DISCHARGE OF CONTRACT<\/strong><\/h2>\n\n\n\nDischarge of Contract\u00a0implies termination of contractual obligations. This is because when the parties originally entered into the contract, the rights and duties in terms of\u00a0contractual obligations\u00a0were set up. Consequently when those rights and duties are put out then the contract is said to have been discharged. Once a contract stands discharged, parties to it are no more liable even though the obligations under the contract remain incomplete.<\/p>\n\n\n\n
A Contract is deemed to be discharged, that is, concluded and no longer binding, in the following circumstances:<\/p>\n\n\n\n <\/figure>\n\n\n\nThe detailed\ndescription is as follows:<\/p>\n\n\n\n
DISCHARGE BY PERFORMANCE<\/strong><\/strong><\/p>\n\n\n\nWhere\nboth the parties have either carried out or attempted to carry out their\nobligations under the contract, is referred to as discharge of the contract by\nperformance. Because performance by one party has the right to receive the\nother party\u2019s performance. <\/p>\n\n\n\n
DISCHARGE OF CONTRACT BY MUTUAL AGREEMENT<\/strong><\/strong><\/p>\n\n\n\nA\ncontract emerges from an agreement between the parties. It thus follows that;\nthe contract must also be discharged by agreement. Therefore, what is required,\ninevitably, is mutuality. Discharge\nby substituted agreement arises when a contract is abandoned, or\nthe terms within it are altered, and both the parties are in conformity over\nit.<\/p>\n\n\n\n
EXAMPLE:<\/strong> A and B\nenter into some agreement, and A wants to change his mind and not to carry out\nhis terms of the contract. If he does this unilaterally then he will be in\nbreach of contract to B. However, if he approaches B and states that he would\nlike to be released from his liabilities under the contract then the latter\nmight agree. In that case the contract is said to be discharged by (bilateral)\nagreement. In effect B has promised not to sue A if he does not perform his\npart of the contract and the consideration for his promise is A\u2018s promise not\nto sue B. <\/p>\n\n\n\nDischarge by agreement may arise in the following ways:<\/p>\n\n\n\n <\/figure>\n\n\n\nNovation<\/strong><\/strong><\/p>\n\n\n\nThe\nterm novation implies the substitution of a new contract for the\noriginal one. This arrangement may be either with the same parties or with\ndifferent parties. For a novation to be valid and effective, the consent of all\nthe parties, including the new one(s), if any, is essential. Moreover, the\nsubsequent or second agreement must be one capable of enforcement in law, the\nconsideration for which is the exchange of promises not to enforce the original\ncontract.<\/p>\n\n\n\n
Rescission<\/strong><\/strong><\/p>\n\n\n\nThis refers\nto cancellation of all or some of the material terms of the contract. If the\ncontracting parties mutually decide to do so, the respective contractual\nobligations of the parties stand terminated.<\/p>\n\n\n\n
Alteration<\/strong><\/strong><\/p>\n\n\n\nThis refers\nto a change in one or more of the terms of a contract with the consent of all\nthe contracting parties. Alteration results in a new contract but parties to it\nremain the same. Here the assumption is that both the parties are to gain a\nfresh but different benefit from the new agreement. Remission This means the\nacceptance (by the promisee) of a lesser sum than what was contracted for, or a\nlesser fulfillment of the promise made. <\/p>\n\n\n\n
As per Section 63<\/strong>, \u2018every promisee may <\/p>\n\n\n\nremit or dispense with it, wholly or in part,\nor <\/li> extend the time of performance, or <\/li> accept any other satisfaction instead of\nperformance\u2019.<\/li><\/ul>\n\n\n\nWaiver<\/strong><\/strong><\/p>\n\n\n\nThe term\nwaiver implies abandonment or relinquishment of a right. Where a party\ndeliberately abandons its rights under the contract, the other party is\nreleased of its obligations, otherwise binding upon it.<\/p>\n\n\n\n
DISCHARGE BY LAPSE OF TIME<\/strong><\/strong><\/p>\n\n\n\nA\ncontract stands discharged if not enforced within a specified period called the\n\u2018period of limitation\u2018. The Limitation Act, 1963 prescribes the period of\nlimitation for various contracts. For instance, period of limitation for\nexercising right to recover an immovable property is twelve years, and right to\nrecover a debt is three years. Contractual rights become time barred after the\nexpiry of this limitation period. Accordingly, if a debt is not recovered within\nthree years of its payment becoming due, the debt ceases to be payable and is\ndischarged by lapse of time.<\/p>\n\n\n\n
DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE<\/strong><\/strong><\/p>\n\n\n\nSometimes\nafter a contract has been established, something might occur, though not at the\nfault of either party, which can render the contract impossible to perform, or\nillegal, or radically different from that originally undertaken.<\/p>\n\n\n\n
However, if\nwhatever happens to prevent the contract from being performed<\/p>\n\n\n\n
has\nnot been caused by either party<\/li> could\nnot have been foreseen, and<\/li> its\neffect is to destroy the basis of the contract<\/li><\/ul>\n\n\n\nthen the\ncourts will, generality, state that the contract has become impossible to\nperform. If that happens then the contract is discharged and neither party will\nhave any liability under it. Section 56 of the Indian Contract Act clearly\nprovides that an agreement to do an act impossible in itself is void<\/p>\n\n\n\n
The\nperformance of a contractual obligation may become subsequently impossible on a\nnumber of grounds. They include the following.<\/p>\n\n\n\n
Objective\nimpossibility of performance<\/li> Commercial\nimpracticability<\/li> Frustration\nof purpose<\/li> Temporary\nimpossibility<\/li><\/ul>\n\n\n\nDISCHARGE OF OPERATION OF LAW<\/strong><\/strong><\/p>\n\n\n\nA contract stands discharged by operation of law in the following circumstances:<\/p>\n\n\n\n <\/figure>\n\n\n\nUnauthorized material alteration of a written document<\/strong><\/strong><\/p>\n\n\n\nA party can\ntreat a contract discharged (i.e., from his side) if the other party alters a\nterm (such as quantity or price) of the contract without seeking the consent of\nthe former.<\/p>\n\n\n\n
Statutes of Limitations<\/strong><\/strong><\/p>\n\n\n\nA contract\nstands discharged if not enforced within a specified period called the \u2018period\nof limitation\u2019. The Limitation Act, 1963 prescribes the period of limitation\nfor various contracts. For instance, limitation period for exercising right to\nrecover an immovable property is twelve years and right to recover a debt is\nthree years. Contractual rights become time barred after the expiry of this\nlimitation period. Accordingly, if a debt is not recovered within three years\nof its payment becoming due, the debt ceases to be payable and is discharged by\nlapse of time.<\/p>\n\n\n\n
Insolvency<\/strong><\/strong><\/p>\n\n\n\nA discharge\nin bankruptcy will ordinarily bar enforcement of most of a debtor\u2019s contracts.<\/p>\n\n\n\n
Merger<\/strong><\/strong><\/p>\n\n\n\nA contract\nalso stands discharged through a merger that occurs when an inferior right accruing\nto party in a contract amalgamates into the superior right ensuing to the same\nparty. For instance, A hires a factory premises from B for some manufacturing\nactivity for a year, but 3 months ahead of the expiry of lease purchases that\nvery premises. Now since A has become the owner of the building, his rights\nassociated with the lease (inferior rights) subsequently merge into the rights\nof ownership (superior rights). The previous rental contract ceases to exist.<\/p>\n\n\n\n
DISCHARGE BY ACCORD AND SATISFACTION<\/strong><\/strong><\/p>\n\n\n\nTo discharge\na contract by accord and satisfaction; the parties must agree to accept\nperformance that is different from the performance originally promised. It may\nbe studied under the following sub-heads.<\/p>\n\n\n\n
Accord<\/strong><\/strong><\/p>\n\n\n\nAn accord is\nan executory contract to perform an act that will satisfy an existing duty. An\naccord suspends, but does not discharge, the original contract.<\/p>\n\n\n\n
Satisfaction<\/strong><\/strong><\/p>\n\n\n\nSatisfaction\nis the performance of the accord, which discharges the original contractual\nobligation.<\/p>\n\n\n\n
If the obligor refuses to perform<\/strong><\/strong><\/p>\n\n\n\nThe obligee\ncan sue on the original obligation or seek a decree for specific performance on\nthe accord.<\/p>\n\n\n\n
DISCHARGE OF CONTRACT BY BREACH<\/strong><\/strong><\/p>\n\n\n\nBreach occurs\nwhere one party to a contract fails to perform its contractual obligations, or\nthe performance is defective. A breach of contract does not per se bring a\ncontract to an end. The breach may give to the aggrieved party the right to\nterminate the contract but it is for the non-breaching side to decide whether\nor not to exercise that option. The aggrieved party has a right of election;\nthat is to say, it can choose either to affirm the contract or to terminate it.\nHowever, once that decision has been taken, it is, in principle, irrevocable.<\/p>\n\n\n\n
A Breach may be:<\/p>\n\n\n\n <\/figure>\n\n\n\nAnticipatory Breach<\/strong><\/strong><\/p>\n\n\n\nAnticipatory\nBreach is also known as \u2018breach by repudiation\u2019. Anticipatory breach occurs\nwhen one party states, before the arrival of the date fixed for performance,\nwithout justification that it cannot or will not carry out the material part of\nthe contractual obligations on the agreed date or that it intends to perform in\na way that is inconsistent with the terms of the contract. This may also occur\nwhere one party by some action makes performance impossible. <\/p>\n\n\n\n
For instance,\nA, after agreeing to sell his car to B on a fixed date, sells it to C. This is\nanticipatory breach.<\/p>\n\n\n\n
Effect of anticipatory breach<\/strong><\/strong><\/p>\n\n\n\nWhere there\nis an anticipatory breach, the non-breaching party may either<\/p>\n\n\n\n