Discharge of Contract2

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DISCHARGE OF CONTRACT

Presented by :Nimesh Prajapati


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Discharge of contract:

Discharge of a contract refers to aprocess, by which the rights and

obligations arising out of a contractcome to an end. Thus, discharge ofa contract means termination of acontract.


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1. By performance

2. By mutual consent or agreement

3. By subsequent or superveningimpossibility or illegality

4. By lapse of time

5. By operation of law6. By breach of contract.

A contract may be discharged in any of

the following ways:


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Actual performance

Attempted performance or Tender

Discharge by performance


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Discharge by mutual consentor agreement:

Novation: when a new contract is substituted for anexisting contract, either between the same parties ordifferent parties, the consideration for such contract

being the discharge of the old contract. Where the contract is between same parties, then

the nature of the obligations must be alteredsubstantially or else it shall amount to alteration &not novation.

Novation cannot be compulsory, it has to be with themutual consent of all the parties.

The new contract must be valid & enforceable, if itsuffers from any legal flaw, then the original contract

shall revive.


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Alteration:

Alteration of a contract refers to change inone or more of the material terms of awritten contract.


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Rescission:

Rescission of a contract means cancellation ofan existing contract without substituting a newcontract in its place.

A contract is said to be discharged byrescission, when the parties come to anagreement, before the date of performance,that the contract is no longer binding on them.

The consideration for such an agreement isabandonment of their respective rights underthe contract, thus releasing each other of theircontractual obligations.


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Contd..

An agmt. for rescission of contract is to bedistinguished from agmts in restraint oflegal proceedings which are void underthe Act. An agreement for rescission is anagmt. out of mutual consent to excuseperformance of contractual obligations.

Thus, an agmt to excuse performance isvalid, where as an agmt not to sue for

breach is void.


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Remission:

It is the acceptance of a lesser sumor lesser fulfillment of the promisemade.

A promisee may remit either entireor a part of the promise made to himand a promise to do so is bindingeven though there is noconsideration for it.

An agmt to extend the time for theperformance of the promise does not

require consideration either.


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Waiver:

The deliberate abandonment of aright which a party has acquiredunder the contract, where upon the

other party is released from hisobligation is waiver.


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Subsequent impossibility orillegality:

A contract to do a particular act, whichbecomes impossible or illegal, due to anevent which the promisor could not prevent,

becomes void and stands discharged. The impossibility should be beyond the

control of the promisor and not be selfinduced.

In order to render an act impossible, it issufficient if it has become impractical,useless or extremely hazardous.


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Cases not covered undersupervening impossibility:

Difficulty of performance: increased difficultyor expense.

Commercial impossibility: when actual loss

becomes certain. Default of third party: failure on the part of a

third party on whom the promisor relied.

Strikes & lock-outs: the former ismanageable & the latter is self-induced.

Failure of one of the objects


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Lapse of time:

Where time is the essence of contract &one of the party fails to perform hispromise within the stipulated time, the

other party is discharged from performinghis promise & can claim damages.

Where there is failure to perform thepromise by both parties to the contract for

a long period, the contract standsdischarged.


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Operation of law:

Death: contracts involving personal skill or ofa personal nature, stand discharged with thedeath of the promisor.

Insolvency: when the insolvency court passesan order of discharge, the contract standsdischarged.

Merger: where an inferior right contract

merges with a superior right contract, theformer stands discharged automatically.

Unauthorized material alteration: rendersthe contract void and hence it stands

discharged.


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Breach of contract:

Breach of contract brings an end tothe obligations arising out of acontract, and hence the contract

stands discharged.

The aggrieved party can sue fordamages.

Breach of contract may beanticipatory or actual.


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Anticipatory breach:

Such a breach occurs before the timestipulated for performance has arrived.

Anticipatory breach may be express or

implied. The aggrieved party may sue the other party

for breach, immediately or wait until the duedate arrives and then sue.

Where he chooses to wait until the due date,the contract remains in operation and theother party may either perform his part of thecontract or take advantage of any supervening

impossibility.


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Actual breach:

Actual breach occurs when a partyfails to perform his obligations uponthe date fixed for performance of

contract.

There can be no actual breach solong as the time for performance has

not yet arrived. The aggrieved party may sue for

damages.

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Discharge of Contract2