Discharge of Contract


Posted On : September 17, 2021
Discharge of Contract
A contract is discharged when the obligations, consideration or responsibility is fulfilled by the entered parties or in other words we can say the liability of any of the parties under the agreement has been going to finish. In another word we can say discharge of contract means "termination of contractual relationship between the parties.
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Table of Contents

Introduction

A contract is discharged when the obligations, consideration or responsibility is fulfilled by the entered parties or in other words we can say the liability of any of the parties under the agreement has been going to finish. In another word we can say discharge of contract means "termination of contractual relationship between the parties. “So many ways has been provided to end up the contractual relationship. It can be ended in positive as well as negative ways by performing the obligations or by breach of obligations.

Modes of discharge

1.   By proper performance

2.   Discharge by agreement or consent

3.   Discharge by subsequent impossibility

4.   Discharge by lapse of time

5.   Discharge by operation of law

6.   Discharge by breach of contract

1.  By proper performance:

A contract is said to be discharged when parties involved have perform their obligation within the time the prescribed time limit and described manner in agreement, then the contract will automatically come to an end. It is in positive mode. It can be performed in two ways.

·   Actual performance: When both the parties involved in the agreement have discharged their obligations in the prescribed manner.

·   The offer of performance or tender: Offer made by the promisor to promise and showing a willingness to perform their obligation, but promise rejected the same is called attempted execution.

2.   Discharge by agreement or consent:

As per the Section 62 of Indian contract act, 1872, if the parties involved in the contract agreed to make a new agreement for it by involving new parties or by changing the consideration, or to rescind, or to alter it, there is no need to perform the original contract. Discharge by agreement or consent could be discharged in the following ways

Novation: When the parties involved to making a new agreement and substituting the original agreement. The meaning of novation is well explained by Lord Selbourne under the case Scarf v, Jardine [1] Novation is of two types:

·   By change of parties

·   Substitution of a new contract

·   Alteration: When terms involved in the of contract have been altered by parties' consent, by alteration of terms, the original contract has been discharged.

United India Insurance Co. Ltd. M.K.J. Corporation [2], without the consent of the parties terms cannot be altered at any cost even not in good faith.

·   Rescission: When all or few terms and conditions of the contract has been cancelled by the consent of the parties.

·   Remission: It is defined in section 63 of the Indian Contract Act, 1872, it means accepting the lesser sum than what was due from promisor.

·   Waiver: In any agreement, when an individual performed few or the majority of their lawful rights, it is said to be a waiver. The Hon'ble Supreme Court has already laid down that waiver is the abandonment of a right which mostly everyone has liberty to waived it.

Waman Shrinivas kini v Ratilal Bhagwandas & Co [3]

·   Merger: When inferior right attached to a party has been merged with superior right attached to the same party and entered into another new contract by discharging old one.

3.   Discharge by the subsequent impossibility

·   Initial Impossibility: It is well defined in section 56 of the Indian Contract Act, 1872, "An agreement is void ab-initio or we can say impossible to perform from the start can't be bind.

·   Subsequent Impossibility: In many situation the contract possible to perform during formation after that becomes void due to impossibility or unlawfully.

4.   Discharge by lapse of time:

As per The Limitation Act, 1963 contract should be performed under prescribed time. If it is not performed, it has been discharged, and if promisee has not taken any legal action within a specific time limit, he is deprived of his remedy from the law.

5.   Discharge by operation of law:

A contract is said to be discharged by operation of law through death, insolvency and merger also.

6.   Discharge by breach of contract:

When either of the parties fails to perform their obligations without any lawful excuse, then the contract will be discharged. It is of two types:

·   Actual Breach: When parties involved in the contract fails to perform their contractual obligation or when performance is left during the contractual performance of the contract. In this breach, the promise holder has right of action for damages due to breaching of contractual obligation.

·   Anticipatory Breach: It happened before the actual date of performance. In anticipatory breach, the promisee not able to file a suit for damages occurred and even it discharges the promisor also from performing his part of the contract. It may take place in two ways: Implied by the conduct and expressly by words.

In this case of Hochster v. De La Tour [4], the representative parties made the contract in April. In this case the defendant agreed that the claimant on a foreign tour should act as his courier, due to begin on 1st June but on 11th may, the defendant informed the claimant that his services would not be required. It held that the claimant could sue for damages immediately and he did not have to wait for the performance date.

In Bowdell v. Parsons [5], it was said that if a man entered into a contract to deliver specific goods or sell on a particular day and before that day he sold and delivered them to another people, he was immediately liable to an action for the suit by the person with whom he has made the contract to sell and provide.

Conclusion

It is concluded that when there is a need to end, it is said to be Discharge of contract. For example, when two parties A and B entered into a contract to made a road in Delhi, Where A is the municipal authority of the city and B is a construction company. Still, due to some reasons, the contract has been discharged. Then in this situation, both parties A and B are free from the obligations of the contract, it means when the rights and obligations of the parties come to an end. Various ways or modes were also available for discharging a deal, but the best way to releasing a contract is based on performance. Through this way, both the parties follow all the terms and conditions of the agreement, and then can go for its discharge and on the other side discharge by the breach is the most unpleasant way to release the parties from duties as it leads to damages and compensation too.

 

[1] (1882) 7 AC 345

[2] 1970 SCR (2) 455

[3] AIR 1959 SC 689

[4] Court of Queen's Bench, (1853)

[5] (1808) 10 East 359: 103 ER 811

 

Written By:
Anik

Anik

Bangalore

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