Discharge of contract

It means the end of a contractual relationship. It may come to an end by the act of the parties or by operation of law. A contract may be discharged by any of the following modes. 1. By performance by the parties of their respective obligations If the parties o a contract perform their respective obligations, the contract is discharged Eg : A contract between A & B specifies that A has agreed to sell his house to B for Rs. 2,00,000 A transfer the house in Bs name and B gives Rs. 2,00,000 to A. The contract is discharged.

 A contract is entered into for being performed and therefore the parties must perform their respective obligations under the contract. Where a promise or dies before performance of a contract, is legal representatives are bound to perform the contract unless the very nature of contract is such that it cannot be performed by legal representatives. Eg : A contracts to deliver certain goods to B for Rs. 1000 on a certain day. A dies before that day A;s representatives are bound to deliver the goods to B and B is bound to pay Rs. 1000 to them. Eg : X promises to paint a portrait of Y for Rs. 10,000 X dies before performance . The contract cannot be enforced either by Xs representative or Y.

 Rules relating to performance of contracts a) As a general rule the contract must be performed by the promisor himself according to the terms of the contract. In certain cases, it appears from the nature of the case that the intention of the parties is that the promise has to be performed by the promisor himself, such promise must be performed by the promisor himself. Eg : A agrees to paint a picture of B. A alone shall perform Eg : A agrees to sell goods to B. A may employ another person to sell the goods. The promisor must offer to perform. If this offer is rejected by the promisee, then the promisor is not responsible for non-performance. He is entitled to sue the promisee for breach

b) The person who can demand performance is the perform to whom the promise is made or in case death his legal representatives c) Where the contract states the time of performance, the parties must perform accordingly Where the contract does not state the time of performance, the parties must perform within a reasonable time Time is the essence of the contract - If a party fails to perform on the specified date, the contract is voidable at the option of the other party

d) Where the contract states the place of performance, the parties must perform accordingly e) Subsequent impossibility or frustration in the following cases, the parties need not perform 1. destruction of subject matter after agreement but before performance 2. death of parties where the personal performance of the parties is required 3. contract becoming unlawful later 4. subsequent incapacity of the parties 5. enemy alien

f) Performance of joint promises All of them must perform Promisee can demand performance from any one of them Eg : A, B and C jointly owe Rs 10000 to X. X may compel either A or B or C to pay the money back g) Performance of contingent contracts (i) Contract contingent on the happening of a event (ii) Contract contingent on the non-happening of a event (iii) Events linked with human conduct

2. By mutual agreement to rescind the contract or alter the terms of the contract or substitute a new contract for the existing one. Where the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the original contract stands discharged. a) Novation When the parties to a contract agrees to substitute the existing contract for a new contract, it is called navation. Eg: A ones a sums of Rs. 1000 to B. B agrees to take Rs 900 form A instead of Rs. 1000. The old debt for Rs.1000 is extinguished b) Rescission- When the parties agree to rescind a contract i.e to put an end to contract, the contract is discharged c) Alteration Where a contract is embodied in a deed makes any material alteration without the contract of the other, the deed shall be deemed to have been cancelled

3. By remission of the rights by the parties to the contract.- When a party to a contract gives up his right under the contract, he is said to have remitted the contract & the contract is discharged Eg: X agrees to sell his house to Y for Rs.2,50,000 . Y pays Rs. 2,00,000 and is yet to pay 50,000 . X gives up his right to claim Rs. 50,000 from Y. The contract is discharged.

4.

By subsequent impossibility of performance of contract.- When a contract subsequently becomes impossible of performance, it is said to have been discharged. The impossibility of performance may occur in the following circumstances
Destruction of subject matter after the agreement but before the performance Where the nature & terms of a contract require personal performance by promisor, his death, serious illness or in capacity will render the contract impossible Contract becoming unlawful Contract with friendly alien becomes impossible if he becomes an enemy alien due to the declaration of war. A contract becomes impossible when the change of circumstances has affected the performance of contract to such an extent as to make it virtually impossible or extremely difficult or hazardous

Eg : A contract for erection of a building on a plot of land becomes impossible if the land is compulsorily acquired by the Govt

6. By breach of contract ie where a party to the contract has refused to perform his liability under it or by his own act makes it impossible to perform his obligations or fails to perform such obligations, he is said to have committed breach of contract. Breach may be 1. Actual (present) 2. Anticipatory

 Breach may further be 1. Minor breach Eg : In a contract for sale of mobile set, a change in the colour of the chip which is not be seen at all 2. Material breach Eg : In a contract for sale of mobile set, a change in the colour of the hand-set 3. Fundamental breach Eg : In a contract for sale of mobile set, delivering a set which does not receive calls and from which no calls can be made

 Effect of breach 1. The contract is discharged 2. The party who has already performed or is ready to perform has remedy in a court of law 3. The party who commits breach is liable 4. The party who is ready and willing to perform is discharged of his liability

 Remedies for breach of contract Where a party to a contract breaks his obligation, a right of action is conferred upon the other party. The party who suffers from a breach of contract is called the injured party He has the following remedies under the law.

1. Specific performance: It means actual execution according to the terms and stipulations of the contract.An order for specific performance is an order requiring the defendant to do the very thing he promised to do where the lose suffered by breach of contract cannot be compensated by damages or where there are no state to ascertain the quantum of damages, the aggrieved party may approach the court for grant of a decrees for specific performance of contract Eg: If a agree to sell his house to B and commits breach of contract, B may go to the court for grant of an order of specific performance of the contract Eg: A agrees to sell an antique to B. If A commits breach B may require specific performance by A

2. Injunction: Injunction is an order of restraint. If a party to a contract who has promised not to do a thing, commits breach of that promise, the court may issue an order of injunction and refrain that party from doing that thing.
Eg : A promises to sing in Bs theatre and not to sing in anybody elses theatre. If A commits breach and agrees to sing in Cs theatre, B can prevent A from singing in Cs theatre by an order of injunction

3. Suit for damages: The party who is injured by breach of a contract may bring an action for damages ie monetary compensation for the loss suffered by the injured party due to the breach committed by the other party. Eg : P agrees to deliver 10 tons to rice to Q but does not deliver. Q may file a suit for damages against P Damages may be 1. Liquidated where the parties themselves decide the quantum of damages at the time of agreement 2. Unliquidated where the quantum is not decided by the parties, the court will decide.

4. Quantum Meruit: When a contact becomes void or one party who has already received advantage under a contract, commits breach, he has to return back that advantage to the party from whom he has received it. Eg : A agrees to sell his land to B for Rs 10 lacs. B pays Rs 1 lac as advance. Later A fails to deliver the house. B is entitled to take back the advance of Rs lac and A is bound to return it back to B.

 Anticipatory breach This arises when one party to a contract renounces the contract before one party to a contract renounces the contract before the due date of performance i.e prior to the promised date of performance, promisor signifies his intention not to fulfill the contract and that he will no longer be bound by it. In such a case, the other party need not wait till the date of performance and then file a suit for breach of contract, the can immediately.
Eg: A promised to marry B after the life time of Bs father. During the lifetime of Bs father A refused to marry B and married C. B filed a suit immediately against A for breach of promise the court held that since A had committed anticipatory breach of performance. B was entitled to succeed in the suit.