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Discharge of Contract

Definition:
When the rights and obligations arising out of a contract come to end, the contract is said to be discharge.
A contract may be discharge in any of the following ways: 1. Discharge by Performance 2. Discharge by Agreement 3. Discharge by Sub subsequent impossibility 4. Discharge by Laps of time 5. Discharge by Operation of law 6. Discharge by Breach of contract

Discharge by Performance:
Performance is the natural mode of discharge. When the parties to a contract perform their promises, the contract is discharge. Performance may be: 1. Actual Performance 2. Tender

Actual Performance:
According to Section (37): When each party to a contract fulfils the obligations arising under the contract According to the terms and conditions of the contract It is called actual performance of the contract And the contract comes to an end

Tender:

According to Section (38): When one of the parties to the contract Offers to perform the contract But the other party does not accept it There is tender It also called offer of performance It is not a actual performance but is equivalent to actual performance.

Discharge by Agreement:
A contract can also be discharge By the fresh agreement Between the same parties It may be discharge by agreement in any of the following ways: 1. 2. 3. 4. 5. Novation Alteration Rescission Remission waiver

Novation:
Novation of Contract means replacement of an existing contract by a new contract. In Novation the Parties may change but the terms and condition or material does not change. A Novation discharge the old contract

Alteration:
Alteration of a contract takes place when one or more of the terms of the contract are changed. The difference between novation and alteration is that in case of novation there may be a change of parties but in case of alteration parties remains the same and only the terms of the contract are changed. (Sec.62)

Rescission:
The rescission means cancellation of contract by mutual consent. A contract may be cancelled by agreement between the parties at any time before it is discharge by performance.(Sec.62)

Remission:
Remission the acceptance of lesser amount or lesser fulfillment of a promise made than what was contracted for in full discharge of the contract. It is unilateral act of the promise discharging at his will the obligations of another (Sec.63)

Waiver: Waiver means the intentional abandonment of a right which a person is


entitled to under a contract. A party may waive his rights under the contract whereupon the other party is released from his obligations. For a waiver neither an agreement nor consideration is necessary.

Discharge by Subsequent impossibility:


1. Initial Impossibility 2. Subsequent impossibility Initial Impossibility: According to section (56): An agreement to do impossible act is void ab-initio. It means agreement which is obviously impossible cannot be binding, e.g., an agreement to discover treasure by magic is void agreement. Subsequent impossibility: According section (56): Sometimes, a contract capable to be performed after formation becomes impossible, or unlawful and as a result void. It means that subsequent impossibility or illegality will make the contract void and the contract will be discharged. A contract will remain valid, if the parties to a contract feel difficulty in performing the contract. This is known as the doctrine of frustration or doctrine of supervening impossibility.

Factors Causing impossibility of performance Distraction of subject matter Failure of ultimate purpose Death or personal incapacity Change of law Declaration of war

Distraction of subject matter: Failure of ultimate purpose:

When the subject matter of the contract is destroyed without the fault of the parties the contract is discharged. Where the ultimate purpose for which the contract is made fails, the contract becomes void.

Death or Personal Incapacity:


Where the performance of the contract depends upon the personal skill, or qualification or the existence of a given person, the Contract is discharged on the illness or incapacity or the death of that person.

Change of Law:
Sometimes contract which are lawful when made but become unlawful later due to change in law. Subsequent such contracts becomes impossible to be performed

Declaration of war:
A contract entered into with an alien enemy during war is void ab-initio contract entered into before the commencement of war is suspended during the war.

Discharge by lapse of time:


1. A Contract is discharge by lapse of time. 2. The limitation Act, 1908 lays down that a contract should be performed within a specified period. 3. if the contract is not performed and no legal action is taken by the promise within the period of limitation, he is deprived of his remedy at law. 4. The contract is terminated in such a case.