Discharge of contract

1. DISCHARGE OF CONTRACT
Ajilal

2. DISCHARGE OF CONTRACT
• Meaning putting an end to the contract or termination
of the contract.
• That the parties are no more liable under the contract.
• Termination of the contractual relationship between
parties is called the discharge of contracts.
• When the rights & obligations created by it comes to
an end.

3. TYPES / VARIOUS MODES OF
DISCHARGE
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.

4. I. DISCHARGE BY PERFORMANCE
Discharge of performance takes place when the parties
to the contract fulfill their obligations arising under the
contract within the time and in the manner prescribed.
Two forms
1. Actual performance--- when both the parties
perform his work.
2. Attempted performance/ tender/offer to perform

5. II. DISCHARGE BY AGREEMENT OR
CONSENT
Mutual consent.
By Agreement or
Consent
By implied
consent
Novation
Rescission
Alteration
Remission
Waiver
Merger
By express
consent

6. 1. NOVATION
Substitution of new contract for existing one.
Two types
(a). Change in parties
(b). Without change in parties

7. 2. RESCISSION
Means cancellation of the contract.

8. 3.ALTERATION
Means a change in one or more of the material terms of the
contract.
Two types
(a). Material Alteration– is one which alters the legal effect
of the contract . For
e.g change in the amount of money to be paid, rate of
interest or the names of the parties.
(b). Immaterial Alteration– it is correcting a clerical errors
in figures or the spelling of the name.

9. NOVATION ALTERATION
• Change in parties
• Old contract is
dissolved by new
contract
• Two types of contract
• Parties remain same
• No dissolution
• One contract

10. 4.REMISSION
Is acceptance of lesser amount than what was
contracted or lesser fulfillment of the promise made.

11. 5. WAIVER
Means the abandonment of a right which a person is
entitled to
Means abandoning the rights
When a party waives his right under the contract, the
other party is released of his obligations
A B( to repair a car)

12. III DISCHARGE BY IMPOSSIBILITY
If an agreement contains an undertaking to perform an
impossibility, it is void ab initio
Rule
1. lex non cognit ad impossibilia i.e the law does not
recognise what is impossible
2. impossibilium nulla obligato i.e what is impossible
does not create an obligation.

13. IMPOSSIBILITY
impossibility existing at impossibility arising subsequent
the time of agreement / to the formation of contract/
pre-contractual impossibility Supervening impossibility /
a. Known to the parties Post- contractual impossibility
A B ( to put life into the dead wife)
b. Unknown to the parties
X Y(due to perils)

14. POST-CONTRACTUAL IMPOSSIBILITY
A. Destruction of subject matter of the contract.
B. Non-existence or non-occurrence of a particular state
of things .
C. Death or incapacity of personal skill.
D. Change of law

15. A. Destruction of subject matter of the
contract.
• E.g TAYLOR VS CALDWELL
gave music hall
C T

16. B. Non-existence or non-occurrence of a
particular state of things .
marriage
A B
mad

17. C. Death or incapacity of personal skill.
e.g. ROBINSON VS DAVISON
to sing at a theater
R D
unable to perform because of illness

18. D. Change of law
E.g. SHIPTON VS ANDERSON & CO.
wheat lying in godown
A S
 Before the delivery godown was sealed by government
 Contract is discharged as the delivery of wheat become
impossible

19. IMPOSSIBILITY OF PERFORMANCE --- NOT AN
EXCUSE
A. DIFFICULTY OF PERFORMANCE
e.g. Blackburn bobbin co vs Alten & sons
sold finland timber( to be supplied bet July- Sep)
A B
but war broke out in the month of August

20. B.COMMERCIAL IMPOSSIBILITY
E.G . KARL VS CHAGANDAR & CO
K C
Bombay Antwerp
( before good sent, war broke out so price increased
because of that higher profit is not realised)

21. C. IMPOSSIBILITY DUE TO FAILURE OF A
THIRD PERSON
(sell cloth, manufacture by C)
E.G. A B
C did not manufacture
A is liable to B for damages.
D. STRIKES, LOCK-OUTS AND CIVIL
DISTURBANCE.

22. EFFECTS OF SUPERVENING IMPOSSIBILITY
1. When the performance of a contract becomes impossible
or unlawful subsequent to its formation, the contract
becomes void.
2. Where one person has promised to do something which
he knew, might have known, and which the promisee did
not know to be impossible or unlawful, the promisor must
make compensation to the promisee for any loss which
the promisee sustains though the non-performance of the
promise.
3. Where an agreement is discovered to be void or when a
contract becomes void, any person who has received any
advantage under such agreement or contract is bound to
restore it or to make compensation to the person from
whom he received it.

23. DOCTRINE OF FRUSTRATION
In England the doctrine of frustration is the parallel
concept of “Supervening impossibility”
It comes into play “ when the common object of a
contract can no longer be achieved or when the
contract, after it is made, becomes impossible of
performance due to circumstances beyond the control
of the parties , the court may declare the contract to
be at an end”

24. IV DISCHARGE BY LAPSE OF TIME
• According to The Limitation Act, 1963– a contract
should be performed within a specified period which
is called as period of limitation

25. V. DISCHARGE BY OPERATION OF LAW
A. BY DEATH
B. BY MERGER
C. BY INSOLVENCY
D. BY UNAUTHORISED MATERIAL
ALTERATION
 Where a party to a contract makes any material
alteration in the contract without the consent of the
other party.

26. VI. DISCHARGE BY BREACH OF
CONTRACT
• Breach of contract means breaking of obligation
• It occurs when a party to the contract does not fulfill
his contractual obligation or by his own act makes it
impossible that he should perform his obligation
• Breach of contract means the failure of a party to
perform his obligations
• The party who fails to perform his obligations , is
said to have committed a breach of contract.

27. Breach of contract may be
1. Actual breach of contract
2. Anticipatory or Constructive breach of contract

28. BREACH OF CONTRACT
ACTUAL BOC ANTICIPATORY BOC
At the time when During the performance
the performance of the contract
is due
Express repudiation Implied repudiation
(by word or act) ( impossibility created by the
act of a party to the contract)

29. ANTICIPATORY BREACH OF CONTRACT
Express Repudiation Implied Repudiation
or or
Renunciation Creating some
impossibility

30. 1. ACTUAL BREACH OF CONTRACT
(a). At the time when the performance is due
actual breach of contract occurs at the time when
the performance is due , when one party fails or
refuses to perform his obligations under the contract
results in breach of contract.

31. Example
• A agrees to deliver 5 bags of sugar to B on 1st July,
but fails to do so on that date, he is said to have
committed a breach of contract

32. b. During the performance of contract
(i) Express Repudiation( by word or act);
when one party fails or refuses to perform the
obligation under the contract during the
performance of the contract. This type of breach of
contract occurs in case of instalment contract.

33. EXAMPLE
CORT vs AMBERGATE RAILWAY & CO.
C contracted with a railway company to supply 3000
tones of railway chairs at a certain price, to be
delivered in instalment. After 1,787 tons had been
supplied, the railway company asked C to deliver no
more. C could bring an action for breach of contract.

34. (ii) Implied Repudiation (impossibility
created by the act of a party to the contract)
If a party, during the performance, makes by his own act
the complete performance of the contract becomes
impossible, the effect is as if he has breached the
contract, and the other party is discharged from the
further performance of the contract.

35. EXAMPLE
P, a British subject, was engaged by the captain of a
warship owned by the Japanese Government to act as
a fireman. Subsequently when the Japanese
Government declared war with China. P was
informed that the performance of the contract would
bring him under the penalties of the Foreign
Enlistment Act. He consequently left the ship.

36. 2.ANTICIPATORY BREACH OF CONTRACT
(i) EXPRESS REPUDIATION:
Anticipatory breach of contract takes place
when one party expresses his inability to perform
or renounces his liabilities under the contract
expressly, before the performance is due. This is
known as express anticipatory breach of contract.

37. EXAMPLE
A agreed to supply certain goods to B on 1st January.
But before this date, A expressly informed B that he
would not supply the goods to him. This is
anticipatory breach of contract by express refusal to
perform it.

38. ii IMPLIED REPUDIATION
A promisor may, before the time for
performance arrives, by doing some act make the
performance of his promise impossible. This is
known as implied anticipatory breach of contract.

39. Example( LOVELOCK VS FRANKLYN)
A promised to assign to B, within 7 years from the date
of his promise, all his interest in a lease for the sum
of $140. Before the end of 7 years he assigned his
interest to another person. Held this was anticipatory
breach of contract by implied repudiation.

40. Rights of the promisee in case of
anticipatory breach
(i) He can treat the contract as discharged so that he is
absolved from the performance of his part of the promise.
(ii) He can immediately take a legal action for breach of
contract i.e., file a suit for damages, specific performance
or injunction .
Anticipatory breach does not necessarily discharge the
contract. It however, discharge the promisee( the
aggrieved) if he so chooses, and entitles him to sue for a
breach at once.

41. Measure in Anticipatory Breach of
Contract
(i) If the contract is ended at once:
if the promisee elects to end the contract at
once, he can sue the promisor for damages. The
amount of damages will be measured by the
difference between the price prevailing on the date
of breach and the contract price.

42. Measure in Anticipatory Breach of
Contract
(ii) If the contract is kept alive till the date of
performance of the contract.
If the promisee keeps the contract alive till
the date of performance, the measure of damages will
be the difference between the price prevailing on the
date of the performance and the contract price.