DISCHARGE OF CONTRACT

DISCHARGE OF CONTRACT
Meaning putting an end to the contract or
termination of the contract.
That the parties are no more liable under the contract.
Termination of the contractual relationship between
parties is called the discharge of contracts.
When the rights & obligations created by it comes to
an end.
TYPES / VARIOUS MODES OF
DISCHARGE
1. DISCHARGE BY PERFORMANCE
2. DISCHARGE BY AGREEMENT OR CONSENT
3. DISCHARGE BY IMPOSSIBILITY
4. DISCHARGE BY LAPSE OF TIME
5. DISCHARGE BY OPERATION OF LAW
6. DISCHARGE BY BREACH OF CONTRACT.
 I. DISCHARGE BY PERFORMANCE

Discharge of performance takes place when the parties to the

contract fulfill their obligations arising under the contract within
the time and in the manner prescribed.
Two forms
1. Actual performance--- when both the parties
perform his work.
2. Attempted performance/ tender/offer to perform
II. DISCHARGE BY AGREEMENT OR CONSENT

Mutual consent.
Novation

Rescission

Alteration
By implied
By Agreement or consent
Consent Remission
By express
consent
Waiver

Merger
 1. NOVATION

Substitution of new contract for existing one.

Two types
(a). Change in parties
(b). Without change in parties
2. RESCISSION

Means cancellation of the contract.

 3.ALTERATION
Means a change in one or more of the material terms of the
contract.
Two types
(a). Material Alteration– is one which alters the legal effect of
the contract . For
e.g change in the amount of money to be paid, rate of interest or
the names of the parties.
(b). Immaterial Alteration– it is correcting a clerical errors in
figures or the spelling of the name.
NOVATION ALTERATION
Change in parties Parties remain same

Old contract is No dissolution

dissolved by new
contract

Two types of contract One contract

4.REMISSION

Is acceptance of lesser amount than what was

contracted or lesser fulfillment of the promise made.
 5. WAIVER
Means the abandonment of a right which a person is entitled
to
Means abandoning the rights

When a party waives his right under the contract, the other
party is released of his obligations
A B( to repair a car)
 III DISCHARGE BY IMPOSSIBILITY

If an agreement contains an undertaking to perform an

impossibility, it is void ab initio
Rule
1. lex non cognit ad impossibilia i.e the law does not
recognise what is impossible
2. impossibilium nulla obligato i.e what is impossible does
not create an obligation.
 IMPOSSIBILITY

impossibility existing at impossibility arising subsequent

the time of agreement / to the formation of contract/
pre-contractual impossibility Supervening impossibility /
a. Known to the parties Post- contractual impossibility
A B ( to put life into the dead wife)
b. Unknown to the parties
X Y(due to perils)
POST-CONTRACTUAL IMPOSSIBILITY
A. Destruction of subject matter of the contract.
B. Non-existence or non-occurrence of a particular state
of things .
C. Death or incapacity of personal skill.
D. Change of law
E. Outbreak of war
A. Destruction of subject matter of the
contract.
E.g TAYLOR VS CALDWELL

gave music hall

C T
B. Non-existence or non-occurrence
of a particular state of things .
marriage
A B
mad
C. Death or incapacity of personal skill.
e.g. ROBINSON VS DAVISON

to sing at a theater
R D
unable to perform because of illness
D. Change of law

E.g. SHIPTON VS ANDERSON & CO.

wheat lying in godown

A S

 Before the delivery, wheat was requisitioned by

government
 Contract is discharged as the delivery of wheat
become impossible
E . Outbreak of war.
A contract entered into with an Alien enemy during
war is unlawful and are therefore impossible of
performance.
IMPOSSIBILITY OF PERFORMANCE ---
NOT AN EXCUSE
A. DIFFICULTY OF PERFORMANCE
e.g. Blackburn bobbin co vs Alten & sons
sold finland timber( to be supplied bet July- Sep)
A B

but war broke out in the month of August

B.COMMERCIAL IMPOSSIBILITY

E.G . KARL VS CHAGANDAR & CO

A B
Bombay Antwerp
( before good sent, war broke out hence shipping rates
increased).Held the contract was not discharged.
 C. IMPOSSIBILITY DUE TO FAILURE OF
A THIRD PERSON
cloth manufacture by C
E.G. A B

C did not manufacture

Held A. is liable to B for damages.
D. STRIKES, LOCK-OUTS AND CIVIL
DISTURBANCE.

E.FAILURE OF ONE OF THE OBJECTS.

EFFECTS OF SUPERVENING IMPOSSIBILITY
1. When the performance of a contract becomes impossible
or unlawful subsequent to its formation, the contract
becomes void.
2. Where one person has promised to do something which he
knew, might have known, and which the promisee did not
know to be impossible or unlawful, the promisor must
make compensation to the promisee for any loss which the
promisee sustains though the non-performance of the
promise.
3. Where an agreement is discovered to be void or when a
contract becomes void, any person who has received any
advantage under such agreement or contract is bound to
restore it or to make compensation to the person from
whom he received it.
DOCTRINE OF FRUSTRATION
In England the doctrine of frustration is the parallel
concept of “Supervening impossibility”

It comes into play “ when the common object of a

contract can no longer be achieved or when the
contract, after it is made, becomes impossible of
performance due to circumstances beyond the
control of the parties , the court may declare the
contract to be at an end”
IV DISCHARGE BY LAPSE OF TIME
According to The Limitation Act, 1963– a contract
should be performed within a specified period which is
called as period of limitation
 V. DISCHARGE BY OPERATION OF LAW
A. BY DEATH
B. BY MERGER
C. BY INSOLVENCY
D. BY UNAUTHORISED MATERIAL ALTERATION
 Where a party to a contract makes any material
alteration in the contract without the consent of the
other party.
E. BY RIGHTS AND LIABILITIES BECOMING
VESTED IN THE SAME PERSON.
 Eg :When a bill gets into the hand of the acceptor the
other parties gets discharged.
VI. DISCHARGE BY BREACH OF CONTRACT

Breach of contract means breaking of obligation

It occurs when a party to the contract does not
fulfill his contractual obligation or by his own act
makes it impossible that he should perform his
obligation
Breach of contract means the failure of a party to
perform his obligations
The party who fails to perform his obligations , is
said to have committed a breach of contract.
Breach of contract may be
1. Actual breach of contract
2. Anticipatory or Constructive breach of contract
 BREACH OF CONTRACT

ACTUAL BOC ANTICIPATORY BOC

At the time when During the performance

the performance of the contract
is due
Express repudiation Implied repudiation
(by word or act) ( impossibility created by the
act of a party to the contract)
1. ACTUAL BREACH OF CONTRACT

(a). At the time when the performance is due

actual breach of contract occurs at the time when
the performance is due , when one party fails or
refuses to perform his obligations under the contract
results in breach of contract.
Example

A agrees to deliver 5 bags of sugar to B on 1st July, but

fails to do so on that date, he is said to have committed
a breach of contract
b. During the performance of contract
(i) Express Repudiation( by word or act);
when one party fails or refuses to perform the
obligation under the contract during the
performance of the contract. This type of breach of
contract occurs in case of instalment contract.
EXAMPLE
CORT vs AMBERGATE RAILWAY & CO.

C contracted with a railway company to supply 3000

tones of railway chairs at a certain price, to be
delivered in instalment. After 1,787 tons had been
supplied, the railway company asked C to deliver no
more. C could bring an action for breach of contract.
(ii) Implied Repudiation (impossibility
created by the act of a party to the contract)
If a party, during the performance, makes by his own act the
complete performance of the contract becomes
impossible, the effect is as if he has breached the contract,
and the other party is discharged from the further
performance of the contract.
EXAMPLE
P, a British subject, was engaged by the captain of a
warship owned by the Japanese Government to act as a
fireman. Subsequently when the Japanese Government
declared war with China. P was informed that the
performance of the contract would bring him under the
penalties of the Foreign Enlistment Act. He
consequently left the ship.
ANTICIPATORY BREACH OF CONTRACT

Express Repudiation Implied Repudiation

or or
Renunciation Creating some
impossibility
2.ANTICIPATORY BREACH OF
CONTRACT
(i) EXPRESS REPUDIATION:
Anticipatory breach of contract takes place
when one party expresses his inability to perform or
renounces his liabilities under the contract
expressly, before the performance is due. This is
known as express anticipatory breach of contract.
EXAMPLE

A agreed to supply certain goods to B on 1st January. But

before this date, A expressly informed B that he would
not supply the goods to him. This is anticipatory
breach of contract by express refusal to perform it.
ii IMPLIED REPUDIATION
A promisor may, before the time for
performance arrives, by doing some act make the
performance of his promise impossible. This is known
as implied anticipatory breach of contract.
Example( LOVELOCK VS FRANKLYN)
A promised to assign to B, within 7 years from the date
of his promise, all his interest in a lease for the sum of
$140. Before the end of 7 years he assigned his interest
to another person. Held this was anticipatory breach of
contract by implied repudiation.
 Rights of the promisee in case of anticipatory breach

(i) He can treat the contract as discharged so that he is

absolved from the performance of his part of the promise.
(ii) He can immediately take a legal action for breach of
contract i.e., file a suit for damages, specific performance
or injunction .

Anticipatory breach does not necessarily discharge the

contract. It however, discharge the promisee( the
aggrieved) if he so chooses, and entitles him to sue for a
breach at once.
Measure in Anticipatory Breach of Contract
(i) If the contract is ended at once:
if the promisee elects to end the contract at
once, he can sue the promisor for damages. The
amount of damages will be measured by the
difference between the price prevailing on the date
of breach and the contract price.
Measure in Anticipatory Breach of Contract
(ii) If the contract is kept alive till the date of
performance of the contract.
If the promisee keeps the contract alive till the
date of performance, the measure of damages will be
the difference between the price prevailing on the date
of the performance and the contract price.