Discharge of contract.
A contract may be discharged or terminated in any of the following ways:
(1) Discharge by Performance : The contract is discharged when the parties to a contract fulfill their obligations arising under a contract within the time and the manner stipulated. Thus the contract comes to an end.
(2) Discharge by Agreement: The parties may agree to terminate the contract by any of the following ways:
(a) By Novation: If the parties to a contract to substitute a new contract for it, the original contract is discharged. (Sec. 62)
(b) Alteration : Alteration means change in one or more terms of contract with the consent of all the parties. In alteration there is a change in the terms of contract but no change in parties.
(c) Recission : Recission of a contract takes place when all or some of the terms of the contract are cancelled. It may occur due to mutual consent of the parties or where one party fails in the performance of his obligations under the contract, the other party may rescind the contract.
(d) By Remission Remission : means acceptance of lesser amount what was contracted for in the discharge of the debt.
(e) Waiver: A contract may be discharged by agreement between the parties to waive their rights arising from the contract.
(f) Merger: When a superior right and an inferior right coincide and meet in one and same person, the inferior right vanishes into a supreme right.
(3) Discharge by impossibility of Performance : Impossibilities known to the parties at the time of making of the contract.
(a) Impossibility unknown to the parties at the time of making of the contract: This is known absolute impossibility. A contract, which at the time was entered into, was impossible to perform is void ab initio and create no right and liabilities e.g.. promise to ride a horse to the sun.
(b) Impossibility to the Formation: Unknown to parties at the time of making contract. A contract which at the time, it was entered into was capable of being performed, may subsequently become impossible to perform or unlawful.
(c) Impossibility which arises subsequent to the formation of the contract: A contract to do an act which after the contract is made becomes impossible or by reason of some event which the promiser could not prevent, becomes void, when the act becomes impossible or unlawful. This is called supervening impossibility. It may arise:
(1) By destruction of the subject-matter.
(ii) By the non-existence of a state of things necessary for the performance.
(iii) By death or personal incapacity of the promiser.
(iv) By change of law.
(4) Outbreak of war: Contracts, entered into before the war between the citizens of the countries, subsequently at war remain suspended during the pending of the war. After the termination of war the contract revives and may be enforced.
(5) Discharge by lapse of time: Every contract must be performed within the stipulated period or within a reasonable time of the contract. Lapse of time may discharge the contract by banning the right of the parties to bring an action to enforce the contract under the Limitation Act.
(6) Discharge by Operation of Law: are as under:
(a) Insolvency: The insolvency of the promiser discharges the O contract. The promiser is discharge from all liabilities incurred prior to his adjudication.
(b) Merger: It occurs when there is acceptance of a higher security in the place of the lower. It is an operation of law, which extinguishes a right by virtue of its concluding with another and greater right in the same person.
(c) Alteration : An alteration of a written contract made without the consent of the other party has the effect of discharging the contract provided the alteration is of a material nature. An alteration which is not material or which is authorised will not affect the validity of the contract.
(d) Death: Where performance of a contract is refused to be made in person and the personal qualification of the promiser are the considerations for the contract, the death of the promiser discharges the contract. In other contracts the right and liabilities of deceased person pass to his legal representatives.
(e) By complete loss of evidence of the existence of the contract.
(7) Discharge by Breach of Contract: When one party of the contract, without any lawful excuse, fails to perform his obligation under the contract according to the terms of contracts, or does an act which makes the performance of the contract impossible, it is known as breach of contract. It discharges the other party from performing his obligation. It may be of following two types:
(a) Actual Breach It takes place either
(1) by non performance of his obligation when it is due; or (i) by non performance of his obligations during the performance of a contract.
Example:
(i) X agrees to deliver 10 bags of sugar to Y on 1st December. On 1st December X fails to deliver the sugar. There is a breach of contract.
(ii) X contracted with a Railway Company to supply it 2,000 railway chairs to be supplied in instalments. When A supplied 1,000 chairs the railway company informed him not to supply any more chairs. This is breach of contract committed during the performance (b) Anticipatory breach of contract: Anticipatory breach of contract occurs, when a party repudiates it before the time fixed for of a contract performance has arrived or when a party by his own act disables himself from performing the contract.
Example: A contracts to marry B. Before the agreed date of marriage he marries C. B is entitled to sue A for breach of promise. Consequences of Anticipatory Breach: Where a party to a contract refuses to perform his part of the contract before the actual time arrives, the promisee may either :
(i) rescind the contract and treat the contract as having come to an end, and at once sue for damages, or
(ii) he may elect not to rescind but to treat the contract operative and wait for the time of performance and then hold the other party liable.
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