Discharge &

Breach of
Contract

Faculty Prof.
Gourav Agrawal
Presented by
Pooja Solanki

DISCHARGE OF
CONTRACTS

The cases in which a contract is

discharged may be classified as
follows:
A. By performance or tender.
B. By mutual consent.
C. By impossibility of performance.
D. By operation of law.
E. By lapse of time
F. By breach of Contract

A. By performance or
tender:

When the contract is performed by both

the parties and there notthing remains to
do, then it is called discharge by
performance

Performance of contract is very common

way of discharge. It may be

Actual Performance
When both the parties perform their
promises.

Attempted Performance or tender

Only an off er to perform the obligation
under the contract.

B. Discharge by mutual
consent or agreement:

The termination of contract by

further agreement or consent.
Ways to do so:
1.Novation
2.Rescission
3.
4.
5.
6.

Alteration
Remission
Waiver
Merger

Discharge by mutual consent or

agreement
Novation

When a new contract is substituted for

an existing one between the same
parties

When a new contract is substituted for

an existing one between one of the
parties and a third party.

Novation should take place before the

expiry of the time of the performance
of the contract.

Discharge by mutual
consent or agreement
Rescission

Takes place when all or some of the

terms of the contract are cancelled.

Could be done by a)mutual consent or

b) when one party fails in the
performance of contract, the other
party could rescind the contract
without fear of claim of compensation.

Discharge by mutual
consent or agreement
Alteration

Modification of one or more terms

of the contract by the mutual
consent of the parties.

Discharge by mutual
consent or agreement
Remission

Remission means acceptance of

lesser sum than what is contracted
or lesser fulfilment of the promise.

Discharge by mutual
consent or agreement
Waiver
When parties to the
contract agree that they
shall no longer be bound
to the contract

Restitution
The party rescinding a voidable contract
shall, restore the benefit ,so far as may
be ,to the part if he has received under the
contract from him.

Merger
Merger of two or more rights into one
contract . When an existing inferior right
of party merges into a newly acquired
superior right by the same party , it is a
merger of rights.

C. BY IMPOSSIBILITY
OF PERFORMANCE
(a)

Inherent impossibility
Known to the parties
Unknown to the parties

(b)

Subsequent impossibility

A contracr is discharged by superventing

impossiblity in the following cases.
1.

When the subject matter of the contract is

destroyed

2.

death or incapacity of the parties

3.

change of law

4.

outbreak of war.

D. BY OPERATION OF
LAW
1. By death
2. By insolvency
3. By merger
4. Rights and liablities becoming
vested in the same person.
5. material alteration
6. loss of evidence of contract

E. By lapse of time

According to law of limitation Act 1963,

a contract should be performed with in
a specifi ed period

That period is called period of

limitation

If it is not performed and no action is

taken by the promiseee with in the
period of limitation ,he can not take
legal action in the court .

In other words , we can say that the

contract is terminated.

F. By breach

Where the promisor neither performs his

contract nor tender his performances or
where the performances is defective ,
ther eis a breach of contract.

It occurs when a party to the contract

does bnot fulfi l his contractual
obligation or makes it impossible.

Breach of contract may be

Actual Breach of Contract

Anticipatory Breach of Contract

Remedies for
Breach of
contract

WHEN A CONTRACT IS BROKEN,

THE INJURED PARTY, HAS ONE
OR
7
MORE OF THE FOLLOWING
REMEDIES:

Rescission of the contract

Suit for Damages

Suit upon Quantum Meruit

Suit for specific performance

of the Contract

Suit for injunction.

WHAT IS A REMEDY
7

A REMEDY IS
THE MEANS
GIVEN BY LAW
FOR THE
ENFORCEMENT

1. RECISSION
7

When a contract is broken by

one party, the other party
may sue to treat the contract
as rescinded and refuse
further performance. In such
a case, he is absolved of all
his obligations under the
contract.
E.g: A promises B to supply
10 Bags of cement on a

THE COURT MAY GRANT

RESCISSION, IF

Where

the contract is
voidable by the plaintiff ; or

Where

the contract is
unlawful for causes not
apparent on its face and
the defendant is more to
blame than the plaintiff.
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2. DAMAGES

Damages are the

monetary
compensation allowed
to the injured party by
the court for the loss
of injury suffered by

OBJECTS OF AWARDING DAMAGES

7

It is to put the injured party in

the same position, so far as
money can do it, as if he had
not been injured, I.e, in the
position in which he would
have
been
there
been
performance and not breach.
This
is
also
known
DOCTRINE OF RESTITUION .
(RESTITUTIO IN INTEGRUM)

as

CASE:HADLEY VS BAXENDALE
7

Xs mill was stopped by the breakdown of

a shaft. He delivered the shaft to Y, a
common carrier, to be taken to a
manufacturer to copy it and make a new
one.
X did not make known to Y that delay
would result in loss of profi ts.
By some neglect on the part of Y the
delivery of the shaft was delayed in
transit beyond a reasonable time.
Held, Y was not liable for loss of profi ts
during the period of delay as the
circumstances communicated to Y did not
show that a delay in the delivery of the
shaft would entail loss of profi ts to the
mill.

DAMAGES ARISING NATURALLY

ORDINARY DAMAGES
7
When a contract has been broken,
the
injured party can recover from the other
party such damages as naturally and
directly arose in the usual course of
things from the breach.These damages
are known as ordinary damages.

E.g.: A contracts to sell and deliver 50

quintals of Farm wheat to B at Rs.475
per quintal, the price to be paid at the
time of delivery.
The price of Wheat rises to Rs. 500 per
quintal and A refuses to sell the Wheat.
B can claim damages at the rate of Rs.25
per quintal.

In

a contract for the sale of

7 goods, the
measure of damages on the breach of a
contract is the difference between the
contract price and the market price of
such goods on the date of the breach.
If,

however, the thing contracted for is

not available in the market, the price of
the
nearest
and
best
available
substitute may be taken into account
for calculating damages.
Where

the subject matter of a contract

is goods specially made to order and
which are not marketable, the price of
the goods is the measure of the
damages.
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COMPENSATION IS NOT TO BE
GIVEN FOR ANY REMOTE OR 7
INDIRECT LOSS OR DAMAGE
E.g: A contracts to pay a sum of money
to B on a specified day. He does not pay
the money on that day.
B in consequence of not receiving money
on that day, is unable to pay his debts,
and is totally ruined.
A is not liable to make good to B
anything except the principal sum he
contracted to pay together with interest
upto the day of payment.

DAMAGES IN CONTEMPPLATION OF
THE PARTIES
7

Damages other than

those arising from the
breach of the contract
may be recovered if such
damages may reasonably
be supposed to have been
in the contemplation of
the both of the parties as
the probable result of the

VINDICTIVE OR EXEMPLARY DAMAGES

7

Damages for the breach of a contract are

given by way of compensation for loss
suff ered, and not by way punishment
for wrong infl icted. Hence,
vindictive or exemplary damages
have no place in the law of contract
because they are punitive by nature.
But in case of
(a)

Breach of promise to marry and

(b)

Dishonor of a cheque by banker

wrongfully when he possesses
suffi cient funds to the credit of the
customer, the Court may award
exemplary damages.

NOMINAL DAMAGES
7

Where the injured party has not in fact

suffered any loss by reason of the breach
of a contract, the damages recoverable
by him are nominal.
CASE : BRACE VS CALDER
A firm consisting of four partners
employed B for a period of two years.
After six months two partners retired, the
business being carried on by the other
two.
B declined to be employed under the
continuing partners.
Held, he was only entitled to nominal
damages as he had suffered no loss.
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DAMAGES FOR LOSS OF REPUTATION

These are generally not recoverable.
7

An exception to this rule exists in the

case of a banker who wrongfully
refuses to honor a customers cheque.
IF the customer happens to be a
tradesman, he can recover damages
in respect of any loss to his trade
reputation by the breach.
And the rule of law is : THE SMALLER
THE AMOUNT OF THE CHEQUE
DISHONOURED, THE LARGER THE
AMOUNT OF DAMAGES AWARDED. BUT
IF THE CUSTOMER IS NOT A
TRADESMAN, HE CAN RECOVER ONLY
NOMINAL DAMAGES.

DAMAGES FOR INCONVINIENCE

AND DISCOMFORT
7

Damages can be
recovered for physical
inconvenience and
discomfort. The general
rule in this connection is
that MEASURE OF
DAMAGES IS NOT
AFFECT BY THE MOTIVE
OR THE MANNER OF THE

CASE : ADDIS VS GRAMOPHONE

CO LTD.
7

was
wrongfully
dismissed in a harsh
and humiliating manner
by
G
from
his
employment. Held,
(a) A could recover a sum
representing his wages
for the period of notice
and
the
commission
which he would have
earned
during
that

DIFFICULTY OF ASSESSMENT
7 are
Although damages which
incapable of assessment cannot be
recovered, the fact that they are
diffi cult to assess with certainty or
precision does not prevent the
aggrieved party from recovering
them.

The court must do its best to

estimate the loss and a
contingency may be taken into
account.
CASE : contd.,

Case : CHAPLIN VS HICKS

7

H advertised a beauty competition

by
which
readers
of
certain
newspapers were to select fifty
ladies. H himself was to select
twelve out of these fifty. The
selected
twelve
were
to
be
provided theatrical engagements. C
was one of the fifty and by Hs
breach of contract she was not
present when the final selection
was made. Held, C was entitled to
damages although it was diffi cult
to assess them.

Cost of decree
7

The aggrieved party is

entitled, in addition to
damages, to get the cost
of getting the decree for
damages. The cost of
suit for damages is in
the discretion of the
court.

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DAMAGES AGREED UPON IN

ADVANCE IN CASE OF BREACH
7

If a sum is named in a contract as the

amount to be paid in case of its
breach, or if the contract contains any
other stipulation by way of a penalty
for failure to perform the obligations,
the aggrieved party is entitled to
received from the party who has
broken the contract, a reasonable
compensation not exceeding the
amount so named.
E.g: A contracts with B to pay B
Rs.1,000 if he fails to pay B Rs.500 on
a given day. B is entitled to recover
form A such compensation not
exceeding Rs.1000 as the court
considers to be reasonable.

LIQUIDATED DAMAGES AND PENALTY

7

Liquidated

damages
represents a sum, fixed or
ascertained by the parties in
the contract, which is a fair and
genuine pre-estimate of the
probable loss that might ensue
as a result of the breach, if it
takes place.
A

penalty is a sum named in

the contract at the time of its
formation,
which
is

3. QUANTUM MERUIT
7 EARNED
means AS MUCH AS
A right to sue on a quantum
meruit arises where a contract,
partly performed by one party,
has become discharged by the
breach of the contract by the
other party.
The right is founded not on the
original
contract
which
is
discharged or is void but on an
implied promise by the other
party to pay for what has been
done.

It

4. SPECIFIC
PERFORMANCE7
In certain cases, damages are
not an adequate remedy. The
court may, in such cases,
direct the party in breach to
carry out his promise
according to the terms of the
contract. This is a direct by
the court for Specific
Performance of the contract
at the suit of the party not in
breach.

CASES WHICH FALL UNDER SPECIFIC

PERFORMANCE
7

(A)When the act agreed

to be done is such that
compensation in money
for its non-performance
is not an adequate
relief.
(B) When there exists no
standard
for
ascertaining the actual
damage caused by the

SPECIFIC PERFORMANCE WILL NOT BE

GRANTED WHERE:

Damages are an adequate

remedy

The contract is not certain, or is

inequitable to either party

The contract is in its nature

revocable

The contract is made by trustees

in breach of their trust

The contract is of a personal

nature E.g: contract to marry

The contract is made by a

company in excess of its powers
as laid down in its M.O.A

The court cannot supervise its

carrying out E.G. Building

5. INJUNCTION
7
Where a party is in breach
of a
negative term of a contract, the
court may , by issuing an order,
restrain him form doing what he
promised not to do. Such an
order of the court is known as
an Injunction.

Case:LUMLEY VS WAGNER
W agreed to sing at Ls theatre,
and during a certain period to
sing nowhere else. Afterwards W
made contract with Z to sing at

Than
k You
Sir