Discharge-of-Contract

Discharge of Contract

Discharge of Contract

The discharge of the contract takes place when the obligations of the contract between the parties of the contract come to an end. This also ends the legal validity of the contract. The discharge of the contract is also referred to as the termination of the contract. The best way to discharge a contract is by going in accordance with the terms of the contract until the end of the contract. In addition to that, a contract can be discharged by six other ways, which are discussed in this article.

By Performance

Performance regards to the completion of the deal in accordance with the terms of the contract. To have a closure of the deal, both parties must live up to the end of their bargain. The contract remains open until the parties perform correctly under the contract. The performance can be either actual or attempted.

Actual

Both the parties in a contract must perform, or offer to perform, their promises. Unless The Indian Contract Act, 1872 or any other law excuses or dispenses such performance. The representatives of the promisors are bound by the promises in the case where a promisor dies before performance unless the contract denotes a contrary intention. This is the actual performance.

Illustration: A promises to deliver the goods to B on a particular day with payment of Rs.1,000. But A dies before such day. So A’s representatives are to deliver the goods to B, in turn, B has to pay Rs.1,000 to A’s representatives.

Attempted

Attempted performance is a tender or form which the promisors predict and perform in the contract. However, an attempted performance should always be:

  • Unconditional
  • Should be for the complete obligation of the contract
  • Formulate at a proper place and time
  • A proper person or adequate agent for that person must formulate it

Illustration: The person A contracts to deliver to person B at his warehouse, on a certain day, a 100 bales of cotton of a certain quality. To make an offer of performance, person A must take the cotton to B’s warehouse, on that day. The delivered 100 Bales of cotton must be of said quality for person B to be satisfied to contract.

By Mutual Agreement

The parties of the contract need not perform if they come into a mutual agreement. This requires the agreement of substituting with a new contract or altering the existing contract. If the performance misleads from the terms of the agreement, then there would occur a breach of the contract.

Illustration: Consider A owes a certain amount of money to B under a contract. A, B and C agree to the contract that B will henceforth consider C as his debtor and not A as his debtor. The old debt of A and B comes to an end, and a new contract debt from C to B is initiated.

Novation

At times the payment or performance does not coincide with the terms of the agreement. Sometimes the debtor will also go into bankruptcy unless there is a reconstruction of the debt. In such a case, the parties use the novation as it is the only way to pay the funds.

Rescission

It is the cancellation of the contract and unwinding of the transaction. This is to bring the parties of the contract to the position they were before entering the contract.

Alteration

The modification or alteration of the contract with the consent of the parties. The effect of the alteration is the formation of a new contract.

Remission

One of the parties allows the other to delay or extend the time of the performance or allows to remit in part or as a whole. This means the discharge from the due, a release from the penalty, forfeiture or debt, pardon of transgression, relinquishment of a right, claim or obligation.

Waiver

The waiver refers to a voluntary abandonment or surrender of the rights or privilege of the contract. The waiver is generally in the form of writing. An example of it is the disclaimer, which after its acceptance becomes a waiver. Sometimes the action of a person also acts as a waiver. The waiver has different other names. They are releases, exculpatory clauses or a holding of the harmless clauses.

By Lapse of Time

There will be a discharge of the contract if the performance is not completed within the given period. This will likewise lead to the breach of contract. In such a case, the person can file a suit in the court to enforce his rights from the contract. The person can file in the court in regard to The Limitation Act, 1963. If the time period expires as stated in the Act, then there is a discharge of the contract, and the promisee cannot enforce the promisor.

By Operation of Law

The provisions of the law do not allow the performance of the contract. This regards to the changes in the existing laws also. But it does not concern the court order or an agreement. The following are the situations where the law authorises the termination of the contract:

  • Insolvency
  • Death
  • Alterations in the unauthorised materials
  • Merger

Illustration: Michael Jackson had to perform on a world tour. But he was met with an unfortunate death; this made all his contracts void and null.

By Supervening Impossibility

This states the provisions which were possible at the establishment of the contract would become impossible in the course of time. The following are the impossibilities:

Physical: This regards to the destruction of the subject matter.

Practical: It relates to the death of the incapacity of the party.

Legal: The changes in the law cease the existence of the foundation of the contract.

Breach of Contract

If the parties do not abide by the terms of the contract, then there would be a breach of the contract. In addition to that, the breach of contract occurs when the performance of the contract cannot be excused by operation of law, tender, impossibility or mutual consent. It is of two types, namely Anticipatory and Actual. An anticipatory breach occurs through the anticipation of the parties. The parties might prepare for such a breach beforehand. An actual breach occurs where the party commits the breach and refuses to abide by the terms.

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