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discharged
, i.e. when
created by
For Example
e.g.
Two parties A & B Make a
contract to build a fly-over in a City.
A is the municipal authority of the
city & B is a construction company.
Due to some reasons the contract get
discharged. Then the both parties are
free from the obligations of contract,
i.e. the rights & obligations of the
parties come to an end.
By Performance
By Agreement or by Consent.
By Impossibility of performance.
By Promisee failing to offer facilities
for performance.
5. By Death
1.Discharge of Contract
By Performance
According to Sec.37 of Indian
Contract Act 1872 If both parties
to the contract have performed what
they have agreed to do, the contract
is discharged.
Performance of obligation by parties
to the contract puts an end to the
contract.
2. By Agreement or by Consent.
A) By Novation
B) By Accord and Satisfaction
C) By Remission and Waiver
D). By Rescission.
A) By Novation
According to Sec. 62 of ICA 1872 If
the parties to a contract agree to
substitute a new contract for it , or to
rescind or alter it, the original contract
need not to be performed.
That means When a new contract is
substituted for an existing contract, either
between the same parties or b/w the
different parties novation occurs.
Novation may occur in two ways I. New party is substituted for the old
one.
e.g.
A owes
money to B under a
contract. It is agreed b/w A, B and C that
B shall henceforth accept C as his debater
instead of A. The old debt of A to B is at
end and a new debt from C to B has been
contracted.
Special cases.
In SCC 586, 2000(1) - Lata construction
Vs Dr. Ramesh Chandra Ramnik lal Shah,
The Honorable Supreme Court of India
stated For novation the terms of the
two contracts are consistence and can
stand
together,
only
then
the
subsequent contract is said to be the
substitution of the earlier one.
Exception
In the case no. SCC 248, AIR 1992, Union
Carbide Corporation Vs. Union of INDIA,
Honorable Supreme Court ordered An illegal
contract cannot constitute an accord &
satisfaction.
As in that particular case of Bhopal Gas tragedy,
The Government of India claimed US$ 3.3 billion
from UCC. In 1989, a settlement was reached
under which UCC agreed to pay US$470 million
(the insurance sum, plus interest) in a full and
final settlement of its civil and criminal liability.
Supreme Court declare this agreement void,
because of the contract is illegal,& only 15% of
the original $3.3 billion claimed in the lawsuit &
without the consent of Bhopal Gas Tragedy Relief
and Rehabilitation Department.
D). By Rescission.
According to sec. 64 of ICA 1872 When
a person at whose option a contract is
voidable rescinds it, the other party
thereto need not perform his promise. He
is discharged from his liability under the
contract.
Rescission may occur by mutual consent of
the parties or when one party fails to
perform his obligation the other party may
rescind the contract. Rescission of a
contract cannot be in part only. The entire
contract must rescinded.
e.g.
1. A induces B to enter into a
contract by fraud. The contract is
voidable at the option of B. He may,
therefore, rescind the contract.
3. By Impossibility of performance.
According to sec. 64 of ICA 1872
When the performance of a contract
becomes subsequently impossible,
the contract becomes void.
It means that an agreement to do an
act impossible in itself is void.
5. By Death
According to sec. 37 of Indian
contract Act 1872 Where a
contract is personal in character, or
where personal skill or ability is
involved, death of the promisor
discharge the contract.
6. By Refusing tender of
performance.
According to sec. 38 of Indian contract Act
1872 If a party offers to perform his
promise and the offer has not been
accepted by the other party, the promisor
is not responsible for non-performance.
In other words refusal to accept offer of
performance, discharge the party making
the offer.
example
e.g.
7. By Unauthorised material
alteration of contract.
In cases of material alteration by one party to the
contract without the consent of the other party,
the contract is discharged.
e.g. A and B have a contract of partnership,
according to contract the profit share would be
distributed in the ratio of 50:50. Without the
consent of B, A made an alteration in the
contract and change the shares in ratio 60:40 or
introduce a new partner C.
In this case the contract get discharged & B is
free from any type of obligations & has right to
sue A.
example
For example the period of
limitation to file a money suit is 3
years. If within 3 years the creditor
fails to file a suit to recover his
amount, the debtor is discharged.
9. By Operation of Law
A contract is discharged or
terminated by the operation of
law, in the following cases
(i) By insolvency or bankruptcy
(ii) By merger.
(ii) By merger.
Merger of superior right into an inferior
right.
For example,
(1)when a higher security is accepted in
the place of the lower security. Inferior or
lower security vanishes or merge into a
higher security.
an ordinary debt is merged into a
mortgage, higher security. The right of
lessee is changed into a right of
ownership.
Brief Summary
Discharge of Contract - Discharge of contract means the
termination of a contractual relationship between parties
Sr. Ways to Discharge of
Contract
Sec. of
Description
ICA 1872
1.
By Performance
Sec.37
2.
By Agreement or by Sec. 62
to 64
Consent.
3. By Impossibility of
performance.
Sec. 64
4. By Promisee failing
to offer facilities
for performance.
Sec. 67
5. By Death
Sec. 37
7. 7. By Unauthorised
material alteration
of contract.
8. 8.
Discharge
lapse of time.
9. 9. By Operation
Law.
by
of