LEGALITY OF OBJECT

Legality of object is another requirement of a valid agreement. A contract must not only be
based upon mutual assent of competent parties but must also have a lawful object. The word
‘object’ means purpose or design of the contract and lawful’ means permitted by law. If the
object of an agreement is unlawful the agreement is not enforceable.
1. Forbidden by law: If the object or the consideration of an agreement is the doing of an act
forbidden by law, the agreement is void. An act is forbidden by law when it is punishable
under the Indian Penal Code. Where the act is forbidden by law, the agreement will be void
and the parties cannot recover anything under such an agreement.
2. Defeat any law: Sometimes the consideration for an agreement may not be directly
forbidden by law but if it defeat the provisions of any law. Such agreement is also void. So,
when an agreement is entered into to defeat the provisions of any law and will therefore be
unlawful. Examples A, a Muslim, contracts to marry B. A already has four wives. His
marriage with B would be void, as the provisions of the Mohammedan law as a Muslim is
authorised to only four marriages.
3. Fraudulent: An agreement made for fraudulent purpose is void. Where the parties agree to
impose a fraud on a third person, their agreement is unlawful.
4. Injurious to person or property: An agreement between two persons to injure the person
or property of another is unlawful and void. If the object of an agreement is such that it
involves injury to the person or property of another, the agreement is void. Examples A
promises to pay B 1000 if he published an article in character against C, so that it would
lower his reputation. B publishes the same. A refuses to pay the amount. B cannot recover
the amount as the agreement between A and B involved injury to C.
5. Immoral: Every agreement, the object or consideration of which, is immoral. The word
immoral means inconsistent with what is right. It takes every aspect of a personal life
deviating from the standard norms of life. Anything contrary to good morals, for example,
sexual immorality, illicit cohabitation, prostitution etc., would be regarded as immoral.
6. Public policy: An agreement is unlawful if the court regards it as opposed to public policy.
A contract, which is opposed, to public policy, cannot be enforced by either of the parties to
it. An agreement, which tends to promote corruption or injustice or is against the interests of
the public, is considered to be opposed to public policy.
 DISCHARGE OF CONTRACT
Discharge of a contract implies termination of contractual obligations. This is because when
the parties originally entered into the contract, the rights and duties in terms of contractual
obligations were set up. Consequently when those rights and duties are put out then the contract
is said to have been discharged. Methods
A. Discharge by performance: Where both the parties have either carried out or tendered
(attempted) to carry out their obligations under the contract, is referred to as discharge of
the contract by performance.
 Actual performance:  When both the parties perform their promises, the contract is
discharged. Performance should be complete, precise and according to the terms of the
agreement. Most of the contracts are discharged by the performance in this manner.
 Tender or Offer of Performance:  Tender or offer of performance means "offer made
by the promisor to promisee expressing his willingness to perform his part of the
obligation under the contract. It is also known as attempted performance.
B. Discharge by agreement: A contract rests on the agreement of the parties..
 Novation: Novation of contract means replacement of an existing contract by another
contract. If the parties are not changed then the material terms of the contract must be
altered in the new contract because a mere variation of some of the terms of a contract is
not novation but alteration. Example: A is indebted to B and B to C. By mutual
agreement B’s debt to C and B’s loan to. A are cancelled and G accepts A as his debtor.
There is novation involving change of parties.
 Rescission: This refers to cancellation of all or some of the material terms of the contract.
If the contracting parties mutually decide to do so, the respective contractual obligations
of the parties stand terminated. Example: A promises to deliver certain goods to B on a
certain date. Before the date of performance, A and B mutually agree that the contract
will not be performed. The parties have cancelled the contract.
 Alteration: This refers to a change in one or more of the terms of a contract with the
consent of all the contracting parties. Alteration results in a new contract but parties to it
remain the same. Here the assumption is that both the parties are to gain a fresh but
different benefit from the new agreement.
  Remission: Remission means the acceptance of lesser sum than what was due from
promisor. According to the section 63, a person who has a right to demand the
performance of a contract may: Remit or give up the whole or part of a debt and Extend
the time for performance. Example: A owes B Rs.5, 000. A pays to B and B accepts in
full satisfaction Rs.2000. The whole debt is discharged.
 Waiver: The term waiver implies abandonment or relinquishment of a right. Where a
party deliberately abandons its rights under the contract, the other party is released of its
obligations, otherwise binding upon it.
C. Discharge by lapse of time: A contract stands discharged if not enforced within a
specified period called the ‘period of limitation‘. The Limitation Act, 1963 prescribes the
period of limitation for various contracts. For instance, period of limitation for exercising
right to recover an immovable property is twelve years, and right to recover a debt is three
years. Contractual rights become time barred after the expiry of this limitation period.
Accordingly, if a debt is not recovered within three years of its payment becoming due, the
debt ceases to be payable and is discharged by lapse of time.
D. Discharge of operation of law: A contract stands discharged by operation of law in the
following circumstances.
 Unauthorized material alteration of a written document: A party can treat a contract
discharged (i.e., from his side) if the other party alters a term (such as quantity or price)
of the contract without seeking the consent of the former. Example: A executes a
promissory note in favour of B for Rs.3, 000. B by alteration exceeds the amount from
Rs.3,000 to 30,000. A may refuse to pay Rs.3, 000.
 Insolvency: A discharge in bankruptcy will ordinarily bar enforcement of most of a
debtor’s contracts. Example: A promises to sell his car to B for Rs.2 lac. Before the
performance of the contract A is declared insolvent by court. The contract between A, &
B is discharged.
 Merger: A contract also stands discharged through a merger that occurs when an inferior
right accruing to party in a contract amalgamates into the superior right ensuing to the
same party. For instance, A hires a factory premises from B for some manufacturing
activity for a year, but 3 months ahead of the expiry of lease purchases that very
premises. Now since A has become the owner of the building, his rights associated with
 the lease (inferior rights) subsequently merge into the rights of ownership (superior
rights). The previous rental contract ceases to exist.
E. Discharge of contract by breach: Breach occurs where one party to a contract fails to
perform its contractual obligations, or the performance is defective. A breach of contract
does not per se bring a contract to an end. The breach may give to the aggrieved party the
right to terminate the contract.
 Anticipatory Breach: anticipatory breach occurs when one party states, before the
arrival of the date fixed for performance, without justification that it cannot or will not
carry out the material part of the contractual obligations on the agreed date or that it
intends to perform in a way that is inconsistent with the terms of the contract. Example:
A contracts with B to supply 100 bags to wheat for Rs.15, 000 on 1 stMarch. On
15th February, A informs B that he will not be able to supply the wheat. There is express
rejection of contract.
 Actual Breach: Actual breach refers to the failure to perform contractual obligations
when performance is due. Failure to perform obligations is the most common form of
breach, wherein a seller fails to deliver the goods by the appointed time, or where,
although delivered, the goods are not up to the mark in respect of quality or quantity
specified in the contract. Example: A degrees t o deliver 5 bags of wheat on 1 st March He
does not deliver the wheat on the day. There is a actual breach of contract.
F. Discharge by Subsequent Impossibility:
 Initial Impossibility: According to section 56, “An agreement to do impossible act is
void ab-initio.” It means agreement which is obviously impossible cannot be binding,
e.g., an agreement to discover treasure by magic is void agreement. Example: A owes B
Rs.5, 000. A pays to B and B accepts in full satisfaction Rs.2000. The whole debt is
discharged.
 Subsequent Impossibility: Sometimes, a contract capable to be performed after
formation becomes impossible or unlawful and as a result void. Example: A and B
contract to marry each other. Before the time fixed for the marriage, A dies. The contract
becomes void.