DISCHARGE OF CONTRACTS UNDER INDIAN CONTRACTS ACT 1872

Submitted by

Moon Mishra

UID : SF0117029

B.A LLB (2nd Year)

Faculty in-charge

Yugal Kishore

Assistant Professor of Indian Contracts Act 1872

National Law University, Assam

Guwahati

1
 TABLE OF CONTENTS

[1]INTRODUCTION .................................................................................................. 3-4

[1.1]Literature Review

[1.2]Objectives of the research

[1.3]Research Questions

[1.4]Research Methodology

[2]METHODS OF THE DISCHARGE OF CONTRACTS UNDER INDIAN

CONTRACTS ACT 1872.........................................................................................5-10

[3]REMEDIES FOR BREACH OF CONTRACT................................................11-16

[4]ILLUSTRATION OF DISCHARGE OF CONTRACTS THROUGH ENGLISH

CASE LAWS.............................................................................................................17-24

[5]CONCLUSION.....................................................................................................25

BIBLIOGRAPHY.....................................................................................................26

2
 [1]INTRODUCTION

The discharge of a contract means that the obligations of the contract come to an end. When
discharge occurs, all duties which arose under the contract are terminated. This chapter
discusses the various methods of discharging a contract and the consequences of each. It
considers how a contract can be discharged through agreement between the parties; the
elements necessary for a contract to be discharged by performance including the rules
relating to partial performance of a contract, and the meaning and effect of the frustration of a
contract. The chapter discusses the meaning of breach of contract, both actual breach and
anticipatory breach, and its consequences. The remedies for a breach of contract are explored,
including the rules relating to remoteness and measure of damages and the difference
between liquidated damages and penalties. Equitable remedies of specific performance and
injunctions are explained.

If the plaintiff has established the fulfilment of the two foregoing sets of conditions
precedent, has proved the contract its breach, has shown the existence of a primary and a
secondary obligation, the remedy follows as of course unless the defendant can show a
discharge. The question of discharge may arise with reference to the primary contractual
obligation, or with reference to the secondary remedial obligation, or with reference to both at
once. It might seem that the continued existence of the primary obligation at the time of its
breach would be a condition precedent to the existence of a secondary obligation, and that the
burden of showing such continued existence is on the plaintiff; but the Courts frequently
assume the continuing existence of both obligations, throwing on the defendant the burden of
proving a discharge of either.

[1.1]LITERATURE REVIEW :

1. Mulla’s Indian Contract Act, edited by Anirudh Wadhwa, LexisNexis publishers:

This book deals with every aspect of Indian contract act very precise manner. It is one of the
good reads of the contract act. This book gives very wide knowledge of Contract act in the
nutshell. The entire concept has been described very clearly and in easy language. This book
provides all the relevant details and facts useful for the completion of the research.

2.. J. Beatson, Anson’s Law of Contract, Oxford New York, 29th ed:

3
The 29th edition of this book is considered as the well-established material in the sphere of
contract. The authors have been extensively deals with the concept of contract especially in
the context of English Law. This book also deals with the concept of duress in the limelight
of the relevant recent case laws. Therefore, this book is significant for this research paper to
fill up the gap in concept through research.

[1.2]SCOPE AND OBJECTIVE

I. To study the methods of the discharge of contracts under Indian Contracts Law 1872
II. To study the remedies available for the discharge of contracts under Indian Contracts
Law 1872
III. To study the discharge of contracts through English Case Laws

[1.3]RESEARCH QUESTIONS

I. To study the methods of the discharge of contracts under Indian Contracts Law 1872?
II. To study the remedies available for the discharge of contracts under Indian Contracts
Law 1872?
III. How is the discharge of contracts explained through English Case Laws?

[1.4]RESEARCH METHODOLOGY

In this research paper, doctrinal form of research has been applied wherein materials form
secondary sources such as libraries , archives, articles and the internet have been used.

4
 [2]METHODS OF THE DISCHARGE OF CONTRACTS UNDER INDIAN
CONTRACTS ACT 1872.

Discharge of a contract means termination of the contractual relationship between the parties.
A contract is said to be discharged when it ceases to operate, i.e. when rights and obligations
created by it come to an end. Following are the important modes by which a contract is
discharged:

[2.1]Performance of a Contract :

Performance means doing of a thing which is required to be done in the contract. Discharge
by performance takes place when the parties to the contract fulfil their obligations arising
under the contract within the time and in the manner prescribed. In short, a contract is
discharged when both the promissor and the promisee perform their respective obligations. In
such a case, the parties are discharged and the contract comes to an end. But if only one party
performs the promise, he alone is discharged. Such a party gets a right of action against the
other party who is guilty of breach.

Example: A agrees to sell his car to B for |1,00,000. As agreed A delivered the car and B
paid the price. Both the parties performed their mutual obligations and contract is said to be
discharged.

[2.2]Discharge by agreement :

As a contract is created by means of an agreement, it may be discharged by another

agreement between the same parties nullifying the previous contract. It is based on the maxim
‘Eodem modo quo quid constituitor, eodem modo destruitur.’ It means a thing may be
destroyed in the same manner in which it is constituted. It may be discharged either by
express or implied agreement.

Example: A agrees to sell his site to B for Rs. 2,00,000 and received Rs. 50,000 as advance.
A extended time beyond the date of registration by taking an extra amount of Rs. l0,000
forming a new agreement. The old agreement is discharged by forming a new agreement.
Sections 62 and 63 deal with the various types of discharge of a contract by agreement or
consent.

(a) Novation : Novation takes place when a new contract is substituted for an existing one
between the same parties or a contract between two parties is rescinded in consideration of a

5
new contract being entered into on the same terms between the same parties or different
parties. In short, it means cancellation of original contract and creation of a new valid
contract. It is essential for the principle of novation to apply that there must be mutual or
tripartite consent of all the parties concerned. For instance, a creditor, at the request of the
debtor, agrees to take another person as his debtor in place of the original debtor. The
consideration for the new contract is the discharge of the old contract.

Examples:

(i.) A owes B under a contract. It is agreed between A, B and C that B shall henceforth accept
C as his debtor instead of A. The old debt of A to B is at an end and a new debt from C to B
has been contracted.

(ii.) A owes B Rs. 10,000. A enters into an agreement with B, and gives B a mortgage of
his(A’s) estate for |5000 in place of the debt of Rs. 10,000. This is a new contract and
discharges the old.

(b) Rescission : Rescission takes place when all or some of the terms of the contract are
cancelled. It may occur (i) by mutual consent of the parties, or (ii) where one party fails in
performing his obligation, the other party may rescind the contract without prejudice to his
right to claim compensation for breach of contract.

Examples:

(a) A promises to supply certain goods to B six months after a date. By that time, the goods
go out of fashion. A and B may rescind the contract by mutual agreement.

(b) A and B enter into a contract that A shall deliver certain goods to B by the 15th of this
month and that 13 shall pay the price on the 1st of the next month. A does not supply the
goods. B may rescind the contract and need not pay the price.

(c) Alteration : Alteration takes place when one or more of the terms of the contract is are
altered by the mutual consent of the parties to the contract. In short, alteration means change
in one or more of the terms of a contract.

Example: A enters into a contract with B for the supply of 100 bales of cotton at his godown
No 1 by the first day of the next month. A and B may alter the term of the contract regarding
the period of performance by postponing one week through mutual consent.

6
(d) Remission: The party to whom an obligation is owed may agree with the other party to
accept something different in place of the former obligation. This is known as remission. It
means acceptance of a lesser fulfilment of the promise made. For instance, acceptance of a
lesser sum than what was contracted for, in discharge of the whole of the debt. It is not
necessary that there must be some consideration for the remission of the part of the debt. So
the promise can dispense with or remit the performance of the promise by the promissor or
extend the time for performance or accept any other satisfaction instead of performance.

Example: A owes B Rs. 5,000. A pays to B and B accepts, in satisfaction of the whole debt,
Rs. 2,000 paid at the time and place at which Rs. 5,000 were payable. The whole debt is
discharged.

(e) Waiver : Waiver means the deliberate abandonment of the right by the parties to a
contract. It takes place when the parties to a contract agree that they shall no longer be bound
by the terms of the contract. It releases the parties from their contractual obligations.
Consideration is not necessary for waiver.
Example: A agrees to give B one watch extra along with the delivery of T.V. for some
amount. A does not give it and B need to pay the extra amount.

(f) 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 the same or some other
contract.

Example: A holds a property under a lease. He later buys the property. His rights as a lease
merge into his rights as an owner.

[2.3] Discharge by impossibility of performance :

Impossibility of performance results in the discharge of the contract. Impossibility may

appear on the face of the contract, or may exist, unknown to the parties, at the time of making
the contract or may arise after the contract is made. In the first case the contract is void ab
initio and creates no rights and obligations between the parties. In the second case also the
contract is void on the ground of mutual mistake. In the last case, the contract is not void
when the agreement was entered into but becomes void due to impossibility of performance.
This is known as the doctrine of subsequent or supervening impossibility. It is based on the
maxim Lex non-cogit ad impossibilla i.e. the law does not compel the impossible.

7
A contract is discharged by supervening impossibility in the following cases:

1. When the subject matter of a contract, subsequent to its formation, is destroyed without
any fault of the parties to the contract the contract is discharged. A contracted to sell a
specific quantity of potatoes to be grown on his farms. The crop largely failed. Held, the
contract was discharged.1

2. When a contract is entered into between two parties on the basis of a continued existence
or occurrence of a particular state of things but there is change in the state of things or state of
things, which ought to have occurred does not occur, the contract is discharged.

Examples:-

A and B contract to marry each other. Before the time fixed for marriage A goes mad. The
contract becomes void.

H hired a flat from K for witnessing a coronation procession of King Edward VII.The
coronation procession was cancelled due to the illness of the king. It was held, H was excused
from paying the rent for the flat on the ground that existence of the procession was the basis
of the contract. Its cancellation discharged the contract.2

3. Contracts, which are lawful when made but become unlawful later by reason of change in
law, become impossible of performance.

Example: A enters into a contract with B on 1st March for the supply of China silk to be
imported in the month of September of the same year. In June by an Act of parliament the
import of such silk is banned. The contract is discharged.

4. A contract entered into before the commencement of war remains suspended during the
war.

Example: A contracts to take in cargo for B at a foreign port. A’s government afterwards
declares war against the country in which the port is situated. The contract becomes void
when war is declared.

1
Howell Vs Coupland(1876) 1 QBD 258.
2
Krell Vs Henry (1903) 2 KB 740.

8
5. A contract may become impossible of performance or incapable of performance by reason
of the death or incapacity or some person whose continued life and health is necessary for the
performance of the contract.

Example: An artist undertook to perform at a concert for a certain price. Before she could do
so she was taken seriously ill. Held, she was discharged due to illness.3

[2.4] Discharge by Lapse of time:

A contract is also discharged by lapse of time. The Indian Limitation Act 1963 lays down that
a contract should be performed within a specified period, called period of limitation. If it is
not performed and if no action is taken by the promisee in a law court within the period of
limitation, he is deprived of his remedy at law. In other words, we may say that the contract is
terminated. For instance, the price of goods sold without any stipulation as to credit should be
paid within three year of the delivery of the goods. Where goods are sold on credit to be paid
for after the expiry of a fixed period of credit the price should be paid within 3 years of the
expiry of period of credit. If the price is not paid and the creditor does not file a suit against
the buyer for the recovery of price within 3 years, the debt becomes time barred and hence
irrecoverable.

Example: A lends B |10, 000 on 1-1-1998. A should recover this amount within 31-12-
2000i.e. 3 years. If B does not repay within this period and A does not take any steps to
recoverit, he loses the amount.

However, it is upto the parties to rejuvenate a contract by acknowledgements.i f a contract is

not performed within certain time (period of limitation) and no action is taken by the
promisee withm the period of limitation, then, as per the Limitation Act 1963, he is deprived
of his remedy at law. In general, the Limitation Act lays down a period of three years for the
enforcement of most of the rights arising under contracts.

[2.5]Discharge by Breach of Contract :

Discharge by breach occurs in any of the following situations:

• When a party thereto renounces his liability under the contract, or when a party, without
lawful excuse, does not fulfill his obligation, or when a party thereto makes it impossible that

3
Robinson Vs Davison (1871) L.R. 6 Ex 269.

9
he should perform his obligations under the contract, or when a party thereto totally or
partially (if partial failure is in relation to essential and integral part of his obligation, so as to
go to the root of the contract) fails to perform his liability (obligations) under the contract.

Kinds of Breach: Breach is of two kinds:

(a)Anticipatory Breach 4 : Anticipatory breach of contract takes place when a party

repudiates it before the time fixed for performance has arrived or when a party by his own act
disables himself from performing the contract. Anticipatory breach occurs when a party to a
contract has either refused to perform his promise in its entirety, or has disabled himself from
performing his promise in its entirety.

Effect/ consequences of anticipatory breach5: Where a party to a contract refuses to perform

his part of the contractual obligations before the actual time arrives, then: the promisee can
treat the contract as discharged, so that he is absolved of the performance of his part of the
promise, and he can immediately take a legal action for the breach of contract, unless he has
signified, by words or conduct, his acquiescence in its continuance; or the promisee can,
without putting an end to the contract, treat it (contract) as still subsisting and alive, and wait
for the performance of the contract on the appointed date.

(b)Actual Breach: Actual breach takes place either at the time when the performance is due
and one party fails or refuses to perform his part, or during the performance when one party
fails or refuses to perform his part. The refusal to perform may be by: express repudiation (by
word or act), or implied repudiation (impossibility )created by the act of the party himself.

Examples

(a) A agrees to deliver B 10 bags on 1st January. He fails to deliver the rice on 1st January.
There is a breach of contract by A.

(b) A agrees to deliver B 10 bags on 1st January. On 1st January, he tenders the rice to B. But
B refuses to accept delivery without valid reasons. There is a breach of contract by B.

4
West Bengal Financial Corporation v Glurco Series Pvt Ltd AIR 1973 Cal 268, Sooltan Chand
v Schiller (1878) 4 Cal 252
5
Frost v Knight (1872) LR 7 Ex 111; Avery v Bowden (1855) 5 E&B 714

10
 [3]REMEDIES FOR BREACH OF CONTRACT

Generally a contract is entered into between the parties with an intention to perform it. When
all the provisions of a contract have been complied with, the contract is said to have been
discharged by performance. In effect, the contract is no longer exists. But sometimes, the
contract may never reach this stage because one party simply refuses to perform or may
handle the agreement in an unsatisfactory manner. This makes the performance of the
contract impossible. So, parties to a lawful contract are bound to perform its respective
obligations. But when one of the parties fails to perform their respective obligation, he is said
have committed a breach of contract.

[3.1] Rescission:

Where one of the parties to a contract commits breach, the other party may sue to treat the
contract as rescinded and refuse further performance. In such a case, he is freed from all the
obligations under a contract. Under section 64, the party rescinding a voidable contract shall,
if he has received any benefit thereunder from another party to such contract, restore such
benefit to the person from whom it was received. Further under section 75 a person who
rightfully rescinds a contract is entitled to compensation for any damage, which he has
sustained through the non-fulfilment of the contract.

Example: A promises B to supply 10 bags of sugar on a certain day. B agrees to pay the
price after the receipt of the goods. A does not supply the goods. B is discharged from
liability to pay the price.

Under the following circumstances the court may grant recession:

(1) When the contract is voidable by the plaintiff Example: A sells a field to B. There is a
right of passage over the field to which A has direct personal knowledge but which he
conceals from B. B is entitled to have the contract rescinded.
(2) Where the contract is unlawful for causes not apparent on its face and the defendant i
more to blame than the plaintiff. For example, A, an attorney, induces his client B, a
Hindu widow to transfer property to him for the purpose of defrauding B’s creditors.
Here the parties are not equally in fault and B is entitled to have instruments to
transfer rescinded. However, the court may refuse to rescind the contract under the
following circumstances.

11
 1. Where the plaintiff has expressly or impliedly ratified the contract.

2. Where, owing to the change of circumstances since the making of the contract, the
parties cannot be restored to their original positions.

3. Where the third parties have, during the subsistence of the contract, acquired right in
good faith and for the value.

4. Where only a part of the contract is sought to be rescinded and such part is not
severable from the rest of the contract.

[3.2] Suit for damages :

Under section 73, where a contract has been broken, the party who suffers by such breach is
entitled to receive compensation for any loss or damage caused to him from the party who
has broken the contract. Damages are a monetary compensation allowed to the injured party
by the court for the loss or injury suffered by him. The object of awarding damages for the
breach of a contract is to put the injured party in the same financial position as if the contract
had been performed. This is called the doctrine of restitution. The fundamental basis of
awarding damages is that law of contract does not seek to punish the guilty but the court will
compel the party in breach to make good the loss by paying damages to the other party. The
foundation of modern law of damages is to be found in the judgement of the following case.

Hardley Vs Baxendale6 :

After his crank shaft broke, Hadley’s corn mill operation ceased until the shaft could be
replaced. Hadley had to send the shaft to engineering company, Joyce and Co., so that they
could use it as a model to make a new one. Hadley and Pickford and Co., a shipping
company owned and operated by Baxendale, entered into a contract where if Hadley deliver
the shaft to Pickford and Co before noon the next day, Baxendale would have the shaft
delivered to Joyce and Co. the following day. As agreed, Hadley delivered the shaft to
Pickford and Co. before noon and paid the shipping services. Unfortunately the shipping was
delayed as a result of Pickford’s negligence, and the shaft was delivered several days after the
agreed upon date. As a result of Pickford’s breach, Hadley’s mill remained closed until the
new shaft was delivered. In response Hadley filed a claim against Baxendale seeking

6
Hardley Vs Baxendale[1854]EWHC J70

12
damages. In the claim for damages, Hadley included the lost profits his business suffered as a
result of Pickford and Co.’s breach.

[3.3] Quantum Meruit :

Quantum meruit is another remedy available for a party to a contract on its breach by another.
Sometimes, it so happens that one party to the contract has performed part of the promise and
fails to perform the remaining part because the other party has committed a breach. The first
party must, therefore, be compensated for the part he has performed.This is called the
doctrine of quantum meruit. It means as much as meruited or earned or deserved.

The claim for quantum meruit arises only when the original contract is discharged. If the
original contract exists, the party not in default cannot have quantum meruit remedy. In such
a case, he has to take remedy in damages. Further, only the party who is not at default can
bring the claim for quantum meruit. The claim for quantum meruit arises in the following
cases:

(a) When an agreement is discovered to be void (Sec. 65)

When an agreement is discovered to be void, or when a contract becomes void, any person
who has received any advantage under such agreement or contract is bound to restore it or to
make compensation for it, to the person from whom he received it.

Example: CE was employed as a managing director in a company. After he rendered service

for three months, it was found that the directors were not qualified to appoint him. Held, CE
could recover remuneration for the services rendered by him on quantum meruit.7

(b)When something is done non-gratuitously :

When a thing is lawfully done or a person without any intention to do so gratuitously to

another person goods are supplied by and such other person enjoys the benefit thereof, he is
bound to make compensation to the former in respect of, or to restore, the thing so doneor
delivered.

Example: A, a trader, leaves goods at B’s house by mistake. B treats the goods as his own.
He is bound to pay A for them.

7
Craven-Ellis Vs Canon Ltd., (1936) 2 KB. 403

13
(c) Where there is an express or implied contract to render services but there is no
agreement as to remuneration.

In such case a reasonable remuneration is payable. What is reasonable remuneration is

determined by the court and this remuneration is quantum meruit.

Example: There was an implied agreement between P and a fire brigade for the services of
the brigade. Held, renumeration was payable by P for the services received by him.8

(d) When the completion of the contract has been prevented by the act of the other
party to the contract :

Example: C engaged P to write a book on ancient armoury to be published by instalments in

a periodical called “The Juvenile Library” for the fee of |l00. After a few issues of the
periodical had appeared, it was abandoned. Held, P could recover on quantum meruit for the
work he had done under the contract .9

(e) When a contract is divisible:

When a contract is divisible and the party not in default has enjoyed the benefit of the part
performance, the party in default may sue on quantum meruit. But if the contract is not
divisible i.e. where it requires complete performance as a condition of payment, the party in
default cannot claim remuneration on the ground of quantum meruit.

Example: P agreed to pay C, appointed as second mate, 30 guineas on the completion of a

voyage from Jamaica to Liverpool. C died before the completion of the voyage. Held, C’s
widow was not entitled to claim proportionate payment for the part of the voyage completed
as the contract imposed one indivisible obligation which had not been performed .10

(6) When an indivisible contract is completely performed, but badly When an indivisible
contract for a lump sum is completely performed, but badly the person who has performed
the contract can claim the lump sum. But the other party can make a deduction for bad work.

8
Council V s Powell (1942) 1 AIl.ER 220
9
Panache Vs Colburn, (1831) 8 Bing, 14
10
Cutter Vs Powell (1975) 6T.L.R. 320

14
Example: P agreed to decorate D’s flat for a lump sum of Rs. 750, certain requirements
having been laid down. P did the work but D complained of faulty workmanship. It costed
Rs. 204 to remedy that defect. Held P could recovered Rs. 750 less Rs. 204 .11

[3.4]Specific performance of contract:

Sometimes damages are not an adequate remedy for breach of contract. The injured party
may ask the court to compel the defaulting party to actually carry out promises what should
have been agreed as per the terms of contract. In such cases, the court may direct the party in
breach to carry out his promise according to the terms of the contract. This is a direction by
the court for specific performance of the contract at the suit of the injured party.

However, an injured party cannot claim specific performance as an absolute right. It is the
discretion of the court to grant such a remedy. Generally, the court will order for specific
performance of the contract in the following cases.

1. When the act agreed to be done is such that compensation in money for its non
performance is not an adequate relief.

2. When there exists no standard for ascertaining the actual damages caused by the non-
performance of the act agreed to be done.

3. When it is probable that the compensation in money cannot be got for the non performance
of the act agreed to be done.

But, under the following circumstances, the court will not grant specific performance:

1. When damages are an adequate remedy

2. When the court is not certain or is inequitable to either party.

3. When the contract is in its nature revocable.

4. When the trustees in breach of their trust make the contract.

5. When the contract is of a personal nature e.g. a contract to marry.

6. When the contract is made by a company in excess of its powers as laid down in its
Memorandum of Association.

11
Hoening Vs Issacs, (1952) All E.R. 176

15
7. When the court supervises its carrying out e.g. a building contract.

[3.5] Injunction :

When a party is in breach of a negative term of a contract (i.e. where he is doing something
which he promised not to do), the court may, by issuing an order, restrain him from doing
what he promised not to do. Such an order of the court is known as injunction. In short, an
injunction is an order of the court restraining a party from doing a wrongful act. On breach of
contract, the court can restrain a party, by an order of injunction, from committing the breach.
However, the power of the court to grant injunction is discretionary and may be granted for a
temporary or an indefinite period. It is granted when (l) damages would be an inadequate
remedy and (2) the specific performance of the contract would involve a general
superintendence with the court could not undertake.

Example: N, a film actress, agreed to act exclusively for W for a year and for no one else.
During the year she contracted to act for Z. Held, she could be restrained by injunction from
doing so. 12

12
Warner Bros Vs Nelson (1937) IKB 209

16
 [4]ILLUSTRATION OF DISCHARGE OF CONTRACTS THROUGH ENGLISH
CASE LAWS

[4.1] PERFORMANCE

THE GENERAL RULE

(a) Re Moore and Landauer 13

There was an agreement for the sale of 3,000 tins of canned fruit packed in cases of 30 tins.
When delivered it was discovered that half the cases contained only 24 tins although the total
number of tins was still 3,000. The market value was not affected. The Court of Appeal held
that notwithstanding that there was no loss to the buyer, he could reject the whole
consignment because of the breach of s13 of the Sale of Goods Act (goods must correspond
with the description).

(b)Cutter v Powell 14

A seaman who was to be paid his wages after the end of a voyage died just a few days away
from port. His widow was not able to recover any of his wages because he had not completed
performance of his contractual obligation. However, this situation is now provided for by the
Merchant Shipping Act 1970.

MODIFICATION OF THE GENERAL RULE

(c)Sumpter v Hedges 15

The plaintiff agreed to erect upon the defendant's land two house and stables for £565. He did
part of the work to the value of about £333 and then abandoned the contract. The defendant
completed the buildings. The Court held that the plaintiff could not recover the value of the
work done, as he had abandoned the contract.

(d)Roberts v Havelock 16

13
Cutter v Powell (1795) 6 Term Rep 320
14
Cutter v Powell (1795) 6 Term Rep 320
15
Sumpter v Hedges [1898] 1 QB 673
16
Roberts v Havelock (1832) 3 B. & Ad. 404

17
A shipwright agreed to repair a ship. The contract did not expressly state when payment was
to be made. He chose not to go on with the work. It was held that the shipwright was not
bound to complete the repairs before claiming some payment.

(e)Christy v Row 17

A ship freighted to Hamburg was prevented 'by restraint of princes' from arriving.
Consignees accepted the cargo at another port to which they had directed it to be delivered.
The consignees were held liable upon an implied contract to pay freight pro rata itineris (ie,
for freight at the contract rate for the proportion of the voyage originally undertaken which
was actually accomplished). A contract was implied from their directions re alternative port
of delivery.

(f)Planche v Colburn 18

The plaintiff was to write a book on 'Costume and Ancient Armour' for a series, and was to
receive £100 on completion of the book. After he had done the necessary research but before
the book had been written, the publishers abandoned the series. He claimed alternatively on
the original contract and on a quantum meruit.

The court held that: (a) the original contract had been discharged by the defendants' breach;
(b) no new contract had been substituted; and (c) the plaintiff could obtain 50 guineas as
reasonable remuneration on a quantum meruit. This claim was independent of the original
contract and was based on quasi-contract.

(g)Dakin v Lee 19

The defendants promised to build a house according to specification and failed to carry out
exactly all the specifications, for example, concrete not four feet deep as specified, wrong
joining of certain rolled steel joists and concrete not properly mixed. The Court of Appeal
held that the builders were entitled to recover the contract price, less so much as ought to be
allowed in respect of the items found to be defective.

(h)Startup v M'Donald 20

17
Christy v Row (1808) 1 Taunt 300
18
Planche v Colburn (1831) 8 Bing 14
19
Dakin v Lee [1916] 1 KB 566
20
Startup v M'Donald (1843) 6 M&G 593

18
The plaintiffs agreed to sell 10 tons of oil to the defendant and to deliver it to him 'within the
last 14 days of March', payment to be in cash at the end of that period. Delivery was tendered
at 8.30pm on 31 March. The defendant refused to accept or pay for the goods because of the
late hour. The court held that the tender was equivalent to performance and the plaintiffs were
entitled to recover damages for non-acceptance. Today note s29(5) SGA 1979: Demand or
tender of delivery may be treated as ineffectual unless made at a reasonable hour; and what is
a reasonable hour is a question of fact.

[4.3]. BREACH

(a)Hochster v De La Tour 21

An employer told is employee (a travelling courier) before the time for performance arrived
that he would not require his services. The courier sued for damages at once. The court held
that he was entitled to do so.

(b)Avery v Bowden 22

A charterparty provided that a ship should proceed to Odessa and there take a cargo from the
charterer's agent. The ship arrived at Odessa and the master demaned a cargo, but the agent
could not provide one. The ship's master continued to ask for one. A war broke out. The
charterer sued. The court held, inter alia, that if the agent's conduct amounted to an
anticipatory repudiation of the contract, the master had elected to keep the contract alive until
it was discharged by frustration on the outbreak of war.

(c)Panchaud Freres SA v Establissments General Grain Co 23

Buyers of maize rejected it on a ground which was subsequently found to be inadequate.

Three years later, they discovered that the grain had not been shipped within the period
stipulated for in the contract. They, therefore, sought to justify their rejection on this ground.
The Court of Appeal held that they were not entitled to do so. Lord Denning MR stated that
the buyers were estopped by their conduct from setting up late delivery as a ground for
rejection because they had led the sellers to believe they would not do so.

(d)Federal Commerce & Navigation v Molena Alpha 24

21
Hochster v De La Tour (1853) 2 E&B 678
22
Avery v Bowden (1855) 5 E&B 714
23
Panchaud Freres SA v Establissments General Grain Co [1970] 1 Lloyd's Rep 53

19
Clause 9 of a charter provided that the charterers were to sign bills of lading stating the
freight had been correctly paid. After a dispute arose concerning deductions made by the
charterers, the shipowners withdrew this authority contrary to the terms of the charter. The
master was instructed not to sign bills of lading with the indorsement 'freight pre paid' or
which did not contain an indorsement giving the shipowners a lien over the cargo for freight.
This meant that the charterers were put in an impossible position commercially. The
charterers treated the owner's actions as a repudiation of the charter.

The House of Lords held that although the term broken was not a condition, the breach went
to the root of the contract by depriving the charterers of virtually the whole benefit of the
contract because the issue of such bills was essential to the charterers' trade. Therefore, the
owner's conduct constituted a wrongful repudiation of the contract.

(e)Woodar Investment v Wimpey Construction 25

Wimpey contracted to buy land for £850,000 and agreed to pay £150,000 on completion to a
third party, Transworld Trade Ltd. The contract allowed the purchaser to rescind the contract
if before completion a statutory authority 'shall have commenced' to acquire the property by
compulsory purchase. At the date of the contract both parties knew that a draft compulsory
purchase order had been made. Wimpey purported to terminate relying on this provision, and
Woodar sought damages alleging that this amounted to a wrongful repudiation. Their
damages claim included the loss suffered by the third party (as to which, see Privity of
Contract).

The House of Lords held, by a majority of 3:2, that in order to constitute a renunciation of the
contract there had to be an intention to abandon the contract and instead of abandoning the
contract Wimpey were relying on its terms as justifying their right to terminate.

[4. 4]FRUSTRATION

(a)Taylor v Caldwell26

24
Federal Commerce & Navigation v Molena Alpha [1979] AC 757
25
Woodar Investment v Wimpey Construction [1980] 1 WLR 277
26
Taylor v Caldwell (1863) 3 B&S 826

20
For facts, see below. Blackburn J stated: "The principle seems to us to be that, in contracts in
which the performance depends on the continued existence of a given person or thing, a
condition is implied that the impossibility of performance arising from the perishing of the
person or thing shall excuse the performance."

(b)Davis Contractors v Fareham UDC 27

For facts, see below. Lords Reid and Radcliffe stated that the 'radical change in the
obligation' test required the court to:1. Construe the contractual terms in the light of the
contract and surrounding circumstances at the time of its creation. 2. Examine the new
circumstances and decide what would happen if the existing terms are applied to it. 3.
Compare the two contractual obligations and see if there is a radical or fundamental change.

(c)Taylor v Caldwell28

Caldwell agreed to let a music hall to Taylor so that four concerts could be held there. Before
the date of the first concert, the hall was destroyed by fire. Taylor claimed damages for
Caldwell's failure to make the premises available. The court held that the claim for breach of
contract must fail since it had become impossible to fulfil. The contractual obligation was
dependent upon the continued existence of a particular object. See above for the quote of
Blackburn J.

(d)Condor v The Baron Knights29

A drummer engaged to play in a pop group was contractually bound to work on seven nights
a week when work was available. After an illness, Condor's doctor advised that it was only
safe to employ him on four nights a week, although Condor himself was willing to work
every night. It was necessary to engage another drummer who could safely work on seven
nights each week. The court held that Condor's contract of employment had been frustrated in
a commercial sense. It was impracticable to engage a stand-in for the three nights a week
when Condor could not work, since this involved double rehearsals of the group's music and
comedy routines.

(e)Phillips v Alhambra Palace Co30

27
Davis Contractors v Fareham UDC [1956] AC 696
28
Taylor v Caldwell (1863) 3 B&S 826
29
Condor v The Baron Knights [1966] 1 WLR 87

21
One partner in a firm of music hall proprietors died after a troupe of performers had been
engaged. The contract with the performers was held not to be frustrated because the contract
was not of a personal nature, and could be enforced against the surviving partners.

(f)Graves v Cohen 31

The court held that the death of a racehorse owner frustrated the contract with his employee,
a jockey, because the contract created a relationship of mutual confidence.

(g)Krell v Henry32

Henry hired a room from Krell for two days, to be used as a position from which to view the
coronation procession of Edward VII, but the contract itself made no reference to that
intended use. The King's illness caused a postponement of the procession. It was held that
Henry was excused from paying the rent for the room. The holding of the procession on the
dates planned was regarded by both parties as basic to enforcement of the contract.

(h)Herne Bay Steamboat Co v Hutton33

Herne Bay agreed to hire a steamboat to Hutton for a period of two days for the purpose of
taking passengers to Spithead to cruise round the fleet and see the naval review on the
occasion of Edward VII's coronation. The review was cancelled, but the boat could have been
used to cruise round the assembled fleet. It was held that the contract was not frustrated. The
holding of the naval review was not the only event upon which the intended use of the boat
was dependent. The other object of the contract was to cruise round the fleet, and this
remained capable of fulfilment.

(i)Metropolitan Water Board v Dick Kerr 34

Kerr agreed to build a reservoir for the Water Board within six years. After two years, Kerr
were required by a wartime statute to cease work on the contract and to sell their plant. The
contract was held to be frustrated because the interruption was of such a nature as to make the
contract, if resumed, a different contract.

30
Phillips v Alhambra Palace Co [1901] 1 QB 59
31
Graves v Cohen (1929) 46 TLR 121
32
Krell v Henry [1903] 2 KB 740
33
Herne Bay Steamboat Co v Hutton [1903] 2 KB 683
34
Metropolitan Water Board v Dick Kerr [1918] AC 119

22
(j)Denny, Mott & Dickinson v James Fraser35

A contract for the sale and purchase of timber contained an option to purchase a timber yard.
By a wartime control order, trading under the agreement became illegal. One party wanted to
exercise the option. It was held that the order had frustrated the contract so the option could
not be exercised.

(k) Re Shipton, Anderson and Harrison Brothers 36

A contract was concluded for the sale of wheat lying in a warehouse. The Government
requisitioned the wheat, in pursuance of wartime emergency regulations for the control of
food supplies, before it had been delivered, and also before ownership in the goods had
passed to the buyer under the terms of the contract. It was held that the seller was excused
from further performance of the contract as it was now impossible to deliver the goods due to
the Government's lawful requisition.

(l)Jackson v Union Marine Insurance 37

A ship was chartered in November 1871 to proceed with all possible despatch, danger and
accidents of navigation excepted, from Liverpool to Newport where it was to load a cargo of
iron rails for carriage to San Francisco. She sailed on 2 January, but the next day ran aground
in Caernarvon Bay. She was refloated by 18 February and taken to Liverpool, where she
underwent extensive repairs, which lasted till August. On 15 February, the charterers
repudiated the contract.

The court held that such time was so long as to put an end in a commercial sense to the
commercial speculation entered upon by the shipowner and the charterers. The express
exceptions were not intended to cover an accident causing such extensive damage. The
contract was to be considered frustrated.

[4.5]LIMITATIONS OF THE DOCTRINE

(a)Davis Contractors v Fareham UDC 38

35
Denny, Mott & Dickinson v James Fraser [1944] AC 265
36
Re Shipton, Anderson and Harrison Brothers [1915] 3 KB 676
37
Jackson v Union Marine Insurance (1873) LR 10 CP 125
38
Davis Contractors v Fareham UDC [1956] AC 696

23
The plaintiff agreed to build 78 houses in eight months at a fixed price. Due to bad weather,
and labour shortages, the work took 22 months and cost £17,000 more than anticipated. The
builders said that the weather and labour shortages, which were unforeseen, had frustrated the
contract, and that they were entitled to recover £17,000 by way of a quantum meruit. The
House of Lords held that the fact that unforeseen events made a contract more onerous than
was anticipated did not frustrate it.

(b)Maritime National Fish v Ocean Trawlers [1935]39

Maritime chartered from Ocean a vessel which could only operate with an otter trawl. Both
parties realised that it was an offence to use such a trawl without a government licence.
Maritime was granted three such licences, but chose to use them in respect of three other
vessels, with the result that Ocean's vessels could not be used. It was held that the
charterparty had not been frustrated. Consequently Maritime was liable to pay the charter fee.
Maritime freely elected not to licence Ocean's vessel, consequently their inability to use it
was a direct result of their own deliberate act.

(c)Walton Harvey Ltd v Walker & Homfrays Ltd 40

The defendant's granted the plaintiffs the right to display an advertising sign on the
defendant's hotel for seven years. Within this period the hotel was compulsorily acquired, and
demolished, by a local authority acting under statutory powers. The defendants were held
liable in damages. The contract was not frustrated because the defendant's knew, and the
plaintiffs did not, of the risk of compulsory acquisition. They could have provided against
that risk, but they did not.

39
Maritime National Fish v Ocean Trawlers [1935] AC 524
40
Walton Harvey Ltd v Walker & Homfrays Ltd [1931] 1 Ch 274

24
 [5]CONCLUSION

When parties enter into a contract, each has rights and duties that are spelled out in the
agreement. When the sides perform their rights and duties, the contract is then discharged. In
these cases, discharge of contract refers to an agreement that's fully performed.

However, discharge of contract can happen due to other circumstances. Sometimes,

obligations are incomplete, but the parties are no longer liable for them. The discharge of a
contract means that the obligations of the contract come to an end. When discharge occurs,
all duties which arose under the contract are terminated. This chapter discusses the various
methods of discharging a contract and the consequences of each. It considers how a contract
can be discharged through agreement between the parties; the elements necessary for a
contract to be discharged by performance including the rules relating to partial performance
of a contract, and the meaning and effect of the frustration of a contract. The chapter
discusses the meaning of breach of contract, both actual breach and anticipatory breach, and
its consequences. The remedies for a breach of contract are explored, including the rules
relating to remoteness and measure of damages and the difference between liquidated
damages and penalties. Equitable remedies of specific performance and injunctions are
explained.

25
 BIBLIOGRAPHY

BOOKS

Avtar Singh, Contract and Specific Relief Act, Eastern Book Company, 2013 Ed.

Mulla’s Indian Contract Act, edited by Anirudh Wadhwa, LexisNexis Publishers, and

15th Ed. J. Beatson, Anson’s Law of Contract, Oxford New York, 29 th ed.

OTHER SOURCES

http://www.lexisnexis.com

https://westlawindia.com

http://www.scconline.com

26