Performance and Discharge

Discharge

• Discharge usually results from performance but can occur in other ways:

• (1) the occurrence or failure of a condition on which a contract is based,

(2) breach of the contract,

(3) agreement of the parties, and

• (4) operation of law.

Discharge by Performance

• Types of Performance :

– Complete Performance.

– Substantial Performance.

– Performance to the Satisfaction of a Third Party.

– Material Breach

Complete Performance.

• When a party performs exactly as agreed, there is no question as to whether the

contract has been performed. When a party's performance is perfect, it is said to be complete.

Substantial Performance.

• Generally, performance that provides a party with the important and essential benefits of a contract, in spite of any omission or deviation from the terms, is substantial performance.

* Good faith is required

* Willfully failing to comply is a breach of the

contract.

Substantial Performance

• Because substantial performance is not perfect, the other party is entitled to damages to compensate for the failure to comply with the contract.

• The measure of the damages is – the cost to bring the object of the contract into

compliance with its terms, if that cost is reasonable.

– If the cost is unreasonable, the measure of damages is the difference in value between the performance that was rendered and complete performance.

Material Breach of Contract

• A breach of contract is the nonperformance of a contractual duty. The breach is

material when performance is not at least substantial

Performance to the Satisfaction of a Party

When the subject matter of contract is personal, a

contract to be performed to the satisfaction of one of

the parties is conditioned, and performance must

actually satisfy that party.

Contracts that involve mechanical fitness, utility, or

marketability need only be performed to the

satisfaction of a reasonable person.

Performance to the Satisfaction of a Third Party

Courts are divided.

A few courts require the personal satisfaction

of the third party.

A majority of courts require the work to be

satisfactory to a reasonable person.

Time for Performance

• If no time for performance is stated in the contract, a reasonable time is implied.

• If a specific time is stated, the parties must usually perform by that time.

• Unless time is expressly stated to be vital, however, a delay in performance will not destroy the performing party's right to payment.

• When it is construed to be "of the essence," the parties must perform within the stated time period. The time element becomes a condition.

Express and Implied Conditions

• Express conditions are provided for by the parties' agreement. An express condition is usually prefaced by the word if, provided, after, or when.if, provided, after, or when.

• Conditions implied in fact are understood to be Conditions implied in fact are understood to be part of the agreement, but they are not found in the part of the agreement, but they are not found in the express language of the agreement. The court express language of the agreement. The court infers them from the promises.infers them from the promises.

Discharge by Agreement

• Discharge by Rescission

• Discharge by Novation

• Discharge by Alteration

• Discharge by Remissions

Discharge by Rescission

• Rescission is the process by which a contract is canceled or terminated and the parties are returned to the positions they occupied prior to forming it.

• There must be an offer, an acceptance,and consideration.

Example:- A promise to supply certain goods to B six months after date .By that time, the goods goes out fashion. A and B may rescind the contract.

Discharge by Novation A novation occurs when both of the parties to a

contract agree to substitute a third party for one of the original parties.

• The requirements of a novation are as follows:– 1.A previous valid obligation.– 2.An agreement of all the parties to a new contract.– 3.The extinguishment of the old obligation (discharge

of the prior party).– 4.A new contract that is valid.Example:- A owes B RS 10000. H enter into a agrement

with B gives B a mortgage of his (A’s) estate for RS 5000 in place of debt of RS 10000 . This is a neww contract which extinguishes the old one

Discharge by Alteration

Alteration of a contract may take place when one or more of the term of the contract is altered by the mutual consent of the parties to the contract .In this case the old contract is discharged

Example:-A enters into a contract with B for the supply of 100 bales of cotton at his godown by the first of the next month.A and B may alter the term of he contract by mutual consent.

Discharge by Remission

Remission means acceptance of a lesser fulfillment of the promise made, eg acceptance of a lesser sum than what was the contracted for , in discharge of whole of the debt.

Example:-A owes B RS 5000 .A pays to B who accepts in satisfaction of the whole debt RS 2000 paid at the time and place at which the RS 5000 were payable .The whole debt is discharged.