A contract is a legally binding agreement or contract is an agreement creating and defining obligations between parties According to section 2(h) of Indian Contract Act,1872 An agreement which is enforceable by law is contract. In order to create a valid contract, According to Sec.-10 of contract Act,1872 there must be:- An Agreement ( offer + acceptance) Sec.-2(e) Competent parties (major,sound mind,not otherwise disqualified) Free consent (sec.-14) Lawful Consideration Lawful object Contract should not be declared void by contract act.(ex:- sec.-26,27,28,29,30,56) Other requirements should be fulfilled (written,registration,witness)Discharge: To discharge a contract is to end the obligation by agreement or by carrying it outDischarge of contractDischarge of a contract refers to a process, by which the rights and obligations arising out of a contract come to an end or the parties are released from their obligations in the contract Thus, discharge of a contract means termination of a contract.Why we need to discharge of contracts? It is the act of making a contract or agreement null. A discharged contract refers to contract that is fully performed. We need to discharge the contract because of:-7. Confusion, where the duty to pay and the right to receive unite in the same person.Non performance of contract or when the performance falls due8. Extinction, or the loss of the subject matter of the contract.10. The inability of one of the parties to fulfill his/her part.11. The death of the contractor, as where s/he undertook to teach an apprentice.12. Bankruptcy.13. lapse of time.14. neglecting to give notice to the, person charged.17. the discharge of a defendant, who has been arrested under a capiases amd satisfaciendum.18. certificate and discharge under the bankruptcy laws.Ways of discharge of contractsA contract can be discharged in any of the 6 following ways: 1. By performance (sec.-37 to 55)2. By mutual consent or agreement.(sec.- 62,63,64)3. By impossibility of performance. (sec.-56) 4. By lapse of time5. By operation of law6. By breach of contract. (sec.-39)DISCHARGE BY PERFORMANCEPerformance means the doing of that which is required by a contract. Discharge by performance takes place when the parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed. In such a case the parties are discharged and the contract comes to an end. But if only one party performs the promise,he alone is discharged. Such a party gets a right of action against the other party who is guilty of breach. Usually, the parties have to perform all of their obligations in the exact way stated in the contract However, there are 4 exceptions to this Where the contract is divisible Where the contract can be completed by substantial performance Where performance has been prevented by the other party Where partial performance has been accepted by the other partyThe contract is divisiableA court may decide that parts of the contract are separate from other parts E.g. : John makes a contract with Jane to carry out improvements to her home. He installs new heaters and a new bath. If the heaters are defective but the bath is ok, then Jane can refuse to pay for the heaters but she must pay for the bath.Substantial Performance A contract may be discharged by substantial performance of what was agreed In other words, the most important part is completed and only a small part is has not been done (or a small part needs to be fixed)Hoenig v. Isaacs [1952] 2 All ER 175 Contract to redecorate a flat for 750 The work was done, except for minor defects (which would cost 55 to put right) The decorator could sue for 750 though he was liable to pay back 55 in compensation Performance Prevented If one party prevents the other from performing their obligations under the contract then the contract is discharged If some work has been done before this, then the party may claim payment for the work which has been doneE.g.: John has a contract with Jane to paint her house. He starts the work, but after two days, Jane asks him not to come back because her pet cat is scared of him John can claim payment from Jane for the two days work which he has donePartial Performance Accepted The contract can be discharged if one party accepts partial performance by the other partyEg: Jim places an order with Fred for 12 bottle of wine. However, Fred can only supply 10 bottles. Jim could refuse to accept the 10 bottles However, he could accept 10 bottles and reduce the price he paysThat would be accepting partial performance by Fred.DISCHARGE BY CONSENT OR AGREEMENTAs it is the agreement of the parties which binds them, so by their further agreement or consent the contract may be terminated.Types of discharge by agreement or consent:-1. Novation 2. Rescission 3. Alteration 4. Remission 5. Waiver6. Merger novation: when a new contract is substituted for an existing contract, either between the same parties or different 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 altered substantially or else it shall amount to alteration & not novation. novation cannot be compulsory, it has to be with the mutual consent of all the parties. The new contract must be valid & enforceable, if it suffers from any legal flaw, then the original contract shall revive. alteration Alteration of a contract refers to change in one or more of the material terms of a written contract. Where such alteration takes place with mutual consent, then the original contract is discharged & the new altered contract comes into existence. The alteration should be material & alter the legal effect of the contract, mere correction of clerical errors does not amount to alteration. Where such alteration is made by one party, without the consent of the other party, then such alteration will render the entire contract void & none of the parties can maintain an action upon it. Unlike novation, here there is no change of parties, the parties to the contract remain the same, only the material terms of the contract are altered.Rescission Rescission of a contract means cancellation of an existing contract without substituting a new contract in its place. A contract is said to be discharged by rescission, when the parties come to an agreement, before the date of performance, that the contract is no longer binding on them. The consideration for such an agreement is abandonment of their respective rights under the contract, thus releasing each other of their contractual obligations. An agmt. for rescission of contract is to be distinguished from agmts in restraint of legal proceedings which are void under the Act. An agreement for rescission is an agmt. out of mutual consent to excuse performance of contractual obligations. Thus, an agmt to excuse performance is valid, where as an agmt not to sue for breach is void.Remission: It is the acceptance of a lesser sum or lesser fulfillment of the promise made. A promisee may remit either entire or a part of the promise made to him and a promise to do so is binding even though there is no consideration for it. An agmt to extend the time for the performance of the promise does not require consideration either.