DISCHARGE BY AGREEMENT

• Although contracts need to be performed, there are some contracts

which do not require performance. The following are the
conditions when the contracts are not required to be performed:
1. By novation, rescission and alteration – when the parties to the
contract enter into new contract, agree to change or rescind the
contract, the old contract ceases to be performed.
• For example – A owes B rs 1000. A, B and C agree that C will pay
B and he will accept rs 1000 from C in lieu of the sum due from A.
A’s liability shall come to an end, and the old contract between A
and B will be substituted by the new contract between B and C.

2. By waiver or remission – when the promisor is waived from the

performance of the contract by the promisee, the promisor is not
required to perform his promise.
DISCHARGE BY LAPSE OF TIME

• A contract is required to be performed within a specified period or

stipulated time.
• If it is not performed and no action is taken by the promisee within
the specified period of time, then the promisee is deprived of the
remedy under the law.

• For example –
• If a creditor does not file a suit against the buyer for recovery of
the price within 3 years, the debt becomes time-barred and hence
irrecoverable.
DISCHARGE BY OPERATION OF LAW

• A contract is discharged by the operation of law under the following

circumstances:
1. Death – the contract is discharged on the death of the promisor where
the contract requires personal skill
2. Insolvency – the insolvent is discharged from all liabilities on all the
contract entered into by him up to the date of insolvency.
3. Merger –when 2 parties to a contract enter into another contract
which confers superior rights to the other party, the contracts are said
to be merged and the inferior rights are not required to be enforced.
For example – lessee becomes owner of property.
DISCHARGED BY BREACH

• Breach of contract means the failure of a party to fulfil or perform

his obligations or promise under the contract.
• It discharges the aggrieved party from performing his obligations.

• Breach of contract is of 2 types –

 Anticipatory breach of contract
 Actual breach of contract
ANTICIPATORY BREACH OF CONTRACT

• When the party to the contract or the promisor refuses to perform

his/her obligation or promise under the contract or inform his/her
willingness before the time of performance has arrived, it is
referred to as anticipatory breach of contract.

• The amount of damages in such breach of contract differ from case

to case.
• For example – A agrees to employ B from 1 March and on 25 February he
writes to B that he need not join the service. The contract has been expressly
repudiated by A before the date of performance. This is anticipatory breach of
contract.

The consequences of anticipatory breach of contract are –

 the aggrieved party can rescind the contract and claim damages for the breach
of the contract without waiting until the due date of performance.
 The aggrieved party may treat the contract as operative and wait until the due
date for performance and claim damages if the promise still remains
unperformed.
ACTUAL BREACH OF CONTRACT

• Actual breach of contract occurs when one of the parties to the

contract refuse to perform the obligation or promise under the
contract on the due date of the performance of the contract.
• When party refuses to perform his promise and breach of contract
takes place the other party is liable to obtain the rights to claim
damages or compensation.

• A agrees to deliver 100 bags of sugar to B on 1 February 2018. On

the said date he failed to supply 100 bags of sugar to B. this is
actual breach of contract.
• The consequences of actual breach of contract are –
 When time is the essence of contract – the contract is voidable at the
option of the aggrieved party and he can claim the compensation for
the loss of non- performance.. However, the aggrieved party cannot
claim compensation when he accepts delayed performance, such
acceptance may be express or implied.

 When time is not the essence of contract – the contract is not voidable
but the aggrieved party can claim compensation for any loss caused by
the non-performance.
REMEDIES FOR/ARISING OUT OF BREACH OF CONTRACT

• Suit for damages

• Rescission of contract

• Suit for specific performance

• https://www.youtube.com/watch?v=zpQYsk-8dWg&t=198s
• The total no. of companies registered in the country as on
31st March 2017 was 16, 41, 333

• There were 11,69,309 active companies as on 31st March

2017
• 3, 01, 778 companies were closed
• 802 companies were assigned dormant status
• 1,38,206 are inactive companies
• 30, 962 were under closure process
• 282 companies were in the process of being re-activated
WHAT IS COMPANY?
The Companies Act 2013 defines the
word ‘company’ as a company
formed and registered under the
Act or an existing company formed
and registered under any of the
previous company laws. [Section - 3].
Chief Justice Marshal – A corporation is an
artificial being, invisible, intangible, existing
only in contemplation of the law. Being a mere
creation of law, it possesses only the properties
which the Charter of its creation confers upon
it, either expressly or as an incidental to its very
existence.
Lord Lindley - the company is association of
many persons who contribute money or
money’s worth to a common stock and employ
it in some trade or business; and who share the
profit and loss arising from it.
Prof. Haney – A company is an artificial person,
created by law, having perpetual succession
and common seal.
characteristic
FEATURES OF THE
COMPANY
MEANING AND NATURE OF COMPANY
LAW

• The Companies Act 2013 defines the word ‘company’ as a

company formed and registered under the Act or an
existing company formed and registered under any of the
previous company laws. [Section - 3].
• Lord Lindley - the company is association of many persons
who contribute money or money’s worth to a common stock
and employ it in some trade or business; and who share the
profit and loss arising from it.
• Prof. Haney – A company is an artificial person created by law,
having perpetual succession and common seal
INCORPORATED ASSOCIATION
A co. must be incorporated or registered u/the
Companies Act.

Minimum no. for the purpose is 7, in case of

a public company, and 02, in case of a
private company.

Maximum no. of members in case of public

company - unlimited and in case of private
company - 200
ARTIFICIAL PERSON
A Co. is created with the sanction of law
and is not itself a human being, it is
therefore called artificial. And since it
clothed with certain rights and duties it is
called a person. A Co. is accordingly a
artificial person.
SEPARATE LEGAL ENTITY
Unlike partnership, company is distinct from the person
who constitute it.

On registration the association of persons becomes a

body corporate by the name contained in the
memorandum.
FACTS

Salomon carried on business as a leather merchant.

He sold his business for a sum of £ 30,000 to a company formed by

him along with his wife, a daughter, and four sons.

Saloman was also the Managing Director of the Company.

The company almost ran into difficulties and eventually became

insolvent and winding up commenced.
At the winding up, the total assets of the company amounted to £
6,050;

Its liabilities were £ 10,000 secured by the debentures issued to Mr.

Salomon and £8,000 owing to unsecured trade creditor.

The unsecured creditors claimed the whole company’s assets, viz.

£6,050 on the ground that the company was a mere alias or agent
of the Salomon.
A company was formed for the purpose of
manufacturing aerial top dressing.
Lee held all but one of the shares in the company.
And by the articles was appointed governing
director of the company and chief pilot.
Lee
was
killed
while
piloting
the
compa
ny’s
aircraft
His widow claimed compensation for his
death under Workmen Compensation Act.

The company opposed the claim on the ground

that Lee was not a worker as the same person
could not be employer and the employee
It was held that there was valid
contract of service between Lee and
the company, and Lee was, therefore, a
worker. Mrs. Lee’s contention was
upheld.
The co. being a separate
person, its members are
not as such liable for its
debts.

In case of a co. limited by

shares, the liability of
members is limited to the
nominal value of shares
held by them. Thus, if the
shares is fully paid by them
their liability is nil.
 In the following
cases, a share 1. Where members of the
holder or member company are reduced
shall lose the below the statutory
privilege of limited minimum, viz., 7 in case
liability – of a public company and 2
in case of a private
2. Where in the course company. And the company
of winding up, it appears that carries on the business for
any business of the more than 6 months
company has been carried while the members are so
on with intend to defraud reduced. Every member
creditors, the Court may who is aware of the fact
declare the persons who were that it is operating with
knowingly parties to the fewer than the requisite
transaction personally liable number shall be personally
without limitation of liability for liable for the whole of the
all or an of the debts or other debts contracted during
liabilities of the company. that time.
SEPARATE PROPERTY
Macaura held all except
one share of a timber
company
He had also advanced
substantial amount to the
company.
On timber being destroyed by
fire his claim was rejected for
want of insurable interest.

The Court applying principle

of separate legal entity held,
the insurance company was
not liable. As He insured the
company’s timber in his personal
name
A co. being an artificial person is not bestowed with
a body of natural being. Therefore, it has to work
through its directors, officers and other employees.
But it can be held bound by only those documents
which bears its signatures. Common seal is the
official signature of the co.
A co. being an artificial person cannot be
incapacitated by illness and it does not have
an allotted span of life. The saying “King is
dead, long live the King” very aptly applies
to the company form of organization.
Another fall out of separate legal entity is that the
company, if aggrieved by some wrong done to it
may sue or be sued in its own name.
 CASES WHEN CORPORATE VEIL MAY BE
LIFTED

For the protection of revenue. – Sir Dinshaw Maneckjee Petit

 d

a b
A

B
INVESTED
C MONEY IN
MARKET
D
 A

B
INVESTED
MONEY IN PROFIT C

MARKET
D
 A

PROFI
LOAN
T
C

D
It was held that the company was formed by the Sir Dinshaw purely and simply as
a means of avoiding tax and company was nothing more than he himself.

It did no business, but was created simply as a legal entity to ostensibly receive
the dividends and interest and to hand them over to Sir Dinshaw as pretended
loan.
Prevention of fraud– Jones v
Lipman
L agreed to sell a certain land to J. he subsequently changed his mind and to avoid
the specific performance of the contract, he sold it to a company which was
formed specially for the purpose. The company had L and a clerk of his solicitors
as the only members. J brought an action for the specific performance against L
and the company.
The court looked to the reality of the
situation, ignored the transfer and
ordered that the company should
convey the land to J.
Prevention of improper conduct– Gilford motors v horne
f
o
r
m
e
d

Co.
Where the company is a sham – Gilford Motors Co. Ltd. v Horne –
H a former employee of a company was subject to a covenant not to solicit
its customers.

He formed a company to carry on a business which if he had done so would

have been a breach of contract.

An injunction was granted both against him and the company to restraint
them from carrying on the business.

The company was described in this judgement as device a stratagem and as a

mere cloak or sham for the purpose of enabling the defendant to commit a
breach of his covenant against solicitation
Determination of character of a company whether it is enemy – Daimler Co. Ltd v
Continental Tyre & Rubber Co. Ltd.

A co. was incorporated in England for the purpose of selling in England Tyres made in
Germany by German company which held the bulk of shares in the English company.
The holders of the remaining shares except one and all the directors were Germans,
resident in Germany.

During the First World War the English company commenced an action for recovery of
trade debt.

It was held that the company was alien company and payment of the debt to it would
amount to trading with the enemy and therefore the company was not allowed to
proceed with the action
UNDER STATUTORY PROVISION

• Mis-statement in the prospectus [s 34 and 35]

• Failure to return application money [s 39]

• Misdescription of Name [s 12]

• For facilitating the task of an inspector appointed under section
210 or 212 or 213
• Fraudulent Conduct [339]

• Liability under other Statutes.