DISCHARGE OF

CONTRACT

Submitted By :Rahul Kalra

Roll No :23
MEANING
 Discharge of Contract “Discharge of contract
means the termination of a contractual
relationship between Parties”. OR “The
discharge of a contract happens when the
obligations of both the parties come to an
end”.
FOR EXAMPLE
 e.g. Two parties A & B Make a contract to
build a fly-over in a City. A is the municipal
authority of the city & B is a construction
company. Due to some reasons the contract
get discharged. Then the both parties are
free from the obligations of contract, i.e.
the rights & obligations of the parties come
to an end.
MODES OF DISCHARGE OF CONTRACT
 By Performance
 By Agreement
 By Lapse of Time
 By Operation of Law
 By Impossibility of Performance
 By Breach of Contract
DISCHARGE BY PERFORMANCE
 Actual Performance: Both the parties
actually performed their respective
obligations.
 Attempted Performance: Promisor
performs offer, but Promisee refused then
Promisor is discharged from his obligation of
Non-performance of the contract & can claim
expenses/damages.
 e.g. in our previous example A & B had a
contract to build a fly-over. B build the fly-
over in the prescribed manner and A provides
the consideration to B. Here both parties
performed their obligations & rights , what
they promised to do in the contract. Thus
the contract is come to an end by the
performance.
DISCHARGE BY AGREEMENT
 According to sec. 62-64 of Indian Contract
Act 1872 – A Contract can be terminated or
discharged by mutual express or implied
agreement between the parties in any of the
following ways –
 By Agreement
 or by Consent.
DISCHARGE BY AGREEMENT
 a. Novation:
 Substitution of a New contract in place of an existing one.
 E.g.:-
A owed from B Rs. 10k & gives B a mortgage of his (A’s)
estate of Rs. 5k, this replaced the old contract.
 Essentials:
 Free consent of all the parties.
 Discharge of existing contract.
 Must be enforceable by law.
 Take place before the expiry of existing contract.
DISCHARGE BY AGREEMENT
 b. Alteration:
 Change in one or more Terms of a contract .
 Eg:-
A has to deliver 100 Projectors by Mid of October, now
after alteration supply be made by the end of November.
 Essentials:
 Free consent of all the parties.
 Existing contract remains the same.
 Only the terms are changed
DISCHARGE BY AGREEMENT
  c. Rescission:
 Cancellation of a contract .
 Rescission of Contract by two ways:-
 By failure to perform Obligation
 By Aggrieved Party: when consent is not free
(caused by coercion, undue influence, fraud,
misrepresentation) the aggrieved party has an
option to rescind (cancel) the contract.
DISCHARGE BY AGREEMENT
  E.g.:
A induces B to enter into a contract by fraud.
The contract is voidable at the option of B. He
may, therefore, rescind the contract.
DISCHARGE BY AGREEMENT
 d. Remission:
 acceptance of a lesser performance.
 Eg:-
 Mr. Radhey Mr. Shyam Taken Rs. 5k Returns Rs.
4k Here, Mr. Radhey accepts the amount in
satisfaction of the whole debt.
DISCHARGE BY AGREEMENT
 E.Waiver
 means “abandoning”the rights.
 According to Sec. 63 of ICA 1872 – “When a
party to the contract abandons or waiver his
rights, the contract is discharged”.
 e.g.
 A promise to paint picture for B. B afterwards
forbid him to do so. A is no longer bound to
perform the promise.
DISCHARGE BY AGREEMENT
 f. Merger:
 merger of 2 or more rights into 1 contract.
 Eg:-
 Mr. Shekhar Ms. Suman Existing inferior right (on
lease) New Superior right (Buys) Effects when an
inferior right merges into a newly made superior
right by the same party.
 Superior right will continue
 Inferior right automatically stands discharged.
DISCHARGE BY LAPSE OF TIME
 when a contract is to be performed within a
stipulated time period & a party does not
perform it within that time, the contract is
discharged by ‘Lapse of time’. 
  Eg:-
 Employee Employer Join within a week
Discharge after week (Stipulated – given)
DISCHARGE BY OPERATION OF LAW 
 a. Death:
 when a contract is of a Personal nature & involves
personal Skill. Here, the contract is discharged on
the death.
 Eg:- Mr. Kumbh Promised Mr. Karan to Paint
a Picture Death before performance In other
case, if skill is not involved then the
obligation must performed by his legal
representative.
DISCHARGE BY OPERATION OF LAW 
  b. Insolvency:
 when a person is adjudged insolvent, he is released
from all of his liabilities
 Eg:-
 Borrower Lender 5 cr. payment Insolvent Here,
his Assets & Liabilities are transferred to the
official receiver.
DISCHARGE BY OPERATION OF LAW 
 C. Rights & Liabilities becoming vested in the
same person: The same person becomes
liable to himself OR He acquires right against
himself. In such cases, the contract in effect
is discharged
DISCHARGE BY OPERATION OF LAW 
 D. Loss of evidence of contract:
 evidence of the existence of the contract is
lost, the contract is discharged
 Eg:- Mr. Laung Ms. Lachi Contract b/w them
Even evidence is lost Here, document
lost/destroyed & no evidence available, the
contract is discharged. 
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
 According to sec. 64 of ICA 1872 – “When the
performance of a contract becomes
subsequently impossible, the contract
becomes void”.

 It means that an agreement to do an act

impossible in itself is void.
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
 According to sec. 23 & 24 of ICA,
 “Anagreement becomes void, if the
consideration or object of contract or its part of
which is unlawful”
 As per the honorable Supreme Court of
India‟s order in the SCC no. 77, 1999(5) –
 “Impossibility must be physical or legal
impossibility”
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
 e.g. A promises B to sell his horse on 1st June,
but before the day, the horse dies. Now its
impossible to fulfill the promise due to
impossibility of performance.
 Such type of impossibilities in which at a time
of contract, contract was capable of being
performed, but subsequently its performance
becomes impossible is called “ SUPERVENING
IMPOSSIBILITY”
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE

  Initial impossibility –
 Eg:-
Dr. Shiv Contract Discover treasure by Magic
Ms. Mahima  
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
 The concept of supervening impossibility is
known as ‘doctrine of frustration’ in English
law. Doctrine of frustration
 Where Performance of contract becomes
impossible.
 Object of contract has failed.
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
  Destruction of subject matter:
 when subject after the formation of contract is
destroyed without any fault of parties, the contract is
discharged.
 Cases of Supervening/Frustration
 Mr. Vidhu Sell specific Apple to Mr. Vinod but
the crop failed Here, contract become void by
supervening impossibility.
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE

 Change of Law:
 ifchange in Govt. policy takes place then a
contract made earlier may become impossible.
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
  Outbreak of war:
a contract entered into during war with alien
enemy is unlawful/void & it can be enforced
after the war is over.
 Cases of Supervening/Frustration
 Mr. Billu Mr. Bawra Cargo to foreign port War
declared Here, contract becomes void when war
is declared.
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
 Order of the court:
 performance discontinues due to court stay.
 Cases of Supervening/Frustration Ms. Mona
Selling Property to Ms. Lisa Court Stay
 Here, as long as the stay order is in force, the
contract cannot be enforced.
DISCHARGE BY BREACH OF
CONTRACT
 By Breach of Contract According to sec. 39 of
Indian contract Act 1872 –
 “When a party to a contract has refused to
perform, or disable himself from performing his
promise in its entirety, the promise may put an
end to the contract.”
 In other words – “Breach of contract occurs
where a party refuses to perform his part of the
promise.
DISCHARGE BY BREACH OF CONTRACT
 (i) Actual breach of contract.
 The actual breach occurs when during the performance of
the contract or at the time when the performance of
contract is due, one party either fails or refuse to perform
his obligation under the contract.
 e.g.
A agrees to deliver to B 5 bags of sugar on 1st Jan., He
fails to do so on 1st Jan, There is a breach of contract by
A. In the above example, if A tenders the sugar to B on the
particular day, But B for no valid reason refuses to accept
delivery, this is a breach of contract by B
DISCHARGE BY BREACH OF CONTRACT

 (ii) Anticipatory breach of contract.

 When a party to contract refuse to perform his
part of the contract before the actual time of
the performance of the contract is due, it is
called an anticipatory breach of contract.
DISCHARGE BY BREACH OF CONTRACT
 Example of anticipatory breach of contract –
A promises to sell his car to be on before 1st
May, but before 1st May, A sells his car to C.
Here A had performed such a voluntary act that
the performance of his obligation towards B is
impossible and therefore, “Anticipatory breach
by impossibility” is committed.
THANK YOU