DISCHARGE OF CONTRACT

Discharge means termination of the

contractual relationship between the
parties.
A contract is said to be discharged
when it ceases to operate.
When the rights and obligations
created by it come to an end.
 MODES
1. By performance
2. By agreement or consent
3. By impossibility of performance
4. By lapse of time
5. By operation of law
6. By breach of contract.
 Novation It takes place when a
contract is substituted with an
existing contract between the same
parties or a contract is rescinded in
consideration of a new contract
being entered into same terms
between one of the parties and third
party.
Eg E owes Rs. 10000 to V. He
enters into agreement with V and
gives V a mortgage of his (Es )
estate for Rs. 5000 in place of Rs
10000. This is new contract formed
 Rescission It takes place when all or some of
the terms of the contract are cancelled.
It may occur
1. By mutual consent of the parties or
2. Where one of the party fails in the performance
of his obligation. In such case the other party
may rescind the contract and has right to claim
compensation for breach of contract.
. Eg J induces H to enter into a contract by
fraud. In this case the contract is voidable at the
option of H. He may rescind the contract.
. Remission may be total or partial. Total
remission means discharge of the entire
contract. Partial remission means variation in
terms of contract or rescinding some clauses of
the contract.
 Alteration - When one or more terms
of the contract are changed (Altered)
by mutual consent of the parties to
the contract.
In such case the old contract stands
discharged
Eg G enters into contract on 1st
November with K for supply of 100
kg of sugar by or on 16th November.
G and K may alter / change the terms
of contract my mutual consent , by
deciding to deliver the goods on 20th
November.
 Remission It means acceptance of a
lesser fulfilment of the promise
made.
Eg Acceptance of lesser amount
than what was contracted for, in
discharge of the whole debt.
Eg A owes to B Rs. 5000. A pays to
B Rs. 2000, in satisfaction of the
whole debt of Rs. 5000. The entire
debt is discharged.
 Waiver - Waiver takes place when
parties to the contract agree that
they shall no longer be bound by the
contract.
Consideration is not necessary for
waiver.
 Merger It takes place when an
inferior right accruing to a party
under the contract merges into a
superior right accruing to the same
party under the same or some other
contract.
Eg P holds a property under a
lease. He later buys the property. His
rights as lessee merge into his rights
as an owner.
 Discharge by Breach of
Contract
Breach of contract means breaking of
the obligation which a contract imposes.
It occurs when a party to the contract
without lawful excuse does not fulfill his
contractual obligation or by his own act
makes it impossible that he should
perform his obligation under it.
It confers a right if action for damages
on the injured party.
 Actual Breach of Contract
At time when performance is due. Eg A
agrees to deliver B 5 bags of wheat on 1 st
January, A does not deliver the same on the
same day, there is breach of contract.
During performance of the contract. Eg C
contracted with a railway company to supply
it 3000 tins of railway chairs at a certain
price, to be delivered in installments. After
1787 tons had been supplied, the railway
company asked C not to deliver any more. C
could bring an action for breach of contract.
 Anticipatory breach of contract
It occurs when a party to an executory
contract declares his intention of not
performing the contract before the
performance is due.
It may be done either by
1) Expressly renouncing his obligation
under the contract. Eg Amar
undertakes to supply 100 TV sets to
Raj on 1st March. Before this date he
informs Raj that he is not going to
supply the goods. This is
Conti.
2) By doing some act so that the
performance of his promise becomes
impossible.
Eg Baban promised to assign to
Ravi , within 7 years from the date of
his promise, all his interest in a lease
for the sum of Rs 10 lakhs. Before
the end of 7 years he assigned his
interest to another person. It was an
anticipatory breach by implied
repudiation.
 Remedies for Breach of
Contract
1. Rescission
2. Damages
. Ordinary damages
. Special damages
. Exemplary damages
. Nominal damages
. Mitigation of damages
. Liquidated damages / penalty
. Payment of interest
3. Quantum Meruit As much as earned.
Where a contract is partly performed by
one party has became discharged by
the breach of contract by the other
party. The right is exercised for what
the party has performed and not the
entire contract.
4. Specific performance Where
damages are not adequate remedy,
the injured party can ask for Specific
Performance. It may be at the
discretion of the court.
5. Injunction
6. Rectification or Cancellation
Questions???