Discharge of Contract

D i s c h a r g e … of Contract
• A contract is said to be discharged when the obligations

created by it come to an end.
The various modes of discharge of contract are as follows:
1.Discharge by performance
2.Discharge by agreement or consent
3.Discharge by impossibility
4.Discharge by lapse of time
5.Discharge by operation of law
6.Discharge by breach of contract.
DISCHARGE… OF CONTRACT
• 1. Discharge by performance:
It takes place when the parties to a contract fulfill
their obligations arising under the contract within
the time and the manner prescribed.
• 2. Discharge by agreement or consent:
The contract rests on the agreement of the parties.
The parties may get discharged from the obligations
of performance of contract by agreement or mutual
consent.
Discharge.. of Contract
2.Discharge by agreement or consent: The discharge by consent may
be express or implied. Discharge by consent –
• (a) Novation : When a new contract is substituted for an existing one,
either between the same parties or between the one of the parties and the third
party.
• (b) Rescission: When all or some of the terms of contract are cancelled.
• (c) Alteration : When one or more terms of the contract is/are altered
by the mutual consent of the parties to a contract.
• (d) Remission: Acceptance of a lesser fulfillment of the promise
made
• (e) Waiver: Intentional relinquishment or giving up of a right by a
party entitled thereto under a contract.
• (f) Merger: When an inferior right accruing to a party under a
contract merges in to a superior right accruing to the
same party under a new contract.
Discharge …of Contract
• 3.Discharge by impossibility:
Impossibility of performance may be-
(1)Initial impossibility or (2) Supervening impossibility.
(1)Initial impossibility: An agreement to do an impossible act
in itself is void.
(2)Supervening impossibility: Impossibility which arises
subsequent to the formation of contract (which could be
performed at the time when the contract was entered in to) is called supervening
impossibility. The cases covered by supervening impossibility include: (a)
Destruction of the subject mater
(b) Non-Existence or non-occurrence of a
particular state of things
(c) Death or incapacity for personal service
(d) Change of law, & (e) Outbreak of war
The contract is discharged in these cases.
Discharge of Contract
• 4.Discharge by lapse of time:
If the contract is not performed within the period of limitation and if
no action is taken by the promisee in a law court, the contract is
discharged.
• 5.Discharge by operation of law:
This includes discharge by,
(a) death
(b) merger
(c) insolvency
(d) unauthorized alteration of the terms of a written agreement, and
(e) rights and liabilities becoming vested in the same person.
Discharge of Contract
• 6.Discharge by breach of contract:
If a party breaks his obligation which the contract imposes,
there takes place breach of contract.
Breach of contract may be,(a) Actual or(b) Anticipatory breach.
(1)Actual breach of contract may occur,
(a) at the time when the performance is due, or
(b) during the performance of the contract.
(2)Anticipatory breach of contract occurs when a party
repudiates his liability or obligation under the contract before
the time for performance arrives.
Remedies for
Breach of Contract
• In case of breach of contract, the injured party has one or more
of the following remedies:
1.RESCISSION:When there is breach of a contract by a party , the
injured party may sue to treat the contract as rescinded. He is
also absolved of all the obligations under the contract.
2.DAMAGES:Damages are monetary compensation awarded to the
injured party by Court for the loss or injury suffered by him.
The foundation for modern law of damages, both in India and
England, is to be found in the case of Hadley vs. Baxandile.
2.Hadley vs.Baxandile(1854)
• X’s mill was stopped by the breakdown of a shaft. He delivered
the shaft to Y, a common carrier, to be taken to a manufacturer
to copy it and make a new one. X did not make known to Y that
delay would result in loss of profits. By some neglect on the part
of Y the delivery of the shaft was delayed in transit beyond a
reasonable time (so that the mill was idle for a longer period
than otherwise would have been the case had there been no
breach of the contract of carriage).
• Held, Y was not liable for loss of profits during the period of
delay as the circumstances communicated to Y did not show
that a delay in the delivery of the shaft would entail loss of
profits to the mill.
2.Damages may be of four types:
• (1) Ordinary Damages: These are damages which actually

arise in the usual course of things from the breach of a
contract.
• (2) Special Damages: Damages which may reasonably be
supposed to have been in the contemplation of both the
parties at the time when they made the contract as the
probable result of the breach of it, are known as special
damages and may be recovered.
…..Damages may be of four types:
• 3.Vindictive or Exemplary Damages:These damages are

allowed in case of the breach of a contract to marry
or dishonor of a cheque by a banker wrongfully.
• 4.Nominal Damages: Where the injured party has not
suffered any loss by reason of the breach of a
contract, the Court may award a very nominal sum as
damages.
3. QUANTUM MERUIT:
[As much as earned]
A right to sue on a quantum meruit (as much as

earned) arises where a contract, partly performed by
one party, has become discharged by the breach of
the contract by the other party.
This right is founded on the implied promise by the
other party arising from the acceptance of a benefit
by that party.
Liquidated Damages and penalty.
• ‘Liquidated damages’ represent a sum, fixed or

ascertained by the parties in the contract, which is a
fair and genuine pre estimate of the probable loss
that might ensue as a result of breach.A ‘penalty’ is a
sum named in the contract at the time of it’s
formation, which is disproportionate to the damage
likely to accrue as a result of breach the Courts in
India allow only ‘reasonable compensation’.
4.Specific Performance
• 4.Specific Performance :In certain cases

the Court may direct the party in terms
of the contract to actually carry out the
promise, exactly according to the terms
of the contract.This is called “specific
performance of the contract”.
5.Injunction
• 5.Injunction: It is a mode of securing the

specific performance of the negative
terms of a contract.

Discharge of Contract

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D i s c h a r g e … of Contract

• A contract is said to be discharged when the obligations

• (1) Ordinary Damages: These are damages which actually

• 3.Vindictive or Exemplary Damages:These damages are

A right to sue on a quantum meruit (as much as

• ‘Liquidated damages’ represent a sum, fixed or

• 4.Specific Performance :In certain cases

• 5.Injunction: It is a mode of securing the

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