Discharge of Contract (COMMERCIAL LAWS)

7/21/2019 Discharge of Contract (COMMERCIAL LAWS)

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Discharge of Contract

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A contract is said to be discharged when Boththe parties to a contract have performed orextinguish from their respective obligationsunder the law of contract.

Consequently, the contractual relationsbetween the parties to a contract come to anend.

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Mode of discharges of contract

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A contract can be discharged by performance inany or the following two ways.

1.By actual performance !

A contract is said to be discharged by actualperformance when the parties to the contract

perform their promises in accordance with theterms of the contract.

".By attempted performance or tender !

so far as the renderer of performance isconcerned , a contract is said to be discharged byattempted performance when the promisor hasmade an offer of performance to the promisee butit has not been accepted by the promise.

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#$%C&A'() B* M++A- A('))M)

A Contract is created by an agreement between

the parties. Similarly , it can also come to an endby their mutual agreement. The rights andobligations created by an agreement can bedischarged without their performance by means ofanother agreement between the parties.

The parties may agree to terminate the eistenceof the contract by any of the following ways!!!.

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Novation(Sec 62): -$t means the substitution of a new contract forthe original contract. %uch a new contract maybe either between the same parties or betweendifferent parties. he consideration for the new

contract is the discharge of the original contract. %ince ovation implies a fresh contract in place

of original one, all the parties to the old contractmust agree to it.

)xample ! A owes 's /00 to B. ow A says to Bthat C will mae you payment on behalf of him. Bagrees to it. %o now contracts have been madebetween B and C.

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Rescission (Sec 64)

$t means cancellation of the contract by anyparty or all the parties to a contract.

)xample! 2 promises * sell and deliver 100Bales of cotton on 1 3ct at his god own and ypromises to pay for goods on 1 ov 2 does not

supply the goods. * may rescind the contract.

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Alteration(Sec. 62)

$t means a change in the terms of a contract withmutual consent of the parties. Alterationdischarges the original contract and creates anew contract. &owever, the parties to the newcontract must not change.

)xample! A has to mae a payment of 's /00 to Bon April "/, but now A said $ will pay the amountof 40 April, and B accepted it.

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Difference between Novation andAlteration

$n case of ovation, a new contract is made forthe original contract,

5hereas in alteration no new contract isentered into.

$n case of ovation, sometimes!contracting

parties also change.But in case of alteration the parties always

remain the same.

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Remission (Sec 63)

$t means acceptance by the promise of a lesserfulfillment of the promise made.

)xample! A owes B 's /000. ow at the time ofpayment A pays to B 's "000, and he accept it.

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aiver

$t means intentional relinquishment of a rightunder the contract. hus, it amounts to releasinga person of certain legal obligation under acontract.

)xample ! A owe to B 's 100. Before thepayment B relieves A from the liabilities of

payment. ow A is not bound to perform hisobligation.

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A contract may be discharged by operation oflaw in the following cases!

1.By #eath of 6romisor ! $n that case whencontract is depend on the personal sill ofpromisor, so if the promisor is not alive than itwill be discharged.

". By $nsolvency !5hen a person is declaredinsolvent, then he will be discharged.

4. By +nauthori7ed Material Alteration ! whenone party maes any material alteration in theterms of the contract without the approval of theother party, the contract comes to an end.

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!m"ossi#ilit$ of "erformance

5hen the parties enter into a contract for an actwhich is possible earlier, but latter on that becomesimpossible, then it is nown as subsequent

impossible.

8ollowing list are some examples of this way !1.By destructions of sub9ect matter: aylor ;. Caldwell

1".By death ? personal incapacity4.By change of [email protected] declaration of war

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#ischarge by -apse of ime

A contract is discharged if it is not performedwithin specified period. &ere times means theperiod of limitation.

he limitation act 1=4 has prescribed thedifferent period for different contract, e.g. period oflimitation for recover a debt is 4 years, and torecover an immovable property is 1" years.

he contractual parties cannot exercise theirrights after the expiry of period of limitation.

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#ischarge by Breach of ContractA contract is said to be discharged by breach ofcontract if any party to the contract refuses or failsto perform his part of the contract or by his act,maes it impossible to perform his obligation

under the contract.$t may be occurring in the following two ways !

Anticipatory breach

it occurs when the parties declares his intention ofnot performing the contract before theperformance is due.

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Act%al &reach of Contract

1. 3n the due date of performance!$f any party to a contract refuses of fails toperform his part of the contract at the time fixedfor performance, it is called an actual breach ofcontract on due date of performance.

". #uring the course of performance!

$f any party has performed a part of the contractand then refuses or fails to perform theremaining part of the contract, it is called anactual breach of contract during the course ofperformance. : Cort v.Amber (ate railway co.>

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R''D!'S *R &R'AC+ * C*N,RAC,: -

3n breach of contract the aggrieved party has any one or

more of the following remedies

1. ')%C$%%$3 38 &) C3'AC !$f one party has broen his part of the promise under acontract, the aggrieved party may also rescind the contract.he aggrieved party need not perform his part of promise

under the contract. &e is further entitled to compensationfor the damages sustained by him trough the non!fulfillment of the promise.

1.1. %+$ 83' #AMA()%%+$ 83' #AMA()% !he aggrieved party is entitled to file a suit for

compensation of damages caused to him by the breach ofthe contract. #amages are the monetary award granted toan aggrieved party for the breach of contract. #amagesmay be ordinary, special, or normal.

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3. SUIT ON QUANTUM MERIT: -When an aggrieved party ha part!y per"#r$ed a %#ntra%t& he %an'e "#r the va!'e #" '%h part #" per"#r$an%e. In %ae #" (rea%h #"%#ntra%t thi 'it i )n#*n a 'it #n +'ant'$ $erit i.e. "#r a$'h a earned (y the party. Thi re$edy i #n!y avai!a(!e #n!y'nder #$e pe%i"i% %ir%'$tan%e. Thi right i avai!a(!e inadditi#n t# the right t# da$age.

,. SUIT OR SE/II/ ERORMAN/E: -Where "#r the 0ra%h #"

%#ntra%t& da$age are inade+'ate re$edy& the %#'rt $ay #rder theparty "#r pe%i"i% per"#r$an%e #" the %#ntra%t. 1#*ever& thepe%i"i% per"#r$an%e *i!! n#t (e granted in every %ae.

2. SUIT OR INUN/TION:An aggrieved party %an 'e "#r in4'n%ti#nand %#'rt $ay i'e an in4'n%ti#n againt the party t# a %#ntra%t5

In4'n%ti#n pr#hi(it a party "r#$ d#ing #r %#ntin'ing t# d##$ething *hi%h a$#'nt t# (rea%h #" %#ntra%t. It i genera!!yi'ed t# e%'re pe%i"i% per"#r$an%e #" negative ter$ #" a%#ntra%t.6 Warner (#y 7. Ne!#n8

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Discharge of Contract (COMMERCIAL LAWS)

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