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Ch. Spandana (109505)
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Discharge of contract means termination of the contractual relationship between the parties. A
contract is said to be discharged when it ceases to operate, i.e., when the rights and obligations
created by it come to an end.

A contract may be discharged in any of the following ways; these are called as modes of
discharging contracts.

c 0y Performance
c 0y Mutual Consent or Agreement
c 0y Subsequent or Supervening Impossibility or Illegality
c 0y Lapse of Time
c 0y Operation of Law
c 0y 0reach of Contract

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Performance means the doing of that which is required by a contract. Discharge by performance
takes place when the parties to the contract fulfill their obligations arising under the contract
within the time and in the manner prescribed. cWhen a contract is duly discharged by both the
parties, contract comes to a happy ending and nothing more remains, it is discharge or
termination of contract by due performance. 0ut if one party to the contract alone performs his
performance he lone is discharged and gets a right of action against the other party who is guilty
of breach.

Performance of the contract is the principal and most usual mode of discharge of a contract.
Performance may be actual or attempted. If the performance is actual one, here both the parties
perform their promises, the contract is discharged. In Attempted performance or tender, the
tender is not actual performance but is only an offer to perform the obligation under the contract.
Where the promissory offers to perform his obligation, but the promise refuses to accept the
performance, tender is equivalent to actual performance. A valid tender thus discharge the
contract.

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In this a contract is created by means of an agreement, it may also discharge by another

agreement between the same parties in any of the following manner.

Novation: Novation takes place when a new contract is substituted for an existing contract, either
between the same parties or between different parties, the consideration mutually being the
discharge of old contract. However, novation cannot be compulsory; it can only be by mutual
consent of all parties. The new contract must be valid and enforceable, else the original contract
revives.

Alteration: Alteration of a contract means change in one or more material items of contract such
as change in rate of interest etc. If such alteration in written contract is done by mutual contract,
the original contract is discharged and in its place comes new altered contract.

Rescission: A contract may be discharged before the date of performance, by agreement between
the parties to the effect it shall no longer bind them, and the parties are related from their
obligation arising out of the contract. Rescission is thus mutual cancellation of the contract.

Remission: Remission may be defined as the acceptance of a lesser sum than what was
contracted for or a lesser fulfillment of promise made.

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Impossibility at the time of contract: Impossibility arising subsequent to the formation of

contract is called post-contractual or supervening impossibility.

Discharge by supervening impossibility: Following are the applications of supervening

impossibility

Discharge of subject matter: When the subject matter of the contract, subsequent to its formation
is destroyed without the fault of promissory or promise, the contract is discharge .When specific
properties or goods which are destroyed cannot be regained.

Failure of ultimate purpose: Where the ultimate purpose for which the contract was entered into
fails, the contract is discharged although there is no destruction of any property affected by
contract and the performance of contract remains in literate sense.

Death or personal incapacity of promissory: where the performance of contract depends upon the
personal skill or qualification or existence of a given person, the contract is discharged on the
illness or death of that person.

Change of law: A subsequent change in law may render the contract illegal and in such cases the
contract is deemed discharged.
Outbreak of war: All contracts entered into with an alien enemy during the war are illegal and
void ab-initio. Contracts entered before the outbreak of war are suspended during the war and
may be reviewed after the war is over provided they have not already become time barred.

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The limitation Act, 1963 lays down that a contract should be performed within a specified
period, called period of limitation. If it is not performed, and if no action is taken by the promise
within the period of limitation. He is deprived of his remedy at law.

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A contract may be discharged independently of the wishes of the parties, i.e., by operation of
law. This includes discharge by death, by insolvency, by unauthorized alteration of the terms of a
written agreement and by rights and liabilities becoming vested in the same person.

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0reach of contract by a party there is also a method of discharge of a contract, because breach
also brings to an end the obligations created by a contract on the part of each of the parties.
However the aggrieved party i.e., the party not at fault can sure for damages for breach of
contracts as per law, but the contract as such stands terminated. 0reach of contract may be
Actual breach of contract and Anticipatory or constructive breach of contract.

At the time when the performance is due actual performance of contract occurs, during the
performance of the contract, actual breach contract occurs. Anticipatory breach of contract
occurs when a party to an executor contract declares his intension of not performing the contract
before the performance is due.