DISCHARGE OF CONTRACT BY MUTUAL AGREEMENT OR CONSENT

Contract

A contract is a legally enforceable agreement that creates, defines, and governs mutual rights and obligations between its participants.

With the following criteria, an agreement becomes a contract:

  1. Consent should be unrestricted.
  2. The parties must be legally capable of entering into a contract.
  3. Consideration should be given following the legislation.
  4. Legal objects should be present.

A contract usually entails the transfer of products, services, or money, or the commitment to do so at a later period.

Discharge of Contract

When the contract’s responsibilities between the parties come to an end, the contract’s obligations are discharged. The contract’s legal validity is likewise terminated. The ‘Termination of Contract’ is another term for contract discharge. The best way to discharge a contract is to follow the contract’s provisions until the conclusion of the contract’s term. A contract can also be discharged in one of six different ways:

  1. By Performance
  2. The contract is considered to be discharged when each of the contracting parties fulfils its promises. It’s referred to as the “natural manner of release.”
  3. By Mutual Agreement Or Consent
  4. “If the parties to a contract agree to substitute a new contract for it, or to withdraw or change it, the existing contract need not be fulfilled,” says Section 62 of the Indian contract of 1872.
  5. By Lapse Of Time
  6. The Limitation Act of 1963 establishes a time limit for contract fulfilment. The contract is dismissed and the promisee is deprived of his legal recourse if the contract is not completed and no legal action is taken by the promisee within the time limit.
  7. By Operation Of Law
  8. A contract can be dismissed by operation of law, which includes the promisor’s insolvency or death, as well as a merger and a court judgement.
  9. By Supervening Impossibility
  10. A contract that was capable of being completed at the time it was put into may later become impossible to perform or illegal. In this instance, the contract is null and invalid.
  11. By Breach Of Contract
  12. Breach of contract is defined as either party’s failure to perform contractual obligations without lawful explanation, resulting in the contract being discharged since it constitutes a ground for contract discharge.

Out of the above-listed numerous ways of discharging a contract, we will pay heed to ‘Discharge of Contract by Mutual Agreement or Consent’ in this article.

Mutual Agreement or Consent

When anything happens by mutual consent, it’s because the people or groups involved have reached an agreement. The contracting parties are not required to perform the contract if they have mutually agreed to discharge it.

Discharge of Contract by Mutual Agreement or Consent

Following are the ways by which the contracting parties may mutually agree to discharge the contract:

  1. Novation
  2. Rescission
  3. Alteration
  4. Remission
  5. Waiver
  6. Merger

Novation

Novation is the process of replacing an existing contract with a new one after the contracting parties have reached an agreement. One of the original contracting parties is replaced by a wholly new party that assumes the original party’s rights and obligations. The discharge of the old contract is the new contract’s consideration.

Rescission

Rescission occurs when the parties to a contract agree to dissolve the contract, rendering it null and void and rendering it no longer legally binding. The courts have the power to release non-liable parties from their contractual duties and, when practicable, will endeavour to put them back in the position they were in before the contract’s signing. Only the existing contract is cancelled in the case of rescission, and no new contract is created in its stead. It is, in essence, the cancellation of a contract and the unwinding of a transaction.

Alteration

The word “Alteration of Contract” refers to the modification of a contract’s terms or a change in one or more of the contract’s provisions. The impact of changing a contract is that a new contract is formed, and both parties must adhere to the new contract’s requirements. If the parties desire to change or modify the contract’s terms, they must do so either by express consent or by necessary inference, which would contradict the idea of ‘Acceptance Sub Silentio’. Contractual parties do not change, and it is only deemed valid if it is done with the permission of all contracting parties.

Remission

Accepting a lesser amount or degree of performance than what was contracted for in full discharge of the contract is referred to as remission. As a result, it generally means that one of the parties allows the other to postpone or prolong the performance period, or to remit in part or whole. This is a release from a debt, penalty, forfeiture, or debt, forgiveness for transgression, or relinquishment of a right, claim, or obligation.

Waiver

A waiver is defined as the voluntary abandoning or surrender of a right, privilege, or right under a contract. It is a legally binding provision in which one party to a contract agrees to voluntarily abandon a claim without exposing the other to liability. A contracting party can abandon (waive) his contractual rights. The other party is then released from their responsibilities. It usually takes the form of writing.

Merger

When a party’s existing inferior right in respect of a subject matter merges with a newly acquired superior right in respect of the same subject matter, the earlier contract providing the inferior right is discharged by merging.

Conclusion

The primary goal of getting into a contract is to see it through to its conclusion. However, not every contract will meet its objectives. It is not rare for a contractual relationship to end in the middle of its performance, without having achieved its goal, and this is referred to as Discharge of Contract. The best way to discharge a contract is based on performance because this way both parties follow all of the contract’s terms before proceeding with its discharge, whereas discharge by the breach is the most unpleasant way to release the parties from their obligations because it also results in damages.

References

  1. https://www.upcounsel.com/explain-discharge-of-contract
  2. https://www.indiafilings.com/learn/discharge-of-contract/#:~:text=The%20discharge%20of%20the%20contract,the%20termination%20of%20the%20contract.

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