DISCHARGE OF CONTRACT

• A contract creates rights and obligations

between the parties. But when the rights and
obligations created by an agreement come to
end, the contract is said to be discharged.
The parties thereto are freed from the task of
performing their respective obligations
arising from the contract. Thus discharge
means the termination of the contractual
relationship.
• MODES OF TERMINATION OR DISCHARGE :
A contact may be terminated or discharged in
any one of the following ways :
1. By agreement
2. By performance of the contract
3. By lapse of time
4. By operation of law
5. By material alteration
6. By subsequent impossibility of performance
7. By breach
• 1. Discharge by Agreement :
A contract is the outcome of mutual agreement between the parties. In
the similar manner, parties may agree to terminate the existing
contract. Termination by agreement may occur in any one of the
following ways :
(a) By Novation : Substituting a new contract for the existing one (either
with different terms or between different parties)
(b) By Alteration : Material change in one or more of the terms of a
contract with consent of all the parties.
(c) By Rescission : Cancellation of the contract. Contract may be rescinded
by mutual consent, or by the aggrieved party or by the party whose
consent is not free which renders the contract voidable.
(d) By Remission : Acceptance of a lesser performance than what was
actually due under the contract.
(e) By Waiver : Abandonment or intentional relinquishment of a right
which a person is entitled to.
• 2. By Performance of the Contract :
When the parties to the contract fulfil their obligations under a
contract, the contract is said to have been performed and the
contract comes to an end.
• 3. By Lapse of Time :
The Limitation Act provides that a contrcat should be performed
within a specified period otherwise the contract shall be terminated.
• 4. By Operation of Law :
A contract may be discharged by operation of law in the following
cases :
(a) Death (where personal skill of the promisor is important)
(b) Insolvency :
© Merger (inferior right in a contract merges into the superior right)
(d) Complete loss of evidence of the existence of Contract :
• 5. By Material Alteration by Promisee :
Any material alteration made intentionally in a written contract by the
promisee without the consent of the promisor entitles the latter to regard
the contract as rescinded.

• 6. By Subsequent Impossibility of Performance (Supervening Impossibility):

(Impossibility which arises subsequent to the formation of the contract
because of some event over which neither party has any control, and hence
contract becomes void and the parties are discharged from their obligations
under the contract).
Section 56 provides “a contract to do an act, which, after the contract is
made, becomes impossible, or by reason of some event which the promisor
could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful”. This is known as the “doctrine of Supervening
Impossibility”.
The performance of the contract may become subsequently impossible due to any
of the following reasons :
1. Destruction of the subject matter of a contract
2. Death or personal incapacity :
3. Change of law :
4. Non-existence or non-occurrence of a particular state of things :
5. Outbreak of war

In the following cases, a contract is not discharged on the ground of supervening

impossibility :
1. Difficulty of performance
2. Impossibility due to the failure of a third party on whose work the promisor relied
3. Strikes, lockouts, riots etc.
4. Partial impossibility

In England, the doctrine of frustration is the parallel concept of “supervening

impossibility”.
• 7. By Breach :
If any party to a contract fails to perform his obligation, he is said to
have committed breach of the contract. Breach is also a method of
discharge of a contrcat.
Breach of contract may arise in two ways :
1. Actual Breach
2. Anticipatory Breach.

1. Actual Breach may occur either (a) at the time when performance is
actually due, or (b) during performance of the contract.
2. Anticipatory Breach may happen in two ways : (a) By renunciation (a
party expressly renounces his obligation under the contract before the
due date of performance), or (b) by Implied repudiation (a party by his
own act disables himself from performing the contract, i.e. he acts in a
manner that it becomes impossible for him to perform his promise).