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Chapter: 11th Commerce : Discharge and Breach of a Contract

Discharge of Contract

Discharge of contract implies termination of the contractual relationship between the parties.

Discharge of Contract

Discharge of contract implies termination of the contractual relationship between the parties. A contract is discharged if it ceases to operate and when the rights and obligations created by it come to an end. Sometimes, other rights and obligations may arise as a result of discharge of the contract. These are independent of the original contract.


Modes of Discharge Of Contract

Different modes of discharge of contract have been provided under different sections of the Act.


1. Discharge by Performance

Performance implies carrying out the obligation of the contract. Performance must be completed according to the real intentions of the agreement. Performance must be done according to time and manner prescribed.

Performance of contract may be of two types namely

a.        Actual performance

b.        Attempted performance


2. By Agreement on Consent

Agreement between the parties comes to an end by mutually agreeing for it. Any contract is created by an agreement, hence in the same way,  it can be discharged by  an agreement. In this connection the rule  of law is as follows. “Eodem modo qus and quide constituitor, eodem modo destruitur,” the meaning of which is that a thing may be destroyed in the same manner, in which, it is constituted. The consent may be of the following types

·           Express: Express consent may be given at the time of formation of the contract or subsequent to its formation

·           Implied: The contracts are also discharged by implied consent, different modes of discharge by implied consent are mentioned below

(a) Novation, (b) Alteration,

(c) Recession, (d) Remission, (e) Accord and Satisfaction, (f) Waiver and (g) Merger


3. By Impossibility of Performance

A contract may be discharged if its performance becomes impossible. The rule of impossibility of performance is based on the following maxims

·           the law does not recognize what is impossible and

·           what is impossible does not create an obligation.

According to the Section 56 of the Act, all acts to do impossible acts are void. There are two types of impossibility of performance such as –

·           Impossibility existing at the time of agreement.

·           Impossibility arising subsequent to the formation of contract.

On the other hand, impossibility of performance existing at the time of performance of a contract may be either

(a) known to the parties or (b) not known to the parties.

Likewise impossibility arising subsequent to the formation of a contract or supervening impossibility may be

·           By some event beyond the control of the parties or

·           By some act either of the promisor or of the promisee.


4. By Lapse of Time

According  to  the  Limitation  Act,  1963 a contract must be performed within a specified time. If it is not performed within this specified time limit and against which if no action is taken by the promisee in the Court of Law within specified time, then the promisee is deprived of his remedy at law. In such cases, the contract is discharged.


5. By Operation of Law:

A contract can be discharged by the opera- tion of law. The operation of law by which contract can be discharged are as follows

·           By Death: If the contracts depend  on the personal skill or ability, then such contract may be discharged on the death of the promisor

·           By Merger: Merger will take place when an inferior right accruing to the same party either under the same or another contract.

·           By Insolvency: An insolvent is discharged from all liabilities incurred prior to his adjudication.

·           Unauthorized Alteration of the Terms of a Contract: If one party makes any material alteration in the contract without the consent of the other party, then the other party can avoid the contract.

·           Rights and liabilities vesting in the same person: W here the right and liability become vested in the same person, the other parties are discharged.


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