1. Discharge of Contract COMPILED BY: Dr. Kamlesh Bajaj Associate Prof. (Dept. of Com.) PGGCG 42 CHD

2. DEFINITION Discharge of contact means termination of the contractual relationship between the parties.

3. Discharge of Contract A contract may be discharged by: a)Performance b)Agreement or Consent c) Operation of law d)Breach of contract e) Lapse of time f)Impossibility

4. Discharged by Performance The most common method of discharge, as most contracts are formed and performed without problems. Note that part-performance is not acceptable.

5. Discharge by Agreement A contract is created by agreement. Logically, it can be discharged in the same way. This can be done by a term in the original contract, or by a separate agreement.

6. Discharge by Agreement Novation – Old contract is cancelled & new contract is formed. Alteration – Changing in the terms of original contract parties must remain same. Recession – Old contract is cancelled, no new contract is formed. Remission – To remit or waive off the performance by promise.

7. Illustrations (a)A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted. (b)A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise. (c)A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged.

8. Discharge by Operation of Law Insolvency/Bankruptcy, when the Act prevents the continuation of some contracts Merger of two contracts, when the smaller contract merges with the larger one Alteration made in a written contract without the consent of the other party would discharge the party provided the alteration is material. Death where the performance is to be made in person.

9. Discharge by Breach  Actual breach of contract”, and  “Anticipatory breach of contract”.

10. Discharge of contract by Lapse of time Example: Time barred debt.

11. Discharge by Impossibility of Performance Agreement to do impossible act is void. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non- performance of the promise.

12. Illustrations (a)A pays B 1,000 rupees in consideration of B's promising to marry C, A's daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the 1,000 rupees. (b)A agrees with B to discover treasure by magic. The agreement is void.

13. Contract to do act afterwards becoming impossible or unlawful – 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.

14. Illustrations (a)A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void. (b)A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to make compensation, to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 1,000 rupees paid in advance.

15. Obligation of person who has received advantage under void agreement, or contract that becomes void – When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.

16. Discharge by Supervening Impossibility An outside, “supervening” event, might make performance of the contract impossible. Prevention of performance by an “act of God”, natural disaster,riot, civil commotion, might discharge the contract. The event must be beyond the control of the parties, and not anticipated by them

17. Examples of Frustration/Supervenig Impossibility  Destruction of the subject-matter  Death or Personal Incapacity  Illegality of purpose/Change of Law  Circumstances ceasing to exist  Cancellation of event/Declaration of War

18. Supervening Impossibility not an Excuse Doctrine of frustration will not apply if it still possible to perform the contract. This applies even though it might be much more onerous and/or less profitable to do so.

19. Examples Difficulty of performance Commercial Impossibility Impossibility due to failure of third person Self-induced Impossibility Failure of One of the Objects Strikes, Lock-outs, and Civil Disturbances

20. Consequences of rescission of voidable contract When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he have received any benefit there under from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.'