(part 4) UNIT 1

Discharge of contract
Discharge of a contract means termination of the contractual relations between the parties to the
contract.
1. By an Actual Performance: It means the parties to contract have performed their respective
promises under the contract.
2. By an Attempted Performance or a Tender: It means the promisor has made an offer of the
performance of promise but it has not been accepted by the promisee.
3. DISCHARGE OF A CONTRACT BY IMPOSSIBILITY OF PERFORMANCE : Sometimes, the
performance of a contract is impossible. In such a case, the contract is discharged. This is based
on the principle that law does not recognize what is impossible.
4. DISCHARGE OF A CONTRACT BY LAPSE OF TIME: Every contract and promise under the
contract should be performed within a time limit. The contract is discharged, if it is not
performed or enforced within a specified period called as the period of limitation.
5. DISCHARGE OF A CONTRACT BY OPERATION OF LAW: In the following circumstances,
the contract is discharged by the operation of law.
a. Death: The contract that requires personal skill is discharged on the death of the promisors.
However, any benefit received before the performance shall be returned by the legal
representative of the deceased party.
b. Merger: The conversion of the inferior right into superior right is called as merger. It is also
called as vesting of rights and liabilities in the same person.
c. Insolvency: The insolvent is discharged from all the liabilities on all the contracts, entered
into, up to the date of insolvency.
d.Unauthorized Material Alteration: The alteration which changes the nature of the contract is
material alteration. If one party makes any material alteration in the terms of the contract
without the approval of the other party, the contract comes to an end
6. DISCHARGE OF A CONTRACT BY A MUTUAL AGREEMENT OR BY AN IMPLIED
CONSENT: A contract can be discharged by mutual agreement in any of the following ways.
a. Novation: The novation means a new contract is entered into in consideration of the old
contract. The new contract is entered into between the same parties or the new parties. The
novation is valid when all the parties must consent it. The new contract must be valid and
enforceable, otherwise the old contract will continue valid.
b. Alteration: An alteration of a contract means a change in one or more terms of the contract
with the mutual consent of the parties. The alteration discharges the original contract and
creates a new contract. However, the parties to the new contract remain the same. In case of
alteration of the contract, the old terms and conditions need not to be performed while the
new terms and conditions must be performed.
c. Rescission: The rescission of a contract means the cancellation of the contract by one or all
the parties to contract. It may take place With the mutual consent of the parties. By a party
 whose consent was not freely obtained (voidable contract).One party may rescind the
contract, if a breach of contract by the other party. The party rescinding the contract must
restore the benefit received from the other party. No partial rescission. The party may
rescind the entire contract. The rescission of the contract in part is not possible. Just as a
proposal has to be communicated, the rescission should also be communicated. A rescission
may be revoked in the same manner as a proposal is revoked.
d. Remission: The remission means the acceptance of a lesser consideration than what is agreed
under the contract. It takes place when the promise Dispenses with a part or whole of the
performance of a promise. Extends the time for a performance by the promisor. Accepts a
lesser sum.Accepts any other consideration, than agreed in the contract. Example A owes B
5000. A pays 2000 to B and B accepts the amount in satisfaction of the whole debt. The
whole debt is discharged.It may be noted that when a party accepts a lesser sum in
satisfaction of a larger sum due under the contract it is called ‘accord and satisfaction’ in
the English Law. The promisee accepts a lesser sum than what is due under the contract is
known as ‘Accord’ and the actual payment is the satisfaction. This is a valid contract.
e. Waiver : It means the abandonment (i.e., giving up) of right by the party under the contract.
No consideration is necessary for the waiver. Example A promises to supply goods to Y.
Later on, Y exempts A from carrying out the promise. It amount as waiver of right of
performance on part of Y.
f. Merger : The conversion of the inferior right into superior right is called as merger. It is also
called as vesting of rights and liabilities in the same person.
7. DISCHARGE OF A CONTRACT BY BREACH OF CONTRACT: It means the failure of a party to
fulfill his obligation or promise under the contract. When there is a breach of contract, certain
remedy or consequences are available to the aggrieved party. The aggrieved party means a party
who is not at a fault.