SUBJECT-LAW OF CONTRACT-I,

MODULE-7,
DISCHARGE OF A CONTRACT AND ITS VARIOUS MODES

THIS STUDY MATERIAL IS PREPARED

[for the use of students] BY:

Dr. PRADIP KUMAR DAS

Associate Professor
DEPARTMENT OF LAW AND GOVERNANCE,
SCHOOL OF LAW AND GOVERNANCE
CENTRAL UNIVERSITY OF SOUTH BIHAR
GAYA,
BIHAR
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 SUBJECT-LAW OF CONTRACT-I,
MODULE-7,
DISCHARGE OF A CONTRACT AND ITS VARIOUS MODES

• Performance of Contract- It means the carrying out of these obligations. Each

party must perform or offer to perform the promise which he has made.

Section 37, para-1, says the parties to a contract must either perform, or offer to
perform, their respective promises, unless such performance is dispensed with or
excused under the provisions of this Act, or of any other law.

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 DISCHARGE OF CONTRACT(contd.)
Termination or Discharge of contract:
Methods of Termination:
When the obligations created by a contract come to an end, the contract is said
to be discharged or terminated. A contract may be discharged or terminated in
any of the following ways:
(i).By performance of the Promise;
(ii).By mutual consent cancelling the agreement or substituting a new
agreement in place of the old;
(iii).By subsequent impossibility of performance;
(iv).By operation of law-i.e. death, insolvency, or merger.
(v).By lapse of time;
(vi).By material alteration without the consent of the other parties;
(vii).By breach made by one party.
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 DISCHARGE OF CONTRACT(contd.)
BY SUBSEQUENT IMPOSSIBILITY OR
SUPERVENING IMPOSSIBILITY-

Pre-contractual Impossibility: A contract which at the time it was entered into was
impossible to perform, is void ab initio and creates no rights and obligations, e.g., a
promise to ride a horse to the sun.
Post Contractual Impossibility: A contract, which at the time it was entered into,
was capable of being performed may subsequently become impossible to perform or
unlawful. In such cases the contract becomes void. This is known as the doctrine of
supervening Impossibility. It is also known as the Doctrine of Frustration.
Section 56, para-2: A contract to do an act which, after the contract is made,
becomes impossible, or, by reason of some event which the promisor could not
prevent, unlawful, becomes void when the act becomes impossible or unlawful.
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 DISCHARGE OF CONTRACT(contd.)
GROUNDS OF FRUSTRATION/GROUNDS OF SUPERVENING
IMPOSSIBILITY:
(i). Destruction of Object/Subject Matter-
Example- A musical hall was let for a series of concerts on certain days. The hall
was burnt down before the date of the first concert. The contract becomes
void.[Taylor vs. Caldwell]
(ii).Change of Law:
Example-M sold to N a specified parcel of wheat in a warehouse. Before delivery,
the wheat was requisitioned by the Government under statutory powers. The
delivery being now legally impossible, the contract was discharged.[Howell vs.
Coupland].
(iii).Failure of Pre-Conditions:
Example: A & B contract to marry each other. Before the time fixed for the
marriage, A goes mad. The contract becomes void.
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 DISCHARGE OF CONTRACT(contd.)
(iv). Death or Incapacity for personal services:
Example: G contracts to act at a theatre for six months in consideration of a sum
paid in advance by H. On several occasions G is too ill to act. The contract to act on
these occasions becomes void.
(v).Outbreak of War:
A contract entered into during war with an alien enemy is void ab initio.
EXCEPTIONS TO THE SUPERVENING IMPOSSIBILITY:
Following are the cases which do not come within the principle of Supervening
Impossibility:
(i). Difficulty of Performance;
(ii).Commercial Impossibility;
(iii).Failure of one of the objects;
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 DISCHARGE OF CONTRACT(contd.)
(iv).Strikes, Lockouts, Civil Disturbances and riots

Effects of Supervening Impossibility:

(i).Section 56(para-2) provides that when the performance of a contract becomes
subsequently impossible or illegal, the contract becomes void.
(ii).Section 65 provides that when a contract becomes void, any person who has
received any advantage under it must restore it, or make compensation for it, to the
person from whom he received it.
(iii). Section 56(para-3) provides that, where one person has promised to do
something which he knew, or with reasonable diligence, might have known, and
which the promise did not know to be impossible or unlawful, such promissor must
make compensation to such promise for any loss which such promise sustains
through the non-performance of the promise.
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DISCHARGE OF CONTRACT(contd.)
The Doctrine of Frustration:
When the common object of a contract can no longer be carried out, the court may
declare the contract to be at an end. This is known as the doctrine of Frustration.
English Law- before 1863, a contract, excepting an illegal agreement, was enforced
literally. All the parties of a contract had an absolute obligation to perform it. The
Doctrine of Frustration emerged after 1863 through court decisions.
Basis of the Doctrine in English Law:
(i). In some cases it has been held that every contract contained an implied term that
a particular thing or state of things should continue to exit. The continued existence
of the same state of things is a condition precedent to performance of the
contract,[Kell vs. Henry];
(ii).If the goods which are the subject of the contract are destroyed without any fault
of the parties, the contract should terminate.[Taylor vs. Caldwell]
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 DISCHARGE OF CONTRACT(contd.)
(iii). Where the court gathers as a matter of construction that the contract itself
contained impliedly or expressly a term, according to which it would stand
discharged on the happening of certain circumstances, the dissolution of the contract
would take place under the terms of the contract itself.[British Movietonews Ltd.
Vs.London and District Cinemas Ltd]
(iv)Frustration occurs whenever the law recognizes that without defeat of either
party a contractual obligation has become incapable of being performed because the
circumstances in which performance is called for would render it a thing radically
different from that which was undertaken by the contract.[Per Lord Radcliffe Davis
Contractors Ltd. Vs. Fareham U.D.C.]
Limitation of the doctrine:
(i). If the frustration is self induced by the party, then the contract is not frustrated;
(ii). The frustrating event should defeat the common intention of the parties. There
cannot be frustration on one side only. 9
 DISCHARGE OF CONTRACT(contd.)
TERMINATION/DISCHARGE OF CONTRACT BY BREACH OF
CONTRACT:
When a contract is broken by one party, the other party or parties are freed from the
obligation of performing the contract. They can also take the remedial measures to
which they are entitled.
Breach of contract may arise in two ways:
(i) By anticipatory breach of contract and
(ii) By actual breach or present breach.
(i). Anticipatory breach of contract :
Anticipatory breach of contract:
It occurs when a party repudiates his liability under the contract before the time for
performance is due or when a party by his own act disables himself from
performing the contract.
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 DISCHARGE OF CONTRACT(contd.)

Example: C enters into a contract to supply B with certain articles on the 1st of June.
Before 1st June, he informs B that he will not be able to supply the goods.
Actual Breach of Contract:
Actual breach of contract occurs when during the performance of the contract or at
the time when the performance of the contract is due, one party either fails or
refuses to perform his obligations under the contract.
Example:
D agrees to deliver B, 5 tons of sugar on 1st June. He fails to do so on 1st June.
There is a breach of contract by D.

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