Discharge of Contract

DISCHARGE OF CONTRACTS The cases in which a contract is discharged may be classified as follows: A. By performance or tender. B. By mutual consent. C. By impossibility of performance. D. By operation of law. E. By lapse of time F. By breach of Contract

A. By performance or tender:

(a)Actual Performance When both the parties perform their promises. (b) Attempted Performance or tender Only an offer to perform the obligation under the contract.

B. Discharge by mutual consent or agreement: The termination of contract by further agreement or consent. Ways to do so: 1. Novation 2. Rescission

3. Alteration 4. Remission 5. Waiver 6. Merger

Discharge by mutual consent or agreement

Novation
When a new contract is substituted for an existing one between the same parties When a new contract is substituted for an existing one between one of the parties and a third party. Novation should take place before the expiry of the time of the performance of the contract.

Discharge by mutual consent or agreement

Rescission Takes place when all or some of the terms of the contract are cancelled. Could be done by a)mutual consent or b) when one party fails in the performance of contract, the other party could rescind the contract without fear of claim of compensation.

Discharge by mutual consent or agreement

Alteration Modification of one or more terms of the contract by the mutual consent of the parties. Remission It is acceptance of lesser fulfillment of the promise made.

Discharge by mutual consent or agreement

Waiver When parties to the contract agree that they shall no longer be bound to the contract Merger When inferior right accruing to a party under contract merges into a superior right accruing to the same party.

C. BY IMPOSSIBILITY OF PERFORMANCE

(a)Inherent impossibility
(i) Known to the parties (ii) Unknown to the parties

(b) Subsequent impossibility

Cases of Subsequent impossibility

(i) Destruction of subject matter of contract [Case: Taylor v. Caldwel ]

A music hall was agreed to be let out on certain dates, but before those dates it was destroyed by fire. Held, that the owner was absolved from liability to let the building as promised

(ii) Non-existence or non-occurrence of a particular state of things [Krell v. Henry] A contract was to hire a flat for viewing the coronation procession of the king. The procession had to be cancelled on account of kings illness. In a suit for the recovery of the rent, it was held that the contract became impossible of performance and that the hirer need not pay the rent

(iii) By the death or disablement of the parties (iv) Subsequent illegality

(v) Declaration of war

Impossibility of performance not an excuse 1. Difficulty of performance [ Keshav Lal v. Dewan Chand] D agreed to supply coal with certain time. Due to Govt restrictions on the transport of coal from collieries there was a failure of delivery in time. But since coal was available in the market from where D could have purchased it. D will not be discharged on the ground of supervening impossibility

2. Commercial impossibility

Example: X promised to send certain goods from Bombay to Antwerp in September, In August war broke out and shipping space was not available except at very high rates. Held : The increase of freight rates did not excuse performance

3. Impossibility due to failure of a third person 4. Strikes, lockouts and civil disturbances
[Case: Jacobs v. Credit Lyonnais ] A agreed to supply B certain goods to be produced in Algeria. The goods could not be produced because of riots and civil disturbances in that country. Held : There was no excuse for nonperformance of the contract

5. Failure of one of the objects

[Herne Bay Steamboat Co. v. Hutton K.B.] A agreed to let a boat to H to (i) view the naval review at the coronation and (ii) to cruise round fleet. Owing to the kings illness, the naval review was cancelled, but the fleet was assembled and the boat could have been used to cruise round the fleet. Held : The contract was not discharged

Effects of Supervening Impossibility

(i) Contract becomes void (ii) Compensation for the loss suffered (iii) Restore the benefit

D. BY OPERATION OF LAW

1. By death 2. By insolvency 3. By merger 4. By the unauthorised alteration of terms of a written document

E. By lapse of time

F. By breach
(i) Actual Breach of Contract (ii) Anticipatory Breach of Contract

THANK YOU

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