1.Discharge of Contract

8/6/2019 1.Discharge of Contract

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GROUP 1

ChandanV N

Deon Francis

NirmalMuna

Durga

DISCHARGE OF CONTRACT



Contract may be discharged

y By Performance

y By agreement or consent

y By impossibility

y By lapse of timey By operation of Law

y By breach of contract



BY AGREEMENT OR CONSENT.

y Agreement is basically what binds them, so by their

agreement or consent the contract may be terminated.

y ´A thing may be destroyed in the same manner in which it

was constitutedµ



Some types of this are«..

i. Novation

ii. Rescission

iii. Alterationiv. Remission

v. Waiver

vi. Merger



Novation

y A novation takes place when

I. A new contract is substituted for an existing one between

the same parties.

II. Keeping the same terms and conditions a new contract ismade between the existing and a new party by rescinding

one of the existing party with the consent of all three.



Rescission

y It takes place when all or some of the terms of the contract

are cancelled.

I. By mutual consent of the parties

II. When one party fails in the performance of his obligation .(here the party cannot claim compensation for the breach

of contract.)

III. There may be total or partial rescission.



Alteration

y When the terms or conditions are changed or altered on the

mutual consent of the parties involved.

Remissiony It means acceptance of lesser fulfilment of the promise made

y Accept less amount then what is in the contract.



Waiwer

y When the parties agree that there wont be any further bound

by the contract between them.

y Mutual abandontment to the rights over the contract.

Mergery 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 the same or some other contract.



DISCHARGE BY IMPOSSIBILIT Y OF

PERFORMANCEy If an agreement contains an undertaking to perform an impossibility, it is void ab

initio.

Lexmon cogit ad impossibilia.

impossibilium nulla obligato est.

According to sec 56, impossibility of performance may fall into the followingcategories

1. Impossibility existing at the time of the agreement.

A. Known to parties

B. Unknown to parties.

2. Impossibility arising subsequent to the formation of the contract.



A contract is discharged by supervening impossibility in the

following cases:

1. Destruction of subject matter of contract.

2. Non existence or non occurrence of a particular state ofthings.

3. Death or incapacity for personal service.

4. Change of law or stepping in of a person with statutory

authority.

5. Outbreak of war.



In the following cases, a contract is not discharged on the

ground of supervening impossibility:

1. Difficulty of performance

2. Commercial impossibility

3. Impossibility due to failure of a third person.

4. Strikes, lockouts and civil disturbances.

5. Failure of one of the objects.



� Parallel concept of supervening impossibility.

� In fact impossibility and frustration are oftenused as interchangeable expressions.



There are 3 effects of supervening impossibility

1. A contract to do an act which, after the contract is madebecomes impossible or by reason of some event which

the promisor could not prevent, unlawful ,becomes voidwhen the act becomes impossible or unlawful.

2. Where a person has promised to do something which heknew, or with reasonable diligence, might have knownand which the promisee did not know to be impossible or

unlawful, such promise should make compensation tosuch promise for any loss.

3. When a contract becomes void, any person who receivedany advantage under such contract is bound to restore it.



The Limitation Act, 1963 lays down that a contract should beperformed within a specified period, called period of limitation.

If it is not performed, and if no action is taken by thepromisee within the period of limitation he is deprived of hisremedy at law.

The Limitation Act, 1963 lays down a period of three yearsfor the enforcement of most types of rights.



The price of goods sold without any stipulation as to creditshould be paid within 3 years of the delivery of the goods. If the price is not paid and the creditor does not file a suitagainst the buyer for the recovery of the price within the 3

years, the debt becomes time-barred and henceirrecoverable.



A contract may be discharged independently of the wishes of the parties, i.e., by operation of law.

This includes discharge-

1. By Death

2. By Merger

3. By Insolvency

4. By unauthorized alteration of the terms of a writtenagreement

5. By rights and liabilities becoming vested in thesame person



Here the contract is of personal nature where the death of the promisor discharges the contract.

But in other contracts the rights and liabilities of the

deceased person pass on to the legal representatives of thedead man.



Here the inferior right contract merges into a superior rightcontract, the former stands discharged automatically.

Illustrations:

1. A man holding property under a contract of tenancy buysthe property, his rights as a tenant are merged into therights of the ownership and the contract of tenancy stands discharged by operation of law.

2. A part-time lecturer is made full time lecturer, thecontract of part-time lecturership is discharged by merger.



Meaning: Unable to pay the debts owed

When a person is adjudged insolvent, he is dischargedfrom all the liabilities incurred prior to his adjudication.

The Insolvency Court passes an order of discharge



Where a party to a contract makes any material alteration inthe contract without the consent of the other party , the otherparty can avoid the contract.

A material alteration is one which changes, in a significantmanner, the legal identity or character of the contract or therights and liabilities of the parties to the contract.



Where the rights and liabilities under a contract vest in thesame person , for example when a bill gets into the hands of the acceptor, the other parties are discharged



DISCHARGE BY BREACH OF

CONTRACT



� Breach of a contract means a break of the obligationwhich a contract imposes.

� It occurs when a party to the contract without lawfulexcuse does not fulfill his contractual obligation or by hisown act makes it impossible that he should perform hisobligation under it.

� It confers a right of action for damages on the injured party.

� Breach of contract may be:-

1) Actual breach of contract, or

2) Anticipatory breach of contract.



1)ACTUAL BREACH OF CONTRACT.

a) At the time when the performance is due.

b) During the performance of the contract

- Express repudiation (by word or act)

- Implied repudiation (impossibility created by the

act of a party to the contract)



2)ANTICIPATORY BREACH OF CONTRACT

It occurs when a party to an executory contractdeclares his intention of not performing the contract

before the performance is due.

He may do so by-

1)By expressly renouncing his obligation under the

contract.

2)By doing some act so that the performance of his

promise becomes impossible.



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1.Discharge of Contract

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