7/27/2019 KLE-BL-M8

1/18

Discharge of contract

It means the end of a contractual relationship. Itmay come to an end by the act of the parties or byoperation of law.

A contract may be discharged by any of the

following modes.1. By performance by the parties of their

respective obligations

If the parties o a contract perform theirrespective obligations, the contract is discharged

Eg : A contract between A & B specifies that A hasagreed to sell his house to B for Rs. 2,00,000 Atransfer the house in Bs name and B gives Rs.2,00,000 to A. The contract is discharged.

7/27/2019 KLE-BL-M8

2/18

A contract is entered into for being performed andtherefore the parties must perform their respectiveobligations under the contract. Where a promise or diesbefore performance of a contract, is legalrepresentatives are bound to perform the contract unlessthe very nature of contract is such that it cannot beperformed by legal representatives.

Eg : A contracts to deliver certain goods to B for Rs.1000 on a certain day. A dies before that day A;srepresentatives are bound to deliver the goods to B andB is bound to pay Rs. 1000 to them.

Eg : X promises to paint a portrait of Y for Rs. 10,000 X

dies before performance . The contract cannot beenforced either by Xs representative or Y.

7/27/2019 KLE-BL-M8

3/18

Rules relating to performance of contracts

a) As a general rule the contract must be performed by

the promisor himself according to the terms of thecontract.

In certain cases, it appears from the nature of thecase that the intention of the parties is that the promisehas to be performed by the promisor himself, such

promise must be performed by the promisor himself.Eg : A agrees to paint a picture of B. A alone shallperform

Eg : A agrees to sell goods to B. A may employ anotherperson to sell the goods.

The promisor must offer to perform. If this offer isrejected by the promisee, then the promisor is notresponsible for non-performance. He is entitled to suethe promisee for breach

7/27/2019 KLE-BL-M8

4/18

b) The person who can demand performance isthe perform to whom the promise is made or in

case death his legal representativesc) Where the contract states the time ofperformance, the parties must perform accordingly

Where the contract does not state the time of

performance, the parties must perform within areasonable time

Time is the essence of the contract - If a partyfails to perform on the specified date, the contract

is voidable at the option of the other party

7/27/2019 KLE-BL-M8

5/18

d) Where the contract states the place of

performance, the parties must perform accordingly

e) Subsequent impossibility or frustration in the

following cases, the parties need not perform

1. destruction of subject matter after agreement

but before performance2. death of parties where the personal

performance of the parties is required

3. contract becoming unlawful later

4. subsequent incapacity of the parties

5. enemy alien

7/27/2019 KLE-BL-M8

6/18

f) Performance of joint promises All of them mustperform

Promisee can demand performance from anyone of them

Eg : A, B and C jointly owe Rs 10000 to X. X maycompel either A or B or C to pay the money back

g) Performance of contingent contracts(i) Contract contingent on the happening of aevent

(ii) Contract contingent on the non-happening of aevent

(iii) Events linked with human conduct

7/27/2019 KLE-BL-M8

7/18

2. By mutual agreement to rescind the contract or alter the terms of

the contract or substitute a new contract for the existing one.

Where the parties to a contract agree to substitute a newcontract for it or to rescind or alter it, the original contract standsdischarged.

a) Novation When the parties to a contract agrees to substitutethe existing contract for a new contract, it is called navation.

Eg: A ones a sums of Rs. 1000 to B. B agrees to take Rs 900 form

A instead of Rs. 1000. The old debt for Rs.1000 is extinguishedb) Rescission- When the parties agree to rescind a contract i.e toput an end to contract, the contract is discharged

c) Alteration Where a contract is embodied in a deed makes anymaterial alteration without the contract of the other, the deed shallbe deemed to have been cancelled

7/27/2019 KLE-BL-M8

8/18

3. By remission of the rights by the parties to

the contract.- When a party to a contract gives

up his right under the contract, he is said to have

remitted the contract & the contract is discharged Eg: X agrees to sell his house to Y for

Rs.2,50,000 . Y pays Rs. 2,00,000 and is yet to

pay 50,000 . X gives up his right to claim Rs.

50,000 from Y. The contract is discharged.

7/27/2019 KLE-BL-M8

9/18

4. By subsequent impossibility of performance ofcontract.- When a contract subsequently becomesimpossible of performance, it is said to have beendischarged. The impossibility of performance may

occur in the following circumstances Destruction of subject matter after the agreement but before

the performance

Where the nature & terms of a contract require personalperformance by promisor, his death, serious illness or incapacity will render the contract impossible

Contract becoming unlawful Contract with friendly alien becomes impossible if he becomes

an enemy alien due to the declaration of war.

A contract becomes impossible when the change ofcircumstances has affected the performance of contract tosuch an extent as to make it virtually impossible or extremelydifficult or hazardous

Eg : A contract for erection of a building on a plot ofland becomes impossible if the land is compulsorilyacquired by the Govt

7/27/2019 KLE-BL-M8

10/18

6. By breach of contract ie where a party to

the contract has refused to perform hisliability under it or by his own act makes it

impossible to perform his obligations or

fails to perform such obligations, he is saidto have committed breach of contract.

Breach may be1. Actual (present)

2. Anticipatory

7/27/2019 KLE-BL-M8

11/18

Breach may further be

1. Minor breach

Eg : In a contract for sale of mobile set, a change in the

colour of the chip which is not be seen at all

2. Material breach

Eg : In a contract for sale of mobile set, a change in thecolour of the hand-set

3. Fundamental breach

Eg : In a contract for sale of mobile set, delivering a set

which does not receive calls and from which no calls canbe made

7/27/2019 KLE-BL-M8

12/18

Effect of breach

1. The contract is discharged

2. The party who has already performed or isready to perform has remedy in a court of law

3. The party who commits breach is liable

4. The party who is ready and willing to perform isdischarged of his liability

7/27/2019 KLE-BL-M8

13/18

Remedies for breach of contract

Where a party to a contract breaks his

obligation, a right of action is conferred uponthe other party. The party who suffers from a

breach of contract is called the injured party

He has the following remedies underthe law.

7/27/2019 KLE-BL-M8

14/18

1. Specific performance: It means actual executionaccording to the terms and stipulations of the contract.-

An order for specific performance is an order requiringthe defendant to do the very thing he promised to dowhere the lose suffered by breach of contract cannotbe compensated by damages or where there are nostate to ascertain the quantum of damages, the

aggrieved party may approach the court for grant of adecrees for specific performance of contract

Eg: If a agree to sell his house to B and commitsbreach of contract, B may go to the court for grant ofan order of specific performance of the contract

Eg: A agrees to sell an antique to B. If A commitsbreach B may require specific performance by A

7/27/2019 KLE-BL-M8

15/18

2. Injunction: Injunction is an order of

restraint. If a party to a contract who haspromised not to do a thing, commits

breach of that promise, the court may

issue an order of injunction and refrainthat party from doing that thing.

Eg : A promises to sing in Bs theatre and not to

sing in anybody elses theatre. If A commits

breach and agrees to sing in Cs theatre, B canprevent A from singing in Cs theatre by an

order of injunction

7/27/2019 KLE-BL-M8

16/18

3. Suit for damages: The party who is injured bybreach of a contract may bring an action fordamages ie monetary compensation for the loss

suffered by the injured party due to the breachcommitted by the other party.

Eg : P agrees to deliver 10 tons to rice to Q butdoes not deliver. Q may file a suit for damages

against P

Damages may be

1. Liquidated where the parties themselvesdecide the quantum of damages at the time ofagreement

2. Unliquidated where the quantum is not

decided by the parties, the court will decide.

7/27/2019 KLE-BL-M8

17/18

4. Quantum Meruit: When a contact

becomes void or one party who has

already received advantage under acontract, commits breach, he has to return

back that advantage to the party from

whom he has received it.Eg : A agrees to sell his land to B for Rs 10

lacs. B pays Rs 1 lac as advance. Later A

fails to deliver the house. B is entitled totake back the advance of Rs lac and A is

bound to return it back to B.

7/27/2019 KLE-BL-M8

18/18

Anticipatory breach This arises when one party to acontract renounces the contract before one party to a

contract renounces the contract before the due date ofperformance i.e prior to the promised date ofperformance, promisor signifies his intention not to fulfillthe contract and that he will no longer be bound by it. Insuch a case, the other party need not wait till the date of

performance and then file a suit for breach of contract,the can immediately.

Eg: A promised to marry B after the life time of Bsfather. During the lifetime of Bs father A refused to

marry B and married C. B filed a suit immediately againstA for breach of promise the court held that since A hadcommitted anticipatory breach of performance. B wasentitled to succeed in the suit.