Discharge of

contract

Remedies for Breach of

Contract
PERFORMANCE OF CONTRACTS
Meaning of Performance:
Performance of contract means that each party to a
contract has done, whatever he has required to do under
the contract, within the prescribed time in a manner that
no party to the contract has any claim, grievance or right
outstanding against the other party and the contract has
come to an end.
 Discharge/Termination of Contract

Breach Performance

Subsequent Operation Lapse of

Agreement
Illegality Of Law Time
DISCHARGE/ TERMINATION OF
CONTRACT

1. Discharge by Performance
It’s a natural mode of discharge

Example:
 Bashir agree to sell his watch to Niaz for 400 bashir deliver the
watch and Niaz make the payment its actual performance
Actual performance:
When both parties to a contract fulfill the obligations according to
the terms and conditions of the contract, it is called actual
performance of the contract and the contract comes to an end.
(Sec.37)

Tender:
It is called offer of performance or attempted performance. When
one of the parties to the contract offers to perform the contract but
the other party does not accept it, there is a tender. It is not an
actual performance but is equivalent to actual performance.
DISCHARGE/ TERMINATION OF
CONTRACT

2. Breach

Actual
Anticipatory (Expressed/ Implied)
 Types of Breach

Actual Anticipatory

Actual Breach: it occurs when a party fails to perform a

contract, when performance was due.

Anticipatory Breach: it occurs before the time fixed for

performance has arrived which can be either done
expressly or in an implied manner.
It may happens in two ways.

 Express Breach:
In this case a party to the contract communicates to the
other party, his intention not to perform the contract,
before the due date of performance has arrived.

 Implied Breach:
1. In this case a party to the contract does an act, which
makes the performance of contract impossible.
DISCHARGE/TERMINATION OF CONTRACT

3. Discharge by Agreement:

Alteration

Novation Rescission

Remission
Waiver
 Termination by Agreement

Both party Mutually

Agreed to cancel the Contract

By By By By By
Waiving Rescission Remission Alteration Novation

Previous Contract Cancel; Previous Contract Canceled;

No new Contract New Contract comes into existence
TERMINATION OF OLD CONTRACT

Novation:
Novation of contract means replacement of an existing
contract. The new contract may be between same parties
or between new parties. Thus, an old contract is
discharged and a new contract comes into existence.

Example:
A owes B, Rs. 10,000. A mortgage his estate to B for the
debt of Rs. 10,000. This is a new contract and
terminates the old one.
TERMINATION OF OLD CONTRACT

Remission:
Remission means the acceptance of lesser fulfillment of a
promise that was made. It is an act of the promisee discharging
the obligations of another either wholly or partly. Thus ,
contract may be discharged by remission of performance or
extension of time.
(Sec. 63)

Example:
A owes B Rs. 5000. B agrees to accept Rs. 2000 in full
satisfaction of his claim. The whole debt is discharged.
TERMINATION OF OLD CONTRACT

Alternation:
Alternation of a contract takes place when one or more
of the terms of the contract are changed. If alternation in
contract is made with the consent of all the parties, the
original contract is discharged and a new contract takes
its place. In case of alternation parties remain the same
and only the terms of the contract are changed.
(Sec. 62)

Example:
A agrees to supply B salt on 1st Feb. Later, A and B agree
to change the date of delivery to 1st March. It is
alternation of contract.
TERMINATION OF OLD CONTRACT

Waiver:
Waiver means the intentional abandonment of a right
which a person is entitled to under a contract. When a
party waives his rights under the contract, the other party
is released from his obligations. For a waiver neither an
agreement nor consideration is necessary.

Example:
A promises to make a shirt for B and B afterwards stops
him to do so. A agrees. The contract is terminated by
waiver.
TERMINATION OF OLD CONTRACT

Rescission:
The rescission means cancellation of contract by mutual
consent. A contract may be cancelled by agreement
between the parties at any time before it is discharged by
performance. The cancellation of agreement releases the
parties from their obligation. (Sec. 62)

Example:
A promises to deliver goods to B on a certain date. Before
the date of performance, A and B agree that the contract
will not be performed. The contract is rescinded.
DISCHARGE/TERMINATION OF CONTRACT

4. Discharged By Subsequent Impossibility:

Initial impossibility:
An agreement to do impossible act is void ab-initio. It
means agreement which is obviously impossible to be
done. (Sec. 56)

Example:
An agreement to discover treasure by magic is void
agreement.
DISCHARGE/TERMINATION OF CONTRACT

4. Discharged By Subsequent Impossibility:

Subsequent impossibility:
A contract capable to be performed after formation
becomes impossible, or unlawful and as a result void.
It means that subsequent impossibility or illegality will
make the contract void and the contract will be
discharged. (Sec. 56)
DISCHARGE/TERMINATION
OF CONTRACT

Destruction of Subject matter:

When the subject matter of the contract after the
formation of a contract is destroyed, without the fault
of the promisor or promisee, the contract is discharged.

Example:
C lent his hall to T for concerts. The hall was destroyed
by fire before the first concert. The contract becomes
void.
DISCHARGE/TERMINATION
OF CONTRACT

Failure of Purpose:
Where the formation of a contract depends upon
happening of a certain event, and if that event does not
happen, the contract is discharged.

Example:
Mr. John and Ms. Kelly contract to marry. Before
marriage, Mr. John goes mad. The contract is
discharged.
DISCHARGE/TERMINATION
OF CONTRACT

Death or personal Incapacity:

Where the performance of a contract depends upon
the personal skill, or qualification or the existence of a
particular person, the contract is discharged on the
illness, incapacity or the death of that person.

Example:
Ahmed and Shazia contract to marry. Before the time
fixed for the marriage, Ahmed dies. The contract
becomes void.
DISCHARGE/TERMINATION
OF CONTRACT

Change of Law:
Sometimes contracts which are lawful when made
become unlawful due to change in law. Subsequently,
such contracts become impossible to be performed. A
subsequent change in law may render the contract
illegal and contract is considered to be discharged.

Example:
Mr. A promises to sell Mr. B wheat. But before delivery
the government banned the sale of wheat by private
traders. The contract was discharged.
DISCHARGE/TERMINATION
OF CONTRACT

Declaration of War:
A contract entered into with an alien enemy during
war is void ab-initio. A contract entered into before
the commencement of war remains suspended during
the war. However, such may be revived or restarted
after the war is over, if the nature so permits.

Example:
Mr. Wang contract to carry cargo for Mr. James at a
foreign port. Mr. Wang’s government afterwards
declares war against the country where the port is
situated. The contract becomes void.
DISCHARGE / TERMINATION OF
CONTRACT

5. DISCHARGE BY LAPSE OF TIME :

The limitation act 1980 states that in case of breach of
contract, legal action should be taken within a specified
period. If the contract is not performed and no legal action
is taken by the promise within the period of limitation, he
is debarred from enforcing the contract. Lapse of time
terminates a contract. The period of limitation for simple
contract is “3 years”. If 3 years expire and creditors fail to
file a suit to recover their amount, the debtor is discharged
from his liabilities.
DISCHARGE / TERMINATION OF
CONTRACT

6. DISCHARGE BY OPERATION OF LAW:

1) INSOLVENCY:
Where the court declares the person as insolvent, the rights and duties
of such person are transferred to the official receiver. After the order of
the court, such person is discharged from his liabilities.

EXAMPLE :
Mr. A promised to sell his car to Mr. B for Rs. 2 Lac. Before the
performance of the contract, Mr. A is declared insolvent by court. The
contract is discharged.
DISCHARGE / TERMINATION OF
CONTRACT

6. DISCHARGE BY OPERATION OF LAW:

2) MERGER:
Merger takes place when an inferior right available to the party merges
into a superior right available to the same party under another contract.
As a result, the former contract stands discharged automatically.

EXAMPLE :
Where a part-time lecturer is made full time lecturer, the contract of
part time lectureship is discharged by merger.
DISCHARGE / TERMINATION OF
CONTRACT

6. DISCHARGE BY OPERATION OF LAW:

3) MATERIAL ALTERATION:
Material alteration means a change which affects the rights and
liabilities of the parties. If the document containing the terms of
contract is altered by a party to the contract, without the consent of the
other party, the contract is discharged.

EXAMPLE :
Mr. A executes a pro-note in favor of Mr. B for Rs. 300. Mr. B by
alteration exceeds the amount from Rs. 300 to Rs. 3000. Mr. A may
refuse to pay Rs. 300.
 Remedy for Effected Party against Breach Committed Person

Suit for Suit for Suit for Suit for

Rescission Damages Quantum Specific
Of the Contract Meriut Performance

Liquidated
Suit for
Nominal
Injunction
Ordinary Order

Special

Exemplary
REMEDIES FOR BREACH OF
CONTRACT

 When a party breaks the contract by refusing to perform

his promise the breach of contract takes place. Following
remedies are available to the aggrieved party against the
guilty party.

1. Suit for Rescission of the Contract

2. Suit for Damages
3. Suit upon Quantum Meruit
4. Suit for Specific Performance
5. Suit for Injunction
REMEDIES FOR BREACH OF
CONTRACT
1. Suit for the Rescission of the Contract

 When one of the parties to a contract commits breach of contract, the

other party is released from his obligation under the contract. The
aggrieved party may sit home if he does not want to take any legal
action against the guilty party. If the aggrieved party wants to sue the
guilty party for the damages for the breach of the contract he has to file
a suit for rescission of the contract. When the court grants rescission,
the aggrieved party is free from all his obligations and become entitled
for compensation. (Sec. 75)

 When a party treats the contract as rescinded, he must restore any

benefits received by him under the contract to the party from whom
such benefit was received. (Sec. 64)
REMEDIES FOR BREACH OF
CONTRACT
1. Suit for the Rescission of the Contract

 Examples
 A contracts to supply 20 bags of cement for Rs. 5,000 to B on
15th April, B agrees to pay the price on receipt of goods. A
does not supply cement on the appointed day. B is discharged
from the liability to pay the price. B may also file a suit for
rescission and claim damages.
 A pledges ornaments to B and gets a loan. A does not return

the loan to B. B may file a suit for rescission for the contract in
order to free himself from his responsibility to return the
ornaments on payment.
REMEDIES FOR BREACH OF
CONTRACT
2. Suit for Damages
The aggrieved party may sue for damages. Damages are a monetary
compensation allowed to the injured party for the loss suffered by
him as a result of the breach of contract. The damages are awarded
to compensate the injured party and not to punish the guilty party.
In case of breach of contract, the injured party is entitled to some
damages, which are as follows

KINDS OF DAMAGES
A. Ordinary or General Damages
B. Special Damages
C. Exemplary Damages
D. Liquidates Damages
E. Nominal Damages
SUIT FOR DAMAGES
A. Ordinary Damages
 When a contract has been broken, the injured party can
recover from the guilty party the ordinary damages suffered
by him. Ordinary damages are those, which naturally arise as
the result of breach of contract.

 The aggrieved party can claim damages for loss, which is the
direct result of such breach. He cannot claim damages for the
indirect loss which is too remote. In the case od sale and
purchase, the damages payable would be the different
between the contract price and the market price at the date of
breach. The subsequent increase or decrease in the market
price would not be considered. (Sec. 73)
SUIT FOR DAMAGES
A. Ordinary Damages
Examples
 A contracts to sell and deliver 500 bales of cotton to B on a fixed
day. A knows nothing of B’s mode of conducting his business. A
breaks the promise, and B having no cotton , is obliged to close his
mill. A is not responsible to B for the loss caused to B by the closing
of mill. B however, can claim damages for the breach of contract
 A contracts to pay a sum of money to B on a specified day. A does

not pay the money on that day. B, in consequence of not receiving

the money on that day, is unable to pay his debts, and is totally
ruined. A is liable to pay B only principle sun and interest on that.
SUIT FOR DAMAGES
B. Special Damages
 These damages arise under some special circumstances affecting the
plaintiff. These are not the losses, which naturally arise as a result of
breach of contract like ordinary damages. These arise when a party
makes a special contract through which he expects a large profit and
such profits are likely to be lost through the breach of contract. These
cannot be claimed as a matter of right. These can only be claimed under
the following circumstances:

a) The special circumstances must be known to both the parties at the time of
contract
b) Subsequent knowledge of the special circumstances will not create such
damages
c) The damages must be such as would naturally result from the breach of contract
d) The parties must have the knowledge about the loss, which will arise in case of
breach of contract, before making the contract.
SUIT FOR DAMAGES
B. Special Damages
Examples
 A contracts B to supply him 20 tons iron at Rs.10,000 a ton at a
specified date. A contracts with C to buy 20 tons iron at Rs. 8,000 a
ton. A informs C about the purpose of contract. C fails to perform the
contract. As a result, A cannot supply to B. C is liable for profit
which A would have made by performance of contract with B

 S delivered his sample to NWR co. for consignment to the show

ground at New Castle. The consignment said. “must be at New
Castle on Monday certain”. On accounts of negligence the goods
reached only after the show was over. The Co. was already aware of
the object of carrying the goods there. Held, S could claim damages
for loss of profit at the show.
SUIT FOR DAMAGES
C. Exemplary Damages
These are such damages, which are awarded in order to
punish the guilty party for the breach, and not to compensate
the injured party for the loss suffered. Exemplary damages
are made only in two cases.

a) In case of breach of contract to marry, the amount of damages will

depend upon the extent of injury to the feelings of the party
b) In case of dishonor of a cheque by a banker when there are
sufficient funds to the credit of the customer. The rule is, the
smaller the cheque dishonored, the greater the damage.
SUIT FOR DAMAGES

C. Exemplary Damages
Example

 O, a banking corporation, agreed to loan Q money for a trip to

California by crediting in accounts with such sums, as he might need
after reaching his destination. W reached California, but O refused to
give him the promised credit. The court allowed damaged for
humiliation and mental suffering.
SUIT FOR DAMAGES
D. Liquidated Damages
If parties to a contract fix the amount of damages for the breach
of contract at the time of formation of contract, then such
damages are call liquid damages. (Sec. 74)

Liquidated damages represent only a fair and reasonable estimate

of loss which a party may suffer due to breach of the contract.
Where a sum has been agreed in the contract to be paid by the
defaulting party in case of breach of contract.

Example
 A contracts B to pay him Rs. 1000 if he fails to pay B Rs. 500 on a given
day. A fails to pay B Rs. 500 on that day. B can recover from A such
damages not exceeding Rs. 1000, as the court considers reasonable.
SUIT FOR DAMAGES
E. Nominal Damages
These are neither awarded to compensate the aggrieved party nor
to punish the guilty party. When the aggrieved party suffers no
loss, the court may award him nominal damages in recognition of
his right. But the court has discretion in the case. The court may
refuse to award damages

Example
 A promises to sell 20 bags of cement to B for Rs. 200 per bag. A
does not supply the cement. At the time of breach of contract, the
market rate of cement is the same. B is entitled to nominal damages
 S contracted to buy a Hillman car form C, a car dealer and refused

to buy. C sold the same car to another customer and thus suffered
nothing. C filed a suit for the loss of profit. Held that he was
entitled only to nominal damages.
REMEDIES FOR BREACH OF
CONTRACT

3. Suit upon Quantum Meruit

The term Quantum Meruit means as much is earned or in
proportion to the work done. Where a person has done
some work under a contract, and the other party cancels
the contract or some event happens which makes the
further performance of the contract impossible, the other
party who has performed the work can claim remuneration
of the work he has already done. The right to claim for
quantum meruit arises only when the original contract is
discharged. If the original contract exists, the party not in
default cannot file suit for quantum meruit.
REMEDIES FOR BREACH OF
CONTRACT

3. Suit upon Quantum Meruit

The aggrieved party may file a suit upon quantum
meruit in following cases:

a) When an agreement becomes subsequently void

b) When there is a promise to render service but there is no
agreement as to remuneration
c) Where something is done without any intention to do so
gratuitously
d) When the contract is divisible
e) When the completion of the contract has been prevented by
the other party
f) When an indivisible work is badly performed
REMEDIES FOR BREACH OF
CONTRACT

3. Suit upon Quantum Meruit

Example
 A, engages B, a contractor, to build a three story house. When
only a part of the house was constructed A prevents B from
working any more. A, the contractor, is entitled to get reasonable
compensation for work done.
 C was employed as MD in a company. After C worked for 3

months it was found that the directors were not authorized to

appoint him. C sued for remuneration. Held, C could recover for
the work done.
 A, trader, leaves certain goods at B’s house by mistake. B treats

the goods as his own. He is bound to pay for them.

REMEDIES FOR BREACH OF
CONTRACT

4. Suit for Specific Performance

 Specific performance means the actual carrying out of the
contract by a party. In some cases where the damages are not an
adequate remedy, the court may direct the guilty to fulfill the
contract. The aggrieved party may file a suit for specific
performance in addition to a suit for damages
REMEDIES FOR BREACH OF
CONTRACT

4. Suit for Specific Performance

 Specific performance is granted in the following cases:
 Where compensation in money is not an adequate relief
 Where it is difficult to calculate the actual damages caused by the

non-performance
 Where compensation in money cannot be obtained

 Specific performance is not granted in following cases:

 Where the monetary compensation is an adequate relief
 Where the court cannot supervise the actual execution of the

contract, e.g., a building construction contract

 Where the contract involves personal skill, taste and qualification

e.g., contract to marry

 Where one of the parties is a minor
REMEDIES FOR BREACH OF
CONTRACT

4. Suit for Specific Performance

Examples

 A agrees to sell his plot of land to C, who agrees to purchase

it for erecting his mill there. Due to certain inconveniences, A
commits breach. At the suit of C, A is asked by the court to
carry out the contract.
 A contracts to borrow money from B is not enforceable

because damages are an adequate remedy.

 A agrees to sell B his painting, but commits breach, B cannot

sue for damages. A shall be ordered to make specific

performance to B
REMEDIES FOR BREACH OF
CONTRACT
5. Suit for Injunction
Injunction is an order of a court restraining a person from
doing a particular act. It is a mode of securing specific
performance in the negative form. It is a preventive relief. It
is a discretionary remedy of the court. It is granted by the
court in the cases where the damages are not adequate relief.
It is issued to provide a negative remedy. The court by issuing
Injunction restrains the guilty party from doing, what he
promised not to do. It is appropriate in cases of anticipatory
breach of contract.
REMEDIES FOR BREACH OF
CONTRACT

5. Suit for Injunction

Examples
 W agreed to sing at Lu’s theatre and for no one else.
Afterwards W contracted Z to sing at another theatre and
refused to sing for Lu. Held, W could be restrained by
injunction from singing for Z.
 G agreed to take the whole of supply of Electricity from M

company. The agreement was held, to import negative

promise that he would take non-from elsewhere. He was,
therefore, restrained by an injunction from buying electricity
from any other company.
THANK YOU