Q.1: What are various ways in which a contract can be discharged?

Explain
with cases.
ANS 1:
Discharge of a contract means termination of the contractual relations
between the parties to a contract. A contract is said to be discharged when the
rights and obligations of the parties under the contract come to an end. Modes
of discharge of contract
Discharge by Performance
A contract can be discharged by performance in any of the following ways:
(a) By Actual Performance A contract is said to be discharged by actual
performance when the parties to the contract perform their promises in
accordance with the terms of the contract.
(b) By Attempted Performance or Tender A contract is said to be discharged by
attempted performance when the promisor has made an offer of performance
to the promisee but it has not been accepted by the promisee.
Discharge by Mutual Agreement
Since a contract is created by mutual agreement, it can also be discharged by
mutual agreement. A contract can be discharged by mutual agreement in any
of the following ways:
a) Novation [Section 62] Novation means the substitution of a new contract for
the original contract. Such a new contract may be either between the same
parties or between different parties. The consideration for the new contract is
the discharge of the original contract.
(b) Rescission [Section 62] Rescission means cancellation of the contract by any
party or all the parties to a contract.
(c) Alteration [Section 62] Alteration means a change in the terms of a contract
with mutual consent of the parties. Alteration discharges the original contract
and creates a new contract. However, parties to the new contract must not

Thus. the performance of the promise made to him.change. (c) By Unauthorised Material Alteration If any party makes any material alteration in the terms of the contract without the approval of the other party. (b) By Insolvency When a person is declared insolvent. Discharge by Impossibility of Performance The effects of impossibility of the performance of a contract may be discussed under the following two heads: (a) Effects of Initial Impossibility (b) Effects of Supervening Impossibility . the contract comes to an end. it amounts to releasing a person of certain legal obligation under a contract. (d) By the Identity of Promisor and Promisee When the promisor becomes the promisee. he is discharged from his liability up to the date of his insolvency. wholly or in part.” (e) Waiver Waiver means intentional relinquishment of a right under the contract. the other parties are discharged. or may extend the time for such performance. “Every promisee may dispense with or remit. or may accept instead of it any satisfaction which he thinks fit. According to Section 63. (d) Remission *Section 63+ Remission means acceptance by the promisee of a’ lesser fulfillment of the promise made. Discharge by Operation of Law A contract may be discharged by operation of law in the following cases: (a) By Death of the Promisor A contract involving the personal skill or ability of the promisor is discharged on the death of the promisor.

(c) Declaration of War The pending contracts at the time of declaration of war are either suspended or declared as void. The Limitation Act. it is called an actual breach of contract on due date of performance. (b) Actual Breach of Contract Actual breach of contract occurs in the follow-ing two ways: (i) On Due Date of Performance: If any party to a contract refuses or fails to perform his part of the contract at the time fixed for performance. and to recover an immovable property is 12 years. called period of limitation. (d) Change of Law The contract is discharged if the performance of the contract becomes impossible or unlawful due to change in law after the formation of the contract.g. Explain the rights of an unpaid seller. 1963 has prescribed the different periods for different contracts. Discharge by Breach of Contract A contract is said to be discharged by breach of contract if any party to the contract refuses or fails to perform his part of the contract or by his act makes it impossible to perform his obligation under the contract. A breach of contract may occur in the following two ways: (a) Anticipatory Breach of Contract Anticipatory breach of contract occurs when party declares his intention of not performing the contract before the performance is due. Q2. . Discharge by Lapse of Time A contract is discharged if it is not performed or enforced within a specified period. period of limitation for exercising right to recover a debt is 3 years. e. Explain Goods under Sales of Goods Acts. The contractual parties cannot exercise their rights after the expiry of period of limitation.

It was held that “S” can not exercise his right of lien over TVset. Where the goods have been sold on credit basis and the term of credit has expired. II. growing crops. 50-52) Unpaid seller can stop the goods in transit in the following cases. and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. Anunpaid seller can exercise his right of lien in following cases. grass.Where the buyer has become insolvent even if the period of credit has not been expired Example: A seller “S” sells a TV set to “B” and delivers it to “B” and since the TV set was not functioning properly.“B” delivered it back to “S” for the repairs. . ii. III. Sec 47-49 I. Unpaid seller means a person who has sold the good for a price but price has not been paid to him unpaid seller has rights against the goods and buyer. RIGHTS OF AN UNPAID SELLER The unpaid seller has following rights. 1) Rights against the goods.ANS: As per Sale of Goods Act. 1930. i.Rights of lien The right of lien means lawfully right to retain the goods possession until the full price is received.Where the goods have been sold on the cash basis. “goods” means every kind of movable property other than actionable claims and money. and includes stock and shares.Right of stoppage of goods in transit It means stoppage of goods while they are in transit to take possession until the price is paid (sec.

goods are in transit with career. irrespective of delivery of the goods ii. 2)Rights against buyer personally i. a)Where the goods are of perishable nature. III. Right of resale If a buyer fails to pay or offer the price within a reasonable time. c)Where the unpaid seller has expressly reserved his right of resale.The unpaid seller can stop the goods in transit only for payment of the price of the goods andnot for any other charges Example: “A” sells TV set to “B”. Example: a)“X” sells vegetable to “Y” on credit. “A” can stop delivery.While the buyer becomes insolvent II.e. “Y” does not pay. Suit for price Where ownership of the goods has passed to the buyer and the buyer refuses to pay the price accordingto the terms of the contract. the unpaid seller has the right to resellthe goods in the following circumstances. b)“M” sells 100 blankets to “N” and gives him one week for payment.I. b)Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a noticeto buyer of his intension of resell the goods. iii. Later on gets news that “B”has become insolvent. While the goods are out of actual possession of seller. the seller can sue the buyer for price. “A” delivers the TV to the carrier to carry it to “B”. “X” can resell to any other person. “M” canresell those to any other person. but have not reached buyer’s possessioni. “N” does not pay. Suit for damages for non-acceptance .

Suit for special damages and interest The seller can sue the buyer for special damages where the parties are aware of such damages at thetime of contract. The unpaid seller can recover interest at a reasonable rate on the total unpaid price of goods. .Where the buyer refuses to accept and pay for the goods. from the time it was due until it is paid. The seller can recover damages only and not the full price iii. the seller may sue him for damages for non-acceptance.