National University of Modern Languages

Subject: Business Law

Class: MBA-4
Submitted by: M. Ahmad Ali
Roll No: L-21206
Submitted to: Brig. (R) Muhammad Saleem
Assignment No.06

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 Discharge of contract
A contract is said to be discharged when the obligations created by it come to an end. In other
words, discharge of contract means ' termination of the contractual relationship between the
parties'. There are various modes of Discharge of Contract, a contract may be discharged either
in a positive way (Positive - by performance) or in negative. (Negative - by breach or failure to
perform contractual obligation by either of the parties).

They are as per the following: -

1. Discharge by performance
2. Discharge by agreement or by consent
3. Discharge by impossibility of performance
4. Discharge by promise failing to offer facilities
5. Discharge by death
6. Discharge by refusing tender of performance
7. Discharge by unauthorized material alteration of contract
8. Discharge by lapse of time
9. Discharge by operation of law
10. Discharge by breach of contract

Discharge by Performance
A contract is said to be discharged if the parties to a contract fulfill their obligations arising
under the contract within the time and in the manner prescribed. In such a case, the parties are
discharged and the contract comes to an end.
Performance of a contract is the most usual mode of its discharge. It may be Actual Performance
or attempted Performance.
(a) Actual performance: When both the parties perform their promises, the contract is
discharged. Performance should be complete, precise and according to the terms of the
agreement. Most of the contracts are discharged by the performance in this manner.

(b) Attempted Performance: Tender or offer of performance means "offer made by the
promisor to promisee expressing his willingness to perform his part of the obligation under the
contract. It is also known as attempted performance.

Example: 'A' offers to sell his house to 'B' for $100000 and 'B' accepts the same letter 'B' paid
the amount in full and 'A' handed over the house to 'B'. Here the parties have fulfilled their
obligations. The contract is said to be discharged by performance.

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Discharge of Contract by Agreement or consent
If both the parties to the contract, expressly or impliedly, agree to terminate the contract, the
contract is said to have been discharged by mutual consent.
Example: A buys a scooter from B with the condition that if it’s working is not found
satisfactory, he will return it within 10 days. A is not satisfied with the performance of the
scooter and returns it to B within 10 days. The contract is discharged by mutual consent.

Mutual discharge of a contract may take place in any of the following ways:
 Novation
 Alteration
 Remission
 Rescission
 Waiver
 Merger

Discharge by the Impossibility of Performance

The contract becomes void, if the performance of the contract becomes subsequently impossible.
• Impossibility must be physical or legal impossibility.
Example: A promise to sell B his horse on certain date. The horse dies before that date. The
promise is impossible to be performed.

Discharge of a Contract by Lapse of Time

If the promisor fails to perform and the promisee fails to take action within this specified period,
then the latter cannot seek remedy through law. It discharges the contract due to the lapse of
time.
Example: Peter takes a loan from John and agrees to pay instalments every month for the next
five years. However, he does not pay even a single instalment. John calls him a few times but
then gets busy and takes no action. Three years later, he approaches the court to help him recover
his money. However, the court rejects his suit since he has crossed the time-limit of three years
to recover his debts.

Discharge of a Contract by Operation of Law

A contract can be discharged by operation of law which includes insolvency or death of the
promisor.

Discharge by Breach of Contract

If a party to a contract fails to perform his obligation according to the time and place specified,
then he is said to have committed a breach of contract.

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Also, if a party repudiates a contract before the agreed time of performance of a contract, then he
is said to have committed an anticipatory breach of contract.

In both cases, the breach discharges the contract. In the case of:
an actual breach, the promisee retains his right of action for damages.
an anticipatory breach of contract, the promisee cannot file a suit for damages. It also
discharges the promisor from performing his part of the contract.

Discharge by Non-Provisioning of Facilities

In many contracts, the promisee agrees to offer reasonable facilities to the promisor for the
performance of the contract. If the promisee fails to do so, then the promisor is discharged of all
liabilities arising due to non-performance of the contract.
Example: Peter agrees to fix John’s garage floor provided he keeps his car out for at least 6
hours. Peter approaches him a few times but John is reluctant to get his car out. John fails to
provide reasonable facilities to Peter (an empty floor). This discharges him of all obligations
arising under the contract.
Discharge by unauthorized material alteration of contract
Material alteration means any alteration or change in the contract that affects the rights and
liabilities of the parties to the contract significantly. Material alteration puts an end to the
contract.
If one party without the consent of the other party makes such an alteration in the contract, the
other party can avoid the contract. In such cases, the effect of alteration would be the same as
that of cancellation of the document. However, an alteration which is not material or which is
made to carry out the common intention of the parties, does not affect the validity of the contract.

Discharge by death
Where a contract is personal in character, or where personal skill or ability is involved, death of
the promisor discharges the contract.
Example: A promise to paint a picture for B on a certain date. A dies before that date. The
contract is discharged.

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 Remedies for Breach of Contract
A contract is a legally binding agreement that is enforced by the full weight of the court. In the
event that either party to a contractual agreement fails to perform according to the terms of the
contract, the other party may take legal action. The party who fails to perform is referred to as
the breaching party. A civil lawsuit for breach of contract may be filed to obtain a remedy for
the breach.

There are following remedies to injured party in case of breach of contract:

Monetary damages
The party who breached the contract can be held responsible for the losses caused by the breach.
Both general or expectation damages and consequential damages can result from a breach of a
contract. General or expectation damages refer to the loss directly caused by the breach.
Consequential damages refer to losses that occurred because of the breach but that were an
indirect cause. For example, if you contracted and paid for a machine to be delivered and it
never came, the general losses would include the value of the money you paid for the machine.
The consequential losses could include the loss of business caused by the fact you did not have
the machine you needed to do your work.

Liquidation damages.
Sometimes, it is very difficult to determine how much a person was damaged by a breach of
contract. To address this problem, some contracts contain liquidated damage clauses. Essentially,
these clauses specify that the non-breaching party will be awarded a specific amount of money in
the event a breach occurs. These clauses will be upheld as long as they are fair.

Specific performance.
In some cases, the appropriate remedy for a breach of contract is to correct the breach by forcing
the breaching party to complete the terms of the agreement. Specific performance is an
appropriate remedy in situations where monetary damages could not possibly make the non-
breaching party whole for the losses. For example, if there was a contract created for a buyer to
purchase a very rare piece of art, the buyer could not simply find the art elsewhere. The only
remedy that would help the buyer in this circumstance is for the court to require the sale to go
through so the buyer got the unique one-of-a-kind painting that he contracted for.

Rescission.
Rescission allows the non-breaching party to essentially be released from performance
obligations. Recession is a remedy for a breach of contract because it makes clear that the party
is relieved of his duties due to the failure of the other party to perform.

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