Introduction:

When we say that contract has been discharged or terminated, it means that rights

and liabilities created by law under contract has been finished. The contract act

1872 provides various ways in which a contract may be discharge or terminated.

Modes of discharge of contract:

1. By Performance:

2. By agreement:

3. By impossibility:

4. By lapse of time:

5. By operation of law:

6. By Alteration:

7. By breach of contract:

1.Performance: When all the duties required in the contract are performed by all

the parties, the contract comes to an end. It is called discharge by performance.

Example :- Mr. Nick agree to sell a piece of land to Mr. Ram for Rs. One lac.

Mr. Nick delivers the plot and Mr. Ram makes the payment.

Types of performance:

(i) Actual performance:

When each party to a contract fulfill the obligations arising under the contract

according to the terms and conditions of the contract, it is called actual

performance.

(ii) Offer of performance:

An offer to perform is know as Tender’ or ‘Offer’ of performance when the

promisor offers to perform the obligation but the other party refuses accept, the

offer is equivalent to performance.

Essentials of a valid offer of performance.

(i) It must be unconditional .

(ii) It must be made at proper time.

(iii) It must be made at proper place.

(iv) It must be made by a person who is able to perform the promise.

(v) It must be made to the promise or his agent.

(vi) An offer, of performance made to stranger is invalid.

(vii) In case of tender of money exact amount should be tendered.

2.By agreement:

A contract can also be discharged by the fresh agreement between the parties.

Ways to terminate the contract:

(i) Novation

(ii) Rescission

(iii) Alteration

(iv) Release of waiver

(v) Remission

(vi) Merger

(i) Novation:

If the parties substitute a new contract it is called novation. In this case contract

may be discharged by such as an alteration in its condition as substitutes a new

contract, for the old one.

(ii) Rescission:

It means remedy for inducing a contract which is rejected one or all the terms

of the contract are cancelled. It discharges to parties from obligations of the

original contract.

Rescission may occur;

(i) By mutual consent of the parties.

(ii) When are party fails to preform his contractual obligation, the other party

may rescind the contract.

(iii) Alteration:

When one or more of the contract is altered by actual consent of the parties, the

contract is said to be altered.

(iv) waiver:

It means to relinquish the claim or right. Sometimes promisee himself

surrenders his rights to the contract and releases the promisor from his

obligations.

(v) Remission:

Remission means pardoning of offense or cancelling of the whole or any part

of some obligation.

(vi) Merger:

It takes place when an inferior right accuring under a contract merger into a

superior right accuring to the same party or some other contract.

3. By impossibility: If the performance of contract is not possible then contract

is void and contracting parties are discharged from their obligations.

Example :- Suppose Mr. Carry and Miss. Niky contract to marry each other, on

10th March, 2011. Miss Niky dies before the 10th March. The contract becomes

void because now marriage is impossible.

Factors causing impossibility of performance of contract:

(i) Destruction of subject matter.

(ii) Failure of ultimate purpose

(iii) Death

(iv) Personal incapacity

(v) Change of law

(vi) Declaration of war

4. By lapse of time:

A contract may be discharge by lapse of time. The contract should be performed

with in a reasonable time or a specified time. If a contract is not performed within

a specified time, the contract is discharged.

5. By operation of law:

A contract may be discharged by operation of law.

Ways of termination:

(a) Insolvency:

Where the court declares a person as insolvent, the rights and liabilities are

transferred to officer known as receiver so contract is discharged.

(b) By unauthorized:

If the terms of the contract, written on a document are materially altered by one

party, without the consent of the other party the contract is discharged and can not

be enforced.

6. By Alteration:

When the alteration is made in the written contract without mutual consent it

becomes unauthorized. Such type of alteration discharges the contract by law.

7. By breach of contract:

When one party violates the conditions of lawful contract it is called breach of

contract. When there is a breach by one party the other party gets a right not to

perform his obligations it may also take action against the other party who has

failed to perform.

Example :- "A" agrees to deliver one cycle to "B" on Sunday. He does not

deliver the cycle on Sunday. There is breach of contract.

(i) Actual breach:

(ii) Anticipatory breach:

(iii) Express breach:

(iv) Implied breach:

(i) Actual breach:

It occurs when a party fails to perform a contract, where performance is due.

(ii) Anticipatory breach:

An anticipatory breach contract occurs before the time fixed for performance

has arrived.

(iii) Express breach:

In express breach a party to contract communicates to the other party, his

intention not be perform the contract on his part.

(iv) Implied breach:

In implied breach party to the contract does not act. Which makes the

performance of the contract impossible,