Discharge of Contract

DISCHARGE OF CONTRACT
Discharge of contract means the termination of contractual relationship between the

parties. When a contract is discharged the rights and obligations created by it comes
to an end
A contract may be discharged by the following modes
1. By performance 2. By agreement 3 By impossibility 4. By lapse of time 5. By

operation of law 6 By breach of contract.
1) Discharge by performance
When the parties to a contract fulfill their respective obligations the contract gets
discharged by performance. When the contract is performed fully the contract ceases
and the parties are discharged from any further liability Performance of contract may
be (i) actual performance, or (ii) attempted performance
1. Actual performance. When both the parties perform their obligations exactly as per
the terms of the contracts, the contract is discharged by actual performance
2. Attempted performance or tender. When the promisor offers to perform the

contractual obligation and the promisee is not willing to accept the performance the
contract is deemed to be discharged by attempted performance. A valid tender is
equivalent to performance except in the case of tender of money.
2) Discharge by agreement A contract is created by agreement. Therefore it may be

terminated by the same method There are various modes by which a contract may be
discharged by agreement. They are as follows;
1. Novation. 'Novation" means substituting a new contract in the place of an old

contract. Sometimes the same parties may adopt a new contract in the place of an old
one, or there could be a change of parties.
2. Rescission. Parties to a contract may decide to cancel a contract on the basis of

mutual consent and consideration. When such a rescission happens the original
contract gets discharged.
3. Alteration. Alteration of a contract takes place when one or more of the terms of
the contract is/are altered by mutual consent of the parties to the contract. The old
contract is discharged and the parties become bound by a new contract.
4. Remission. It means acceptance of a lesser performance than what was due under
the original contract.
5. Waiver. It is a deliberate abandonment of the rights which parties to the contract
mutually have against each other. No consideration is necessary for waiver.
6. Merger. Merger takes place when an inferior right accruing to a party under a
contract merges into a superior right accruing to the same party under same or some
other contract.
3) Discharge by impossibility of performance
An agreement to do an act impossible is void from the very beginning. Impossibility may arise in
the following situations;
1. Impossibility known to the parties at the time of making of contract; For example any
agreement entered into for the purpose of doing an act which is legally or physically
impossible is a nullity.
2. Impossibility unknown to the parties at the time of making of contract; Where at the time of
making of the contract both the parties are ignorant of the impossibility, the contract is void on
the ground of mutual mistake.
3. Impossibility known to the promisor alone. If the promisor alone is aware of the impossibility of
performance at the time of making of the contract, he shall have to compensate the promisee for
any loss which such promisee sustains through non performance of the promise
4. Impossibility which arises subsequent to the formation of the contract. When a contract which
was capable of performance at the beginning subsequently due to change of
circumstances becomes impossible of performance, the contract becomes void.
However mere difficulty of performance or impossibility generally is not a ground for
canceling a contract. Only when the impossibility is caused by circumstances beyond
the control of the parties the contract gets discharged.
The following are few situations where a contract gets discharged by supervening
impossibility.
a) Destruction of subject matter of contract. b) Non-existence or non-

occurrence of a particular state of things. c) Death or personal
incapacity. d) Change of law or stepping in of a person with statutory
authority. e) outbreak of war.
4) Discharge by lapse of time
The Limitation Act, 1963 lays down the duration within which an affected party has to
file a case. If a contractual obligation is not performed by the promisor and no legal
action is taken by the promisee within the period of limitation, he is deprived of his
remedy at law. For all practical purposes the contract has got the effect of termination.
5)discharge by operation of law
A contract may be discharged by operation of law also. The following are the
situations;
a) By death. In case of contracts involving personal skill or ability, the contract is

terminated on the death of the promisor.
b) By insolvency. When a person is declared as insolvent and an order of discharge is

passed against him he is released from all past liabilities
c) Unauthorized alteration. Any material alteration of a written contract made without

the consent of the other party has the effect of discharging the contract.
6) Discharge by breach of contract
Breach of contract means breaking of a contractual obligation by a party to the

contract without lawful excuse. When a party to a contract fails to perform the
obligation imposed upon him, he is said to have committed a breach of contract.
Breach of contract is of two types, (1) actual breach, and (ii) anticipatory breach.
Essentials of valid offer
1. It must intend to create legal relations. 2. The terms of the offer must be
definite and certain. 3. Offer must be communicated to the offeree. 4. An offer in
different from a statement of intention or invitation to offer. 5. Special conditions attached to an
offer must be communicated. 6. An offer may be general or specifle. 7. Offer must be made
with a view to obtaining the assent of the other party. 8. An offer may be conditional. 9. Offer
should not contain a term, the non compliance of which would amount to acceptance.

Discharge of Contract

Uploaded by

Copyright:

Available Formats

Discharge of Contract

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Discharge of Contract

Uploaded by

Copyright:

Available Formats

DISCHARGE OF CONTRACT