Presented To: Sir Zulqurnain Naqvi

Presented by : Faisal Hayat(03) Mohammed Arif(09) Asad Saleem(04) Javad Ahmed(24) Atif Rathore(20) Junaid Saleem(21)

Contract Contract Ways of Contract Ways of Contract And remedies in And remedies in case of breach case of breach

of Contractof Contract

Contract

Any agreement or promise enforceable at law is a contract

What is Discharge of Contract ?What is Discharge of Contract ? “ “Discharge of contract means the Discharge of contract means the

termination of a contractual of a contractual relationship between parties”. relationship between parties”.

A contract is said to be discharged A contract is said to be discharged when it ceases to operate , i.e. when when it ceases to operate , i.e. when the the rights rights && obligation created by it created by it come to an end. come to an end.

For Example For Example e.g. Two parties A & B Make a e.g. Two parties A & B Make a

contract to build a fly-over in a City. contract to build a fly-over in a City. A is the municipal authority of the A is the municipal authority of the city & B is a construction company. city & B is a construction company. Due to some reasons the contract Due to some reasons the contract get discharged. Then the both get discharged. Then the both parties are free from the obligations parties are free from the obligations of contract, i.e. the rights & of contract, i.e. the rights & obligations of the parties come to an obligations of the parties come to an end. end.

How a Contract can get How a Contract can get Discharged Discharged ??

1.1. By Performance By Performance 2.2. By Agreement or by Consent. By Agreement or by Consent. 3.3. By Impossibility of performance. By Impossibility of performance. 4.4. By Promisee failing to offer facilities By Promisee failing to offer facilities

for performance. for performance. 5.5. By DeathBy Death

A Contract may be discharged in any of A Contract may be discharged in any of the following way.the following way.

How a Contract can get How a Contract can get Discharged Discharged ??

6. By Refusing tender of performance. 6. By Refusing tender of performance. 7. By Unauthorised material alteration 7. By Unauthorised material alteration

of contract. of contract. 8. Discharge by lapse of time. 8. Discharge by lapse of time. 9. By Operation of Law.9. By Operation of Law.10. By Breach of Contract. 10. By Breach of Contract.

1.Discharge of Contract 1.Discharge of Contract By PerformanceBy Performance

“ “ If both parties to the contract have If both parties to the contract have performed what they have agreed to performed what they have agreed to do, the contract is discharged.” do, the contract is discharged.”

Performance of obligation by parties Performance of obligation by parties to the contract puts an end to the to the contract puts an end to the contract. contract.

e.g. in our previous example A & B had a e.g. in our previous example A & B had a

contract to build a fly-over. B build the fly-contract to build a fly-over. B build the fly-over in the prescribed manner and A over in the prescribed manner and A provides the consideration to B. provides the consideration to B.

Here both parties performed their Here both parties performed their obligations & rights , what they promised obligations & rights , what they promised to do in the contract. Thus the contract is to do in the contract. Thus the contract is come to an end by the performance. come to an end by the performance.

2. By Agreement or by Consent.2. By Agreement or by Consent.

A Contract can be terminated or A Contract can be terminated or discharged by mutual express or discharged by mutual express or implied agreement between the implied agreement between the parties in any of the following parties in any of the following ways - ways -

A) By Novation A) By Novation

B) By Accord and Satisfaction B) By Accord and Satisfaction

C) By Remission and WaiverC) By Remission and Waiver

D). By Rescission. D). By Rescission.

A) By Novation A) By Novation “ “ If the parties to a contract agree to If the parties to a contract agree to

substitute a new contract for it , or to substitute a new contract for it , or to rescind or alter it, the original contract rescind or alter it, the original contract need not to be performed”. need not to be performed”.

That means When a new contract is That means When a new contract is substituted for an existing contract, either substituted for an existing contract, either between the same parties or b/w the between the same parties or b/w the different parties ‘novation’ occurs. different parties ‘novation’ occurs.

Novation means “the wiping out of Novation means “the wiping out of the original contract as well as the the original contract as well as the creating of a new valid contract”. creating of a new valid contract”.

If the new agreement is If the new agreement is invalid it cannot serve as novation, invalid it cannot serve as novation, and the original contract continues and the original contract continues unless the rights there under are unless the rights there under are expressly abandoned. expressly abandoned.

Novation may occur in two ways -Novation may occur in two ways -

I. New party is substituted for the old I. New party is substituted for the old one. one.

e.g. A owes money to B under a contract. e.g. A owes money to B under a contract. It is agreed b/w A, B and C that B shall It is agreed b/w A, B and C that B shall henceforth accept C as his debater instead henceforth accept C as his debater instead of A. The old debt of A to B is at end and a of A. The old debt of A to B is at end and a new debt from C to B has been contracted. new debt from C to B has been contracted.

II. Parties may substituted new II. Parties may substituted new contract for the old one. contract for the old one.

e.g. A owes B Rs. 10,000. A enters e.g. A owes B Rs. 10,000. A enters into an agreement with B, and gives into an agreement with B, and gives B a mortgage of his (A’s) estate for B a mortgage of his (A’s) estate for Rs. 5,000 in the place of the debt of Rs. 5,000 in the place of the debt of Rs. 10,000. This is a new contract Rs. 10,000. This is a new contract which extinguishes the old one. which extinguishes the old one.

B) By Accord and Satisfaction B) By Accord and Satisfaction ““Every promise may dispense with or Every promise may dispense with or

remit the performance of promise made to remit the performance of promise made to him and accept, instead of it, any him and accept, instead of it, any satisfaction which he thinks fit.”satisfaction which he thinks fit.”

In other words “When a lesser sum is In other words “When a lesser sum is actually paid than what is due under an actually paid than what is due under an existing contract, the new contract is existing contract, the new contract is called ‘accord’ & the actual payment is called ‘accord’ & the actual payment is called ‘ Satisfaction’.called ‘ Satisfaction’.

e.g. Ali has an postpaid mobile e.g. Ali has an postpaid mobile connection of AIRTEL. A bill of his connection of AIRTEL. A bill of his mobile is of Rs. 1245.00, which he mobile is of Rs. 1245.00, which he seems more than the actual bill. seems more than the actual bill.

thus he register a complain with thus he register a complain with AIRTEL. The AIRTEL officials offers AIRTEL. The AIRTEL officials offers him to pay Rs. 1200 as a settlement. him to pay Rs. 1200 as a settlement. Here Rs. 1245.00 is accord & Rs. Here Rs. 1245.00 is accord & Rs. 1200.00 is satisfaction. 1200.00 is satisfaction.

C) By Remission and WaiverC) By Remission and Waiver ““When a party to the contract When a party to the contract

abandons or waiver his rights, the abandons or waiver his rights, the contract is discharged”. contract is discharged”.

e.g. A promise to paint picture for B. B e.g. A promise to paint picture for B. B afterwards forbid him to do so. A is afterwards forbid him to do so. A is no longer bound to perform the no longer bound to perform the promise. promise.

D). By Rescission. D). By Rescission. ““When a person at whose option a When a person at whose option a

contract is voidable rescinds it, the other contract is voidable rescinds it, the other party thereto need not perform his party thereto need not perform his promise”. He is discharged from his promise”. He is discharged from his liability under the contract. liability under the contract.

Rescission may occur by mutual consent Rescission may occur by mutual consent of the parties or when one party fails to of the parties or when one party fails to perform his obligation the other party may perform his obligation the other party may rescind the contract. Rescission of a rescind the contract. Rescission of a contract cannot be in part only. The entire contract cannot be in part only. The entire contract must rescinded. contract must rescinded.

e.g. e.g.

1. A induces B to enter into a 1. A induces B to enter into a contract by fraud. The contract is contract by fraud. The contract is voidable at the option of B. He may, voidable at the option of B. He may, therefore, rescind the contract. therefore, rescind the contract.

3. By Impossibility of performance. 3. By Impossibility of performance.

““When the performance of a contract When the performance of a contract becomes subsequently impossible, becomes subsequently impossible, the contract becomes void”.the contract becomes void”.

It means that an agreement to do an It means that an agreement to do an act impossible in itself is void. act impossible in itself is void.

e.g. A promises B to sell his horse on 1e.g. A promises B to sell his horse on 1stst June, but before the day, the horse dies. June, but before the day, the horse dies. Now its impossible to fulfill the promise Now its impossible to fulfill the promise due to impossibility of performance.due to impossibility of performance.

Such type of impossibilities in which at a Such type of impossibilities in which at a

time of contract, contract was capable of time of contract, contract was capable of being performed, but subsequently its being performed, but subsequently its performance becomes impossible is called performance becomes impossible is called “ “ SUPERVENING IMPOSSIBILITY” . SUPERVENING IMPOSSIBILITY” .

4. By Promisee failing to offer 4. By Promisee failing to offer facilities for performance. facilities for performance.

““If the promisee neglect or refuses to If the promisee neglect or refuses to afford the promisor reasonable afford the promisor reasonable facilities for the performance of his facilities for the performance of his promise, the promisor is excused by promise, the promisor is excused by such neglect or refusal to any non-such neglect or refusal to any non-performance caused thereby”. performance caused thereby”.

e.g. A contracts with B to repairs B’s e.g. A contracts with B to repairs B’s house. B neglect or refuse to point house. B neglect or refuse to point out to A the places in which his out to A the places in which his house requires repair. A is excused house requires repair. A is excused for the non-performance of the for the non-performance of the contract, if it is caused by such contract, if it is caused by such neglect or refusal. neglect or refusal.

5. By Death5. By Death “ “ Where a contract is personal in Where a contract is personal in

character, or where personal skill or character, or where personal skill or ability is involved, death of the ability is involved, death of the promisor discharge the contract”. promisor discharge the contract”.

e.g. A promises to paint a picture for e.g. A promises to paint a picture for B by a certain day. A dies before the B by a certain day. A dies before the day. The contract cannot be enforced day. The contract cannot be enforced either by A’s representative or by B.either by A’s representative or by B.

6. By Refusing tender of 6. By Refusing tender of performanceperformance. .

– “– “If a party offers to perform his promise If a party offers to perform his promise and the offer has not been accepted by and the offer has not been accepted by the other party, the promisor is not the other party, the promisor is not responsible for non-performance.”responsible for non-performance.”

In other words refusal to accept “offer of In other words refusal to accept “offer of performance”, discharge the party making performance”, discharge the party making the offer. the offer.

7. By Unauthorized material 7. By Unauthorized material alteration of contract. alteration of contract.

In cases of material alteration by one party to the In cases of material alteration by one party to the contract without the consent of the other party, contract without the consent of the other party, the contract is discharged. the contract is discharged.

e.g. A and B have a contract of partnership, e.g. A and B have a contract of partnership, according to contract the profit share would be according to contract the profit share would be distributed in the ratio of 50:50. Without the distributed in the ratio of 50:50. Without the consent of B, A made an alteration in the consent of B, A made an alteration in the contract and change the shares in ratio 60:40 or contract and change the shares in ratio 60:40 or introduce a new partner C. introduce a new partner C.

In this case the contract get discharged & B is In this case the contract get discharged & B is free from any type of obligations & has right to free from any type of obligations & has right to sue A. sue A.

88. Discharge by lapse of time. Discharge by lapse of time. . Contract is discharged also by lapse of Contract is discharged also by lapse of

time. time. If the creditor does not file a suit to If the creditor does not file a suit to

recover his debt amount from a debtor recover his debt amount from a debtor within a period of limitation as laid down within a period of limitation as laid down under the Limitation Act, his remedy is under the Limitation Act, his remedy is debarred. debarred.

The contract is terminated by virtue of the The contract is terminated by virtue of the Limitation Act and the creditor cannot Limitation Act and the creditor cannot recover his debt.recover his debt.

exampleexample For example – the period of limitation For example – the period of limitation

to file a money suit is 3 years. If to file a money suit is 3 years. If within 3 years the creditor fails to file within 3 years the creditor fails to file a suit to recover his amount, the a suit to recover his amount, the debtor is discharged. debtor is discharged.

9. By Operation of Law9. By Operation of Law ““A contract is discharged or A contract is discharged or

terminated by the operation of terminated by the operation of law, law, in the following cases – in the following cases –

(i) By insolvency or bankruptcy (i) By insolvency or bankruptcy

(ii) By merger.(ii) By merger.

(i) By insolvency or bankruptcy (i) By insolvency or bankruptcy On a person adjudicated insolvent, On a person adjudicated insolvent,

he is released from all his debts & he is released from all his debts & liabilities probable in the insolvency.liabilities probable in the insolvency.

The rights and liabilities are The rights and liabilities are transferred to an Official Receiver transferred to an Official Receiver under the Provincial Insolvency Act. under the Provincial Insolvency Act.

The insolvent is discharged from all The insolvent is discharged from all obligations arising from all his earlier obligations arising from all his earlier contract. contract.

(ii) By merger.(ii) By merger. Merger of superior right into an inferior Merger of superior right into an inferior

right.right. For example, For example, (1)when a higher security is accepted in (1)when a higher security is accepted in

the place of the lower security. Inferior or the place of the lower security. Inferior or lower security vanishes or merge into a lower security vanishes or merge into a higher security. higher security.

an ordinary debt is merged into a an ordinary debt is merged into a mortgage, higher security. The right of mortgage, higher security. The right of lessee is changed into a right of lessee is changed into a right of ownership. ownership.

10. By Breach of Contract10. By Breach of Contract ““When a party to a contract has When a party to a contract has

refused to perform, or disable refused to perform, or disable himself from performing his promise himself from performing his promise in its entirety, the promise may put in its entirety, the promise may put an end to the contract.” an end to the contract.”

In other words – “Breach of contract In other words – “Breach of contract occurs where a party refuses to occurs where a party refuses to perform his part of the promise. perform his part of the promise.

Breach of Contract may be - Breach of Contract may be - (i) Actual breach of contract.(i) Actual breach of contract.

(ii) Anticipatory breach of (ii) Anticipatory breach of contract. contract.

(i) Actual breach of contract(i) Actual breach of contract.. The actual breach occurs when during the The actual breach occurs when during the

performance of the contract or at the time when performance of the contract or at the time when the performance of contract is due, one party the performance of contract is due, one party either fails or refuse to perform his obligation either fails or refuse to perform his obligation under the contract. under the contract.

e.g. A agrees to deliver to B 5 bags of sugar on 1e.g. A agrees to deliver to B 5 bags of sugar on 1stst Jan., He fails to do so on 1Jan., He fails to do so on 1stst Jan, There is a breach Jan, There is a breach of contract by A.of contract by A.

In the above example, if A tenders the sugar to B In the above example, if A tenders the sugar to B on the particular day, But B for no valid reason on the particular day, But B for no valid reason refuses to accept delivery, this is a breach of refuses to accept delivery, this is a breach of contract by B contract by B

(ii) Anticipatory breach of (ii) Anticipatory breach of contractcontract. .

When a party to contract refuse to When a party to contract refuse to perform his part of the contract perform his part of the contract before the actual time of the before the actual time of the performance of the contract is due, it performance of the contract is due, it is called an ‘anticipatory breach of is called an ‘anticipatory breach of contract’. contract’.

Anticipatory breach of contract may Anticipatory breach of contract may be - be -

(a) (a) By repudiation of contract By repudiation of contract (express renunciation). (express renunciation). or or

(b) (b) By impossibility of By impossibility of performance (implied performance (implied renunciation). renunciation).

(a) (a) By repudiation of contract By repudiation of contract (express renunciation).(express renunciation).

““when a party communicates his when a party communicates his inability to perform his part of the inability to perform his part of the contract before the time fixed for the contract before the time fixed for the actual performance is due, he is said actual performance is due, he is said to have expressly renunciation.”to have expressly renunciation.”

(b) (b) By impossibility of performance By impossibility of performance (implied renunciation). (implied renunciation).

When the breach take place by When the breach take place by either party to contract by his own either party to contract by his own voluntary act, which makes voluntary act, which makes performance of contract, Anticipatory performance of contract, Anticipatory breach of contract is committed by breach of contract is committed by impossibility of performance. It is a impossibility of performance. It is a case of implied renunciation of a case of implied renunciation of a contract. contract.

Example of anticipatory breach of Example of anticipatory breach of contract - contract -

A promises to sell his car to be on A promises to sell his car to be on before 1before 1stst May, but before 1 May, but before 1stst May, A May, A sells his car to C. Here A had sells his car to C. Here A had performed such a voluntary act that performed such a voluntary act that the performance of his obligation the performance of his obligation towards B is impossible and towards B is impossible and therefore, “Anticipatory breach by therefore, “Anticipatory breach by impossibility” is committed. impossibility” is committed.

Remedies for Breach of Remedies for Breach of ContractContract

1. Suit for specific performance 1. Suit for specific performance 2. Suit for injunction2. Suit for injunction 3. Suit for damages for the loss 3. Suit for damages for the loss

sustained sustained 4. Quantum Merit4. Quantum Merit

Suit for Specific PerformanceSuit for Specific Performance In this case , the Court directs the In this case , the Court directs the

party committing the breach of party committing the breach of Contract to perform the promise Contract to perform the promise according to the terms of Contract. according to the terms of Contract. Specific Performance of the Contract Specific Performance of the Contract can be granted under Specific Relief can be granted under Specific Relief Act 1877 Act 1877

Specific Performance can be granted Specific Performance can be granted only when damages are an only when damages are an inadequate remedy or when the inadequate remedy or when the Court can supervise the execution of Court can supervise the execution of Contract, or when the Contract is Contract, or when the Contract is Certain , Fair and Just. Certain , Fair and Just.

Specific Performance cannot be Specific Performance cannot be enforced of the Contracts of Personal enforced of the Contracts of Personal Service Service

ExampleExample

A agrees to buy and B agrees to Sell a A agrees to buy and B agrees to Sell a picture and two China Vases picture and two China Vases

A may Compel B specifically to perform A may Compel B specifically to perform the Contract for there is no Standard for the Contract for there is no Standard for ascertaining the actual damage which ascertaining the actual damage which would be caused by its non performancewould be caused by its non performance

Suit for Injunction Suit for Injunction An injunction is an order of the Court An injunction is an order of the Court

directing a person to do or to refrain directing a person to do or to refrain from doing some act, which is from doing some act, which is subject matter , Court can on a suit subject matter , Court can on a suit restrain a party by an order of restrain a party by an order of injunction from Committing the injunction from Committing the breach. The power of Court is breach. The power of Court is discretionary and can be granted for discretionary and can be granted for a temporary or an indefinite period. a temporary or an indefinite period.

A singer contracts with B the Manager A singer contracts with B the Manager of a theatre to Sing at his theatre for of a theatre to Sing at his theatre for one year and to abstain from Singing one year and to abstain from Singing at other theatres during the theatre. at other theatres during the theatre.

She absents herself , B cannot compel She absents herself , B cannot compel A to sing at his theatre, but he may A to sing at his theatre, but he may sue her for an injunction restraining sue her for an injunction restraining her from Singing at other theatres . her from Singing at other theatres .

Suit for damages for the loss Suit for damages for the loss sustainedsustained

In case of a breach of Contract , In case of a breach of Contract , injured party can claim damages for injured party can claim damages for the loss caused by the breach of the loss caused by the breach of ContractContract

Damages are given by the way of Damages are given by the way of restitution and as a monetary restitution and as a monetary compensation to the injured party. compensation to the injured party.

The aggrieved party can recover the The aggrieved party can recover the actual loss caused to him by the actual loss caused to him by the breach of Contract. And not any breach of Contract. And not any unusual damages.unusual damages.

For Example : For Example : 1. A contracts to repair B’s house in a 1. A contracts to repair B’s house in a

certain manner and receives certain manner and receives payments in advance. A repairs the payments in advance. A repairs the house but not according to the house but not according to the Contract. B is entitled to recover from Contract. B is entitled to recover from A , the Cost of making the repairs A , the Cost of making the repairs conforming to the Contractconforming to the Contract

Quantum MeruitQuantum Meruit

Quantum Meruit means as much as he has Quantum Meruit means as much as he has earned Where one person has expressly earned Where one person has expressly or impliedly requested another to render or impliedly requested another to render him a service without specifying any him a service without specifying any remuneration but the circumstances of remuneration but the circumstances of the request imply that the Service is to the request imply that the Service is to be paid for there is implied promise to be paid for there is implied promise to pay quantum Meruit that is so much as pay quantum Meruit that is so much as the party doing the service deserves the party doing the service deserves

Types of Damages Types of Damages

1. 1. Compensatory Damages :Compensatory Damages :

These damages are calculated to These damages are calculated to actually Compensate or make up the actually Compensate or make up the loss suffered by the partyloss suffered by the party

ExampleExample A who owes money to B a money lender A who owes money to B a money lender

undertakes to repay him by delivering undertakes to repay him by delivering him 10 mounds of grain on a certain date him 10 mounds of grain on a certain date and stipulates that in the event of his not and stipulates that in the event of his not delivering the stipulated amount by the delivering the stipulated amount by the stipulated date, he shall be liable to stipulated date, he shall be liable to deliver 20 pounds. This is a stipulation by deliver 20 pounds. This is a stipulation by way of penalty , and B is only entitled to way of penalty , and B is only entitled to reasonable Compensation in case of reasonable Compensation in case of BreachBreach

2.Nominal Damages2.Nominal Damages Damages which naturally arise in the Damages which naturally arise in the

usual course of things from the usual course of things from the breach are called nominal damages.breach are called nominal damages.

It is in the discretion of the Court It is in the discretion of the Court whether to allow or refuse damages. whether to allow or refuse damages. Damages should however be actually Damages should however be actually suffered .suffered .

3.Exemplary Damages3.Exemplary Damages Losses which arise due to remoteor Losses which arise due to remoteor

indirect consequences are not indirect consequences are not allowed. Exemplary damages are allowed. Exemplary damages are granted for Injured feelings, mental granted for Injured feelings, mental pain , suffering etc.pain , suffering etc.

For e.g. Breach of Contract of For e.g. Breach of Contract of Marriage, Banker fusing to honor the Marriage, Banker fusing to honor the Cheque of his Client having sufficient Cheque of his Client having sufficient funds etc funds etc

4.Special Damages4.Special Damages These arise on account of unusual These arise on account of unusual

circumstances. Special damages can be circumstances. Special damages can be recovered only if Stipulated in the recovered only if Stipulated in the Contract. Parties to the Contract must Contract. Parties to the Contract must know of the damages likely to result from know of the damages likely to result from the Breach. Special damages are granted the Breach. Special damages are granted when the parties know at the time of when the parties know at the time of making the Contract that the Special loss making the Contract that the Special loss or damage would result or is likely to or damage would result or is likely to result from the Breach of Contractresult from the Breach of Contract