Discharge of contract and methods of discharge of contract.

Discharge of Contact

Meaning of Discharge of contract:

In simple language, we can say that Discharge of contract means Termination of contract or free of contracts from parties’ contractual relationship.

How can Parties Discharge from the Contracts?

The Parties are discharge from the contract but parties need to follows mentioned theory of Discharge of Contract. there is six method if discharge of contract.

Theory of Discharge of Contract:

  1. Discharge by Performance
  2. Discharge by Agreement or Mutual Consent
  3. Discharge by Impossibility or Performance
  4. Discharge by Lapse of the Time
  5. Discharge by Operation of Law
  6. Discharge By Breach of Contract

The above six methods of Discharge of contract let’s explain it one by one.

1. What is the Discharge by Performance:

Discharge by performance means the parties are bound to perform their duties so if parties are completed their duty as per decided or mention as per the contract then both parties can be free or discharged from the contract but only one party performs his duty as per mentioned or decided contract then performed party are discharged from the contract but non perform party is bound to perform his duty. if non perform party are not perform his duty then the perform party gets the interest from the non performed party. and discharge performance may be:

  • Actual Performance
  • Attempted Performance

Actual Performance :

When both parties are performed to the contracts and both parties completed their duties as per the decided or mentioned contract there is an actual performance.

Attempted Performance:

Attempted performance is only an offer to perform the obligation under the contract. When the promisor agrees to perform the contract but the promisee refuses to accept the performance, then in such case, it is termed as the discharge of contract by attempted performance or tender. 

2. What is the Discharge by Agreement or Mutual Consent?

Discharge by agreement or mutual consent mean party can terminate of the contract by mutual consent and agreement there is six type of termination of contract.
1. Novation
2. Rescission
3. Alteration
4. Remission
5. Waiver
6. Merger

Novation: Novation mean when the old contract are going on and then situation standing for new contract then the parties are discharged from the old on going contract.

Rescission: Rescission means when the parties entered into the contract and parties mutually decide to cancel some material of the contract and mutually decide on new agreements then the parties are mutually discharged from the old agreements or contract.
(Rescission- Ref to Cancellation)

Alteration: The alteration of the contract with the consent of the parties. The effect of the alteration is the formation of a new contract.

Remission: One of the parties allows the other to delay or extend the time of the performance or allows to remit in part or as a whole. This means the discharge from the due, a release from the penalty, forfeiture or debt, pardon of transgression, relinquishment of a right, claim or obligation.

Waiver: The term waiver means abandonment of rights. When one party deliberately abandons his right under the contract, the other party is released of his obligations, else binding upon it.

Merger: Merger denotes coinciding and meeting of an inferior and superior right in one and the same person. In such a case, inferior right available to a party under an agreement will vanish automatically.

3. What is the Discharge by Impossibility or Performance?

Discharge by impossibility or performance means when the agreement cannot be complied with in any way by either party then the parties will be free or discharged from the contract.

4. What is the Discharge by Lapse of the Time?

Discharge by Lapse of time mean when as per mentioned or decided time will be spent or lapse then parties can be discharge or free by Lapse of the time.

5. What is the Discharge by Operation of Law?

Discharge by operation law mean when the the parties’ contractual duties are terminated due to the involvement of the law, death, merger, Unauthorized material alteration, etc. then party will be discharge from the contract.  

6. What is the Discharge By Breach of Contract?

Discharge By Breach of Contract mean when parties can not be performed their duty as per decided or mentioned terms of the contract then it will be breach of contract and parties will be discharged from the contract. there is a two type of breach of contract (1) Actual breach of Contract and (2) Anticipate breach of Contract.

(1) Actual breach of contract : When any parties failure to perform their duty during to performing the contract that is a actual breach of contract.

(2) Anticipate breach of contract : When one party before the arrival of the fixed date for performance states that it cannot or will not able to perform material part of the contractual obligation on the specified date or it aims to perform the contract in a way that is inconsistent with the deeds specified in the contract at the initiation.

Reference : Indian Contract Act 1872 pdf

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