MODE OF DISCHARGE OF CONTRACTS

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MODE OF DISCHARGE OF CONTRACTS

• PROF. V.N. PARTHIBAN, FICWA, LLM, ACS, FIII,
  AIII, ATC

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• Introduction
• A contract is discharged when the rights and
  obligations created between the parties come to
  an end. Discharge or termination of contracts
  mean termination of contractual relations between
  the parties to a contract.

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• Contracts may be discharged or terminated by any
  one of the following modes
• By performance
• By consent or agreement
• By impossibility
• By lapse of time
• By operation of law
• By breach of contract
• By material alteration

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• Discharge by Performance
• Every person who is bound by an obligation must
  be ready to perform it at the time when he had
  promised to perform it (Sect. 37). No
  difficulties arise when the contract is fully
  performed, nor are there any serious difficulties
  when the contract consists of an absolute promise
  by A made to B for a consideration already
  received. Thus, when A contracts to sell his car
  to B for Rs.85,000 and as soon as the car is
  delivered to B and B pays the agreed price for
  it, the contract comes to an end by performance.

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Tender

• TENDER
• The offer of performance or tender has the same
  effect as performance. If a promisor tenders
  performance of his promise, but the other party
  refuses to accept it, the promisor stands
  discharged of his obligation.

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• Discharge by Mutual Consent (Sec. 62)
• If the parties to a contract agree to substitute
  a new contract for it, or to rescind it or alter
  it, the original contract is disbarred. A
  contract may terminate by mutual consent in any
  of the following ways.
• Novation
• Novation means substitution of a new contract for
  the original one. The new contract may be
  substituted either between the same parties, or
  between different parties.

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• Rescission
• Rescission means cancellation of all or some of
  the terms of the contract. Where parties mutually
  decide to cancel the terms of the contract, the
  obligations of the parties there under terminate.
• Alteration
• If the parties mutually agree to change certain
  terms of the contract, it has the effect of
  terminating the original contract. There is,
  however no change in the parties.
• Remission
• Remission is the acceptance of a lesser sum than
  what was contracted for, or a lesser fulfillment
  of the promise made (Sec. 63).

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• Waiver
• Waiver means relinquishment or abandonment of a
  right. When a party waives his rights under the
  contract, the other party is released of his
  obligations.
• 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.
• Merger
• A contract is said to have been discharged by way
  of merger where an inferior right possessed by a
  person coincides with a superior right of the
  same person.

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• Discharge by Impossibility of Performance
• The law relating to discharge by impossibility of
  performance of a contract is laid down in Sec. 56
  of the Contract Act. According to the Section
• An agreement to do an act impossible in itself
  is void. A contract to do an act which, becomes
  impossible after the contract is made, or by
  reason some event which the promisor could not
  prevent, is unlawful, becomes void.

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Subsequent or Supervening Impossibility

• Destruction of subject-matter When there is a
  contract in respect of a particular
  subject-matter, which is, later destroyed without
  the fault of the parties, the contract is
  discharged.

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• Non-existence of a state of things necessary for
  performance When a contract is entered into on
  the basis of the continued existence of a certain
  state of things, the contract is discharged if
  the state of things changes or ceases to exist.
• Death or personal incapacity
• Subsequent illegality When by a subsequent
  legislation, the performance of a contract is
  forbidden by law, the parties are absolved from
  the liability to perform it.

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• Declaration of war If war is declared between two
  countries, subsequent to the making of the
  contract, the parties would be exonerated from
  its performance.
• Difficulty of performance The mere fact that a
  performance is more difficult or expensive or
  less profitable than the parties anticipated does
  not discharge the duty of performance. Increased
  or unexpected difficulty and expense do not, as a
  rule, excuse from the performance.

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Discharge by Operation of Law

• Discharge under this head may take place as
  follows
• By merger
• By unauthorized alteration of terms of a written
  document
• By insolvency
• By death

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• Discharge by Breach of Contract
• A contract terminates by breach of contract. The
  breach of a contract may be
• Actual breach of contract
• Constructive or anticipatory breach of contract.
• The actual breach may take place
• At the time when performance is due, or
• When actually performing the contract

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• Actual Breach of Contract
• Breach at the time when performance is due When
  a person fails to perform a contract when the
  performance is due, the other party can hold him
  liable for breach.

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• Breach during the performance of the contract
  When a party apparently performs the promise but
  the other party says that it is not a proper
  performance, according to the contract, the
  question arises whether there is a breach of
  contract exonerating the other party from the
  performance of his part of the bargain.

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• Anticipatory Breach Contract
• Anticipatory breach of contract occurs, when a
  party repudiated it before the time fixed for its
  performance has arrived, or when a party by his
  own act disables himself from performing the
  contract.

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REMEDIES FOR BREACH OF CONTRACT

• In case of breach of contract, the law provides
  the following remedies to a injured party
• Cancellation or rescission
• Restitution
• Specific performance
• Injunction
• Damages
• Quantum meruit

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• Thank You