DISCHARGE OF CONTRACT:

When the rights and obligations arising out of a contract come to an

end, the contract is said to be discharged or terminated. A contract may
be discharged in any of the following modes:
1. Performance
2. Agreement
3. Subsequent impossibility
4. Lapse of time
5. Operation of law
6. Breach of contract

DISCHARGE BY PERFORMANCE
Performance is the natural mode of discharge of contract.
When the parties to a contract perform their promises, the
contract is discharged. If only one of the several parties
performs their promise, they alone are discharged.
Performance may be *actual performance or *tender

Actual Performance
When both parties to a contract fulfill the obligations according
to the T/C of the contract.

Tender
It is also known as offer of performance or attempted
performance. It is not an actual performance but is equivalent
to actual performance. One party offers to perform the
contract, but the other party does not accept it, there is a
tender.

DISCHARGE BY AGREEMENT
A contract is discharged by agreement in the following ways:

a) Novation – means replacement of an existing contract by a

new contract. It maybe formed between the same parties
or in between new parties. This way the old one is
discharged, and a new contract comes into existence
b) Alteration – takes place when one or more of the terms of
contract are changed. If alteration is made with the
consent of all the parties, the original contract is
discharged, and a new contract takes it place. In case of
alteration, the parties remain the same and only the terms
of contract are changed.
c) Rescission – means cancellation of contract by mutual
consent. It maybe cancelled by agreement between the
parties anytime before it is discharged by performance.
d) Remission – means acceptance of lesser fulfillment of a
promise that was made. Its an act of promisee discharging
the obligations of another either wholly or partly.
 e) Waiver – means the intentional abandonment of a right
which a person is entitled to under a contract.

DISCHARGE BY SUBSEQUENT IMPOSSIBILITY

Initial Impossibility – An act which is “Void ab-initio”. It means
an agreement which is impossible from the very beginning.
Subsequent Impossibility – a contract capable to be performed
after formation becomes impossible, or unlawful and as a result
void.
a) Destruction of subject matter – when the subject matter
of a contract after the formation of contract is destroyed
without the fault of promise or promisor.
b) Failure of purpose – when the formation of contract
depends upon happening of a certain event, and if it
doesn’t happen the contract is discharged.
c) Death or personal incapacity – where the performance of
a contract depends on the personal skills or qualifications
of a particular person, the contract is discharged
d) Change of law – contracts which were lawful when made,
become unlawful due to change in law.
e) Declaration of war – a contract entered into with an alien
enemy during the war is void ab-initio, and hence gets
suspended.
DISCHARGE BY LAPSE OF TIME
Lapse of time terminates a contract, if the time limit expires the
contract can not be enforced.

DISCHARGE BY OPERATION OF LAW

A contract terminates by operation of law in the following cases
a) Insolvency – if the court declares a person as insolvent,
such a person is discharged from their liability
b) Merger – takes place when inferior right merges with a
superior right available to the same party under another
contract
c) Material alteration – means a change which affects the
rights, liabilities and legal position of the parties of a
contract.

DISCHARGE BY BREACH OF CONTRACT

Breach of contract means the failure of party to perform his
obligation. It discharged the aggrieved party from performing
their obligations. It may be *actual breach or *anticipatory
breach.
REMEDIES OF BREACH OF CONTRACT
When a party breaks the contract by refusing to perform their
promise, the breach of contract takes place. The following
remedies are available to the aggrieved party against the guilty
party in case of breach of contract.
1. Suit for rescission – rescission means cancellation of a
contract, when one party breaks a contract the other is
released from its obligation under the contract. If the
aggrieved party wants to sui the guilty party for damages
for breach of contract, it must sue for rescission of the
contract. They are then, after the court grants, entitled to
compensation.
2. Suit for damages – the aggrieved party may sue for
damages in case of breach of contract. Damages are a
monetary compensation allowed to the aggrieved party
for the loss suffered by it, as a result of breach of contract.
There are 5 kinds of damages
a) Ordinary damages
b) Special damages
c) Exemplary damages
d) Liquidated damages
e) Nominal damages
3. Suit upon Quantum Meruit – Q.M means payment in
proportion to the work done or reasonable value of work
done. In an event where the contract is cancelled or
 becomes impossible, the party can claim remuneration for
the work already done.
4. Suit for specific performance – means the actual carrying
out of the contract by a party. In some cases where the
damages are not an adequate remedy, the court may
direct the guilty party to fulfill the contract
5. Suit for injunction – injunction is an order of a court,
restraining a person from doing something which he
promised not to do. It is a mode of securing specific
performance in the negative form. It is a preventative
relief, discretionary remedy.

CONTRACT OF AGENCY
Agent and Principal
A person who acts on behalf of another person is called an
agent. The person who authorizes another person to act is
called a principal. The contract which creates the relationship of
principal is called an agency. The agent is authorized to create a
contract between his principal and third party.
Essentials of Agency
1. Agreement – the relationship of agency exists because of
an agreement between the principal and agent. This
contract maybe express or implied from the conduct of the
parties.
2. Who can be principal – any person who is the age of
majority according to law which he is subject to and who is
of sound mind, can become a principal and employ an
agent
3. Who can be agent – any person may become an agent. It
means minor, or a person of unsound mind can be
appointed as an agent. A minor can bind the principal to
third parties
4. Consideration not necessary – in order to create an
agency, the consideration is not necessary. The fact that
principal has agreed to be represented by the agent is
consideration for principal to support the contact
5. Intention – the agent must have intention to act on behalf
of the principal.

Test of agency – agency exists whenever a person can bind

another by acts done on his behalf. When this power does not
exist, the r/s is not that of agency.
Purpose of agency – to perform any act which the principal
himself can lawfully do. The object of agency should not be
criminal in nature or against public policy.

Kinds of Agent –