Discharge

of

Contract

DISCHARGE OF CONTRACTS

The cases in which a contract is

discharged may be classified as follows:

A. By performance or tender.

B. By mutual consent.

C. By impossibility of performance.

D. By operation of law.

E. By lapse of time

F. By breach of Contract

A. By performance or tender:

(a)Actual Performance

When both the parties perform their

promises.

(b) Attempted Performance or tender

Only an offer to perform the obligation

under the contract.

B. Discharge by mutual consent or

agreement:

The termination of contract by further

agreement or consent.

Ways to do so:

1. Novation

2. Rescission

3. Alteration

4. Remission

5. Waiver

6. Merger

Discharge by mutual consent

or agreement• Novation

When a new contract is substituted for an

existing one between the same parties

When a new contract is substituted for an

existing one between one of the parties and a

third party.

Novation should take place before the expiry

of the time of the performance of the

contract.

Discharge by mutual consent

or agreement• Rescission

Takes place when all or some of the terms

of the contract are cancelled.

Could be done by a)mutual consent or b)

when one party fails in the performance of

contract, the other party could rescind the

contract without fear of claim of

compensation.

Discharge by mutual consent

or agreement• Alteration

Modification of one or more terms of the

contract by the mutual consent of the

parties.

• Remission

It is acceptance of lesser fulfillment of the

promise made.

Discharge by mutual consent

or agreement• Waiver

When parties to the contract agree that

they shall no longer be bound to the

contract

• Merger

When inferior right accruing to a party

under contract merges into a superior right

accruing to the same party.

C. BY IMPOSSIBILITY OF PERFORMANCE

(a)Inherent impossibility

(i) Known to the parties

(ii) Unknown to the parties

(b) Subsequent impossibility

Cases of Subsequent impossibility

(i) Destruction of subject matter of contract

[Case: Taylor v. Caldwel ]

A music hall was agreed to be let out on

certain dates, but before those dates it

was destroyed by fire.

Held, that the owner was absolved from

liability to let the building as promised

(ii) Non-existence or non-occurrence of a

particular state of things

[Krell v. Henry]

• A contract was to hire a flat for viewing the

coronation procession of the king.

• The procession had to be cancelled on

account of king’s illness.

• In a suit for the recovery of the rent, it was

held that the contract became impossible

of performance and that the hirer need not

pay the rent

(iii) By the death or disablement of the

parties

(iv) Subsequent illegality

(v) Declaration of war

Impossibility of performance not an excuse

1. Difficulty of performance

[ Keshav Lal v. Dewan Chand]

D agreed to supply coal with certain time.

Due to Govt restrictions on the transport of

coal from collieries there was a failure of

delivery in time. But since coal was available

in the market from where D could have

purchased it. D will not be discharged on the

ground of supervening impossibility

2. Commercial impossibility

Example: X promised to send certain goods

from Bombay to Antwerp in September, In

August war broke out and shipping space

was not available except at very high

rates.

Held : The increase of freight rates did not

excuse performance

3. Impossibility due to failure of a third

person

4. Strikes, lockouts and civil disturbances

[Case: Jacobs v. Credit Lyonnais ]

• A agreed to supply B certain goods to be

produced in Algeria. The goods could not

be produced because of riots and civil

disturbances in that country.

• Held : There was no excuse for non-

performance of the contract

5. Failure of one of the objects

[Herne Bay Steamboat Co. v. Hutton K.B.]

A agreed to let a boat to H to (i) view the

naval review at the coronation and (ii) to

• cruise round fleet.

• Owing to the king’s illness, the naval

review was cancelled, but the fleet was

assembled and the boat could have been

used to cruise round the fleet.

• Held : The contract was not discharged

Effects of Supervening Impossibility

(i) Contract becomes void

(ii) Compensation for the loss suffered

(iii) Restore the benefit

D. BY OPERATION OF LAW

1. By death

2. By insolvency

3. By merger

4. By the unauthorised alteration of terms

of a written document

E. By lapse of time

F. By breach

(i) Actual Breach of Contract

(ii) Anticipatory Breach of Contract

THANK YOU

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