Discharge of Contract in Indian Contract Act, 1872

In the Indian Contract Act, “Discharge of contract means an agreement which was binding on the parties to it, cease to bind the party, the contract is said to be discharged”.

MODES OF DISCHARGE OF CONTRACT:-
1.] DISCHARGE BY PERFORMANCE.
2.] DISCHARGE BY BREACH OF CONTRACT.
3.] BY IMPOSSIBILITY OF PERFORMANCE.
4.] BY AGREEMENT AND NOVATION.
5.] DISCHARGE BY OPRESSION OF LAW.

1.} DISCHARGE BY PERFORMANCE:- SECTION 37 AND 38
“Each party in a contract is bound to perform his part of obligation. After the parties have made due performance of the contract so their liability in the contract comes to an end. In that case, the contract is said to be discharged by performance” . They are of two types:-
A.} Actual performance – when both the parties perform their obligation in accordance with the terms and conditions of the contract, the contract is discharge.
B.} Tender performance – where a valid tender or contract is not accepted by the other party, the proposal or promisor is said to be discharged.

2.] BY BREACH OF CONTRACT:-
“When party is failed to perform his part of contract is called as breach. There are two consequences of breach. First, the other party is relieved from perform its part of obligation and second, is the one party gets a right to proceed against the party at fault” . They are of two types:-
A.] Actual breach of contract – Non – performance of the contract on the due date of performance. The manner in which actual breach take place is when a party fails to perform, refuses to perform and acts in such a manner that is become impossible to perform.
B.} Anticipatory breach of contract – when a party shows his intention to not performing the contract before the performance of contract is due.

FOR EXAMPLE:- A is to supply certain goods to B on 10st January. On 10st January, A does not supply the goods .A has made actual breach of contract. On the other hand, if A informs B on 31st December that I will not perform the contract on 10st January next, A has made anticipatory breach of contract.
“Neither Minor Breach of contract Nor Minor Irregularity is a Repudiation of contract”

3.] DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE:-
According to SECTION 56 Of ‘Indian Contract Act’ INITIAL IMPOSSIBILITY means “If any act which is impossible to do in itself is void”.
FOR EXAMPLE – If a married man knowing that he cannot marry again without a divorce, if he enter into a contract to marry someone, he is bound to compensate other party for the breach of promise. It is subjected to the polygamy which is forbidden by law so the contract is void.

SECTION 56 is based on the legal maxim, “les non cogit ad impossibilia” which means “the law does not compel a man to do what he cannot possibly perform”.

According to SECTION 56(2) of ‘Indian Contract Act’ SUBSEQUENT IMPOSSIBILITY means “A contract to do any act afterwards become impossible or unlawful, becomes Void.”
FOR EXAMPLE – A contracts to take shipment for B at a International Airport. Suddenly, National emergency imposed in B’s country because of violence. The contracts becomes void.

FRUSTRATION OF CONTRACT-
“When the performance of the contract becomes impossible to do and the purpose in which the parties have in mind is frustrated. If the performance becomes impossible because of any supervening event. The vower is excused from the performance of the contract. This doctrine is known as doctrine of frustration under SECTION 56 of Indian Contract Act”.
In simple language, if the performance of the contract become impossible because of any supervening event. The parties are discharged from their duties and obligations. Restitution is allowed.

SPECIFIC GROUNDS FOR FRUSTRATION / DOCTRINE OF FRUSTRATION IS NOT APPLICABLE:-
1.} DESTRUCTION OF SUBJECT MATTER- “Case Taylor v. Caldwell” In this case it was held that when the contract is not positive and absolute, but subject to an express or implied condition.
2.} CHANGE OF CIRCUMSTANCES- “The doctrine of frustration has been extended only in the cases, where no physical impossibility of performance of the contract, but because there was change in circumstances the adventure was frustrated, or by literal performance of the contract, the main desire or object of the contract could not be fulfilled”. “Case Krell v. Henry”.
3.] NON OCCURRENCE OF CONTEMPLATED EVENT- Happening of event which rendered the contract impossible of performance but not include hard and difficult cases of abnormal rise or fail.
4.] DEATH OR INCAPACITY OF PARTIES– In case of contract based on personal skill or confidence of the parties, the death of a party puts an end to the contract. The representative cannot made liable to perform such a contract. In simple language death of a party or incapacity of a party comes to an end of the contract.
5.] GOVERNMENT OR LEGISLATIVE INTERVENTION- Where, a law promulgated after the contract is made, makes the performance of the agreement impossible, the agreement becomes void. For Example – tobacco industry.

CASES NOT COVERED UNDER DOCTRINE OF FRUSTRATION:-
1.] COMMERCIAL HARDSHIP- “A distinction is drown between the happening of the event which makes the performance of the contract impossible, beyond the control of the promisor, on an event which makes the performance only difficult or more expensive. The nature and terms of the contract may help in deciding whether the performance has become impossible, or merely commercial difficult”.
2.] SELF INDUCED FRUSTRATION- The doctrine of frustration of contract cannot where the event which is alleged to have frustrated the contract arises from the act or election of party.
3.] FAILURE OF ONE OF THE OBJECT- let’s understand that point with illustration. Suppose, you are order five object by the shopkeeper but due to some circumstances the shopkeeper does not send one object among the five objects, so the rejection of order id not lawful and you are not able to say that the shopkeeper has make impossibility of performance.

4.] BY AGREEMENT AND NOVATION:- SECTION 62 AND 63
According to Section 62 of the Indian Contract Act, “The Parties Who Enter into the contract can be allow, NOVATION, RESCISSION, REMISSION AND ALTERATION OF CONTRACT.”
A.) Novation – when the parties of the contract agreed to substitute the existing contract for a new contract, is called novation.
B.) Alteration- “A change or alter in the terms and conditions of the contract with mutual consent of parties. If they do so, their liability has regards the original agreement is extinguished, and in its place they become bound by the new agreement”.
C.) Remission – every promise may remit, wholly or in part, the performance of the promise made to him. No consideration is necessary for remission.
D.) Rescission- It means cancellation of a contract by one or all parties of the contract.
E.) Waiver – The parties can wave the performance by other party.

5.] DISCHARGE BY OPRESSION OF LAW:-
A.) Lapse of time – If the party fails to perform his duties and performance within the time specified, the contract is discharge by non – performance.
B.) Insolvency – “The insolvent is the person who is discharged from liability on all contracts entered into the date of insolvency.” Insolvency not by himself, it is by the court .
C.) Merger – “when inferior right is conversion into a superior right is called as merger.”
D.) Unauthorized material alteration – An alteration which changes the substance of a contract is called a material alteration.
E.) Assignment of Contract – let us understand this point with the help of illustration. A and B are party enter into a contract and C will perform in behalf of B so B has automatically discharged.

Aishwarya Says:

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