. b/w same parties with same terms and conditions
b. b/w same parties with altered terms and
conditions.
c. With change of parties with same terms/conditions
d. With change of parties and with altered terms and
conditions.
Caselaw: Shankerlal Damodhar vs Ambalal Ajiadal

10. • By Remission and Waiver: Waiver means
“abandoning” the rights. According to Sec. 63 of
ICA 1872 – “When a party to the contract
abandons or waiver his rights, the contract is
discharged”.
• e.g. A promise to paint picture for B. B
afterwards forbid him to do so. A is no longer
bound to perform the promise.

11. • By Rescission. According to sec. 64 of ICA
1872 – “When a person at whose option a
contract is voidable rescinds it, the other party
thereto need not perform his promise”. He is
discharged from his liability under the
contract.
• Rescission may occur by mutual consent of
the parties or when one party fails to perform
his obligation the other party may rescind the
contract. Rescission of a contract cannot be in
part only. The entire contract must rescinded.

12. • By Accord and Satisfaction According to Sec.
63 of ICA 1872 “Every promise may dispense
with or remit the performance of promise
made to him and accept, instead of it, any
satisfaction which he thinks fit.”
• In other words “When a lesser sum is actually
paid than what is due under an existing
contract, the new contract is called “accord”&
the actual payment is called “ Satisfaction”.

13. 4. By Breach of Contract: According to sec. 39
of Indian contract Act 1872 – “When a party
to a contract has refused to perform, or
disable himself from performing his promise
in its entirety, the promise may put an end to
the contract.” In other words – “Breach of
contract occurs where a party refuses to
perform his part of the promise.

14. Breach of Contract may be - (i) Actual breach of
contract. (ii) Anticipatory breach of contract.
(i) Actual breach of contract: The actual breach
occurs during the performance of the contract
or at the time when the performance of
contract is due. one party either fails or refuse
to perform his obligation under the contract.
e.g. A agrees to deliver to B ,5 bags of sugar on 1st
Jan., He fails to do so on 1st Jan, There is a
breach of contract by A. In the above example, if
A tenders the sugar to B on the particular day,
But B for no valid reason refuses to accept
delivery, this is a breach of contract by B

15. (ii) Anticipatory breach of contract sec 39: When a
party to contract refuse to perform his part of the
contract before the actual time of the
performance of the contract is due, it is called an
“anticipatory breach of contract‟.
(a) By repudiation of contract (express
renunciation). Or
(b) By impossibility of performance (implied
renunciation).
ex: A promises to sell his car to be on before 1st
jan, but before 1st jan, A sells his car to C. Here A
had performed such a voluntary act that the
performance of his obligation towards B is
impossible and therefore, “Anticipatory breach
by impossibility” is committed.

16. 5. Discharge by lapse of time: Contract is
discharged also by lapse of time. If the
creditor does not file a suit to recover his debt
amount from a debtor within a period of
limitation as laid down under the Limitation
Act, his remedy is debarred. The contract is
terminated by virtue of the Limitation Act and
the creditor cannot recover his debt.
For example – the period of limitation to file a
money suit is 3 years. If within 3 years the
creditor fails to file a suit to recover his
amount, the debtor is discharged.

17. 6. By Operation of Law : “A contract is
discharged or terminated by the operation of
law, in the following cases –
(i) By insolvency or bankruptcy.
(ii) By death.
(iii)By merger.
(iv)Judgment of court.
(v) Alteration /cancellation of written
statement.

18. Thank you