Discharge Of Contract

Topics Coverage

Defination

Modes of Discharge Of Contract

Discharge Of Contract

Discharge of contract means Termination of the contractual relations between parties to the contract

A contract is discharged when rights and obligations created by it comes to an end.

Contracting parties no more have any responsibility or liability to each other.

Modes of Discharge Of Contract

By Performance

By Impossiblity Of Performance

Mutual Agreement

Lapse of Time

Operation of Law

Breach of Contract

Discharge Of Contract by Performance

This is the obvious mode of discharge of contract Parties have done whatever was contemplated

(considered) under the contract

Eg: A contracts to sell his car to B for Rs. 2 Lacks, as soon as the car is delivered to B and B pays the agreed price for it, the contract comes to an and by performance.

Impossibility Of Performance

Impossibility may be inherent in the transaction

Eg: A promissed to pay Rs 50000 to B, if he rides on a horse to the moon

Impossibility may emerge later due to change of other circumstances Sec 56.

Eg: An agreement to do an act impossible in itself is void.

Mutual Agreement

By novation, alteration or recession (Sec.62), remission or waiver (Sec.63)

If the parties to a contract agree to substitute a new contract for it or to rescind oralter it, the original contract need not be performed (it is discharged).

There are six ways.

Mutual Agreement - Novation

Substitution of new contract for the original one Between the same or different parties Requires consent of all the parties (including the

new one, if any) Discharge of old contract is considered sufficient

consideration for the new one. Novation must take place before the expiry of

the original contract

Eg: A owes money to B, B to C, if B agrees that A pays to C, the original contract is discharged.

Mutual Agreement – Rescission Sec 62.

Cancellation of all or some of the terms of the contract

Requires mutual consent of all the parties.

Eg: A promises to supply certain goods to B six months after date. By that time the goods go out of fashion. A and B may rescind the contract.

Mutual Agreement – Alteration

If the parties mutually are to change the certain terms of the contract, it effects to terminate the original contract, and new contract is signed.

Eg: A enters into a contract with B for the supply of 100 bottles, later asks to supply 200 bottles. This is alteration of contract.

Mutual Agreement – Remission Sec 62.

It is acceptance of a lesser sum than what was contracted for or a lesser fulfillment of promise made.

Eg: A owes B Rs 5000. A pays to B Rs 4500, who accepts, in satisfaction. This discharges the whole claim.

Mutual Agreement – Waiver

Waiver takes place when the parties to a contract agree that they shall no longer be bound by the contract.

This amount to a mutual abandonment of rights by the parties to the contract.

Eg: A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

Mutual Agreement – Merger

Merger takes place when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under the same or some other contract.

Eg: P holds a property under a lease. He later buys the property. His right as a lessee merge into his right as an owner.

By Lapse Of Time

The price of goods sold without any stipulation as to credit should be paid within three years of the delivery of the goods. Where goods are sold on credit to be paid for after the expiry of a fixed period of credit, the price should be paid within three years of the expiry of period of credit. If the price is not and creditor does not file a suit against the buyer for the recovery of price within three years, the debt becomes time-barred and hence irrecoverable

By Breach Of Contract

‡Breach of contract may be, (1)Actual Breach of contract. (2)Anticipatory or Constructive Breach of contract.

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ActualBreach of contract

‡Case: (cort vs ambergate) C contracted with a railway company to supply it

3000 tons of railway chairs at a certainprice, to be delivery in installments. After 1787 tons had been supplied, the railway company asked c to deliver no more. Held, c could bring an action for breach of contract

AnticipatoryBreach of contract

‡Case: (Lovelock v. Franklyn ) A promised to assign to B, within seven years

from the date of his promise, all his interestin a lease for the sum of Rs 140. Before the end of seven years he assigned his interest to implied repudiation

By Operations Of Law

A contarct may be dischargedindependently of the wishesof the parties,i.e. by operations of law.

By Death By Insolvency By Change Of Law By Outbreak of War