Discharge or Termination of Contracts

When the Right and Obligations arising out of a contract come to an end

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 Termination of Contracts: Modes
A contract may be discharged in any of the
following modes
1. Performance
2. Agreement
3. Subsequent impossibility
4. Lapse of time
5. Operation of law
6. Breach of contract
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 Termination of Contracts: Modes
• By Performance
– Actual Performance
– Tender (If performance is not accepted by other party)
• By Agreement
– Novation: Replacement of existing contract with a new
contract
– Alteration: When one or more of the terms of the
contract are changed.
– Rescission: Cancellation of contract by mutual consent
– Remission : Acceptance of lesser fulfillment of promise
– Waiver : Intentional abandonment of a right
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 Termination of Contracts: Modes
• By Subsequent Impossibility
– Initial impossibility: Void agreement
– Subsequent Impossibility:
A contract was valid however due to subsequent illegality or
impossibility makes the contract void.
– When the performance of contract depends upon
personal skill of a particular person, the contract is
terminated on death or incapability of the person.
– Change of law
– Declaration of war.
• Discharge by lapse of time: 3 years for debts.
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 Termination of Contracts: Modes
• By Operation of Law
– Insolvency: Rights and Liabilities are assigned to
Official Receiver. After the order of court the person is
released from his liabilities
– Merger: When a contract creating inferior rights for the party
merged in to a new contract creating superior rights, the
former contract is discharged.
– Material Alteration of the contract:
• By Breach of Contract Failure of party to perform his
obligations.

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 Termination of Contracts: Modes
• By Breach of Contract: Failure of party to perform his
obligations.
– Actual Breach
– Anticipatory Breach
Remedies for Breach of Contract
When a party breaks the contract by refusing to perform his
promise and the remedies are available to aggrieved party.

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 Remedies for Breach of Contract
The following remedies are available to
aggrieved party against the guilt party
1. Suit for damages
2. Suit upon quantum meruit
3. Suit for specific performance
4. Suit for injunction

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 Remedies for Breach of Contract
• Suit for Rescission – Cancellation
• Suit for Damages – Monetary compensation
– Ordinary damages –
Assessment on the basis of actual loss
– Special damages : Special
circumstances – Parties must be aware of the loss which
may arise from the breach of contract. Subsequent
knowledge of special circumstances will not create special
liability on guilty party.
– Exemplary damages:
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• Exemplary Damages often called punitive damages, these are
damages requested and/or awarded in a lawsuit when the defendant's willful
acts were malicious, violent, oppressive, fraudulent, wanton, or grossly
reckless. Examples of acts warranting exemplary damages: publishing that
someone had committed murders when the publisher knew it was not true
but hated the person; an ex-husband trashes his enemy’s auto and threatens
further property damage; a stockbroker buys and sells a widow's stocks to
generate commissions resulting in her losing all her capital (money). These
damages are awarded both as a punishment and to set a public example.
They reward the plaintiff for the horrible nature of what she/he went
through or suffered. Although often requested, exemplary damages are
seldom awarded. There have been major awards in egregious (remarkable
or outstanding) cases, such as fraud schemes, or other intentional and
vicious actions even when the provable actual damages were not extensive.

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 Liquidated Damages

When parties to a contract fix the amount of

damages for the breach of contract at the
time of breach of contract. In such cases, the
court will allow damages not exceeding the
amount already agreed.

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 Nominal Damages
These are neither awarded to compensate the aggrieved
party nor to punish the guilty party. When the aggrieved
party suffer no loss, the court may award a nominal
damages in recognition of his right. The court may refuse
to award damages.

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 Suit upon Quantum Meruit
• Quantum meruit is a Latin phrase meaning "what one has
earned". In the context of Contract Law, it means something
along the lines of "reasonable value of services".

• When a person hires another to do work for him, and the

contract is either not completed or is otherwise rendered un-
performable, the person performing may sue for the value of the
improvements made or the services rendered to the defendant.
The law implies a promise from the employer to the workman
that he will pay him for his services, as much as he may deserve
or merit.

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Good Luck

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