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    Discharge of Contract FINAL

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    Ravikant Sharma
    A contract is a legally binding agreement between two or more parties. For a contract to be valid it must have an offer and acceptance, consideration, lawful purpose, and certainty of terms. A contract can be discharged through performance of obligations, agreement or consent of the parties, impossibility of performance, lapse of time, operation of law, or breach. Discharge by performance occurs when all parties fulfill their contractual duties. Discharge by agreement happens when parties mutually agree to cancel or modify the contract terms. Impossibility of performance voids a contract if unforeseen events prevent its completion. Breach allows parties to terminate their duties if one side fails to comply with the contract.

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    Discharge of Contract FINAL

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    Ravikant Sharma
    553 views6 pages
    A contract is a legally binding agreement between two or more parties. For a contract to be valid it must have an offer and acceptance, consideration, lawful purpose, and certainty of terms. A contract can be discharged through performance of obligations, agreement or consent of the parties, impossibility of performance, lapse of time, operation of law, or breach. Discharge by performance occurs when all parties fulfill their contractual duties. Discharge by agreement happens when parties mutually agree to cancel or modify the contract terms. Impossibility of performance voids a contract if unforeseen events prevent its completion. Breach allows parties to terminate their duties if one side fails to comply with the contract.

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    A contract is a legally binding agreement between two or more parties. For a contract to be valid it must have an offer and acceptance, consideration, lawful purpose, and certainty of terms. A contract can be discharged through performance of obligations, agreement or consent of the parties, impossibility of performance, lapse of time, operation of law, or breach. Discharge by performance occurs when all parties fulfill their contractual duties. Discharge by agreement happens when parties mutually agree to cancel or modify the contract terms. Impossibility of performance voids a contract if unforeseen events prevent its completion. Breach allows parties to terminate their duties if one side fails to comply with the contract.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    553 views6 pages

    Discharge of Contract FINAL

    Uploaded by

    Ravikant Sharma
    A contract is a legally binding agreement between two or more parties. For a contract to be valid it must have an offer and acceptance, consideration, lawful purpose, and certainty of terms. A contract can be discharged through performance of obligations, agreement or consent of the parties, impossibility of performance, lapse of time, operation of law, or breach. Discharge by performance occurs when all parties fulfill their contractual duties. Discharge by agreement happens when parties mutually agree to cancel or modify the contract terms. Impossibility of performance voids a contract if unforeseen events prevent its completion. Breach allows parties to terminate their duties if one side fails to comply with the contract.

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    The key takeaways are that a contract is a legally binding agreement between two or more parties and it discusses the essential elements of a valid contract as well as different ways a contract can be discharged.

    The essential elements of a valid contract are offer and acceptance, lawful consideration, capacity of the parties, free consent, and lawful object.

    A contract can be discharged through performance, agreement or consent of the parties, impossibility of performance, lapse of time, operation of law, and breach of contract.

    CONTRACT:

    A contract is a legally binding agreement between two or more persons. For example, if someone purchase any goods, borrow money, order goods or machinery from a manufacturer, or sign up for a telephone plan, buy a house, these all are different types of contracts.

    ESSENTIAL ELEMENTS OF A CONTRACT:


    Minimum two parties: There are at least two parties one is the promisor or offeror who makes the offer and other is the acceptor who accepts the offer for enter into a contract. Offer and acceptance: There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement. Without these no such contract can be made. Both offer and acceptance should be legal. Legal obligations: Both the parties must be mean to create a legal obligation. The agreement required to be enforced should consider legal relations between the parties to it. Lawful consideration: A contract is basically an agreement between two parties, each receiving 'something' of value or benefit to them. This 'something' is described in law as 'consideration'. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought.. Lawful object: The objective of the contract or agreement must be lawful. If the agreement is illegal, immoral, fraudulent, cause injury to the person or property of another or opposed to public policy it will be comes under unlawful contract. Certainty and possibility of performance: The norms and condition of a contract must not be unclear or uncertain. If an agreement is unclear and its meaning cannot be determined then it cannot be enforced.

    DISCHARGE OF CONTRACT:
    Discharge of contract can be defined as termination or end of the contractual relationship among the parties. When the rights and the responsibilities arise out of a contract is extinguished then the contract can be said that it is discharged or terminated. It can be discharged either by the acts or the concerned of the parties or by the operation of law. Act of parties can be of different forms like performance, agreement, breach, etc. whereas operation of law includes death, insolvency, etc. Or in other words Discharge of a contract is related to the circumstances or the situations in which the contract or agreement is brought to an end. Where a contract is discharged, each party gets untied from their continuing obligations under the contract. According to Saha (2012) The contract gets discharged when the agreement between the parties get terminated. The most enviable or desirable case is when the contract gets terminate when it is completely performed with all its terms under which it is created is carried out.

    THE CONTRACT CAN BE DISCHARGED:

    By Performance By Agreement or consent By Impossibility of performance

    By Lapse of time
    By Operation of law By Breach of contract
    DISCHARGE BY PERFORMANCE:
    By performance it means doing of the things which is required by the contract. It takes place when the parties involved in the contract accomplish their responsibilities or obligations arising under the contract within the given time and in the prescribed manner. In this case the parties get discharge and the contact comes to an end. If only one party performs or accomplishes the promise then the party gets discharged and has the right to take the action against the other party who is considered guilty of breach. It can be by actual performance or by attempted performance or tender: Actual Performance is when the parties perform their assigned promises then the contract gets discharged. It should be complete precise and as per the terms of the agreement. Tender or attempted performance is not an actual performance but it is only an offer to perform an obligation under the contract. When the promisor offers to perform his obligation to the other party but the other party i.e. promisee refuses to accept the performance, it is equivalent to actual performance.

    DISCHARGE BY AGREEMENT OR CONSENT:


    As the parties are bind with the agreement, so by their further agreement or consent the contract may be terminated. Following are the type of discharge by agreement or consent:

    Novation: It takes place in two conditions;

    When the new contract is substituted for an existing one between the same parties. When the contract between the parties got cancelled in consideration of new contract being entered into the same terms. Rescission: It takes place when the parties involved in the contract may decide that they will forget the contract and will not bring a new contract into existence to replace it. It becomes the mutual consideration to discharge of contract. Alteration: It takes place when one or more of the terms of contract get altered be the mutual consent of the parties. In such case the old contract is discharged.

    DISCHARAGE BY IMPOSSIBILTY OF PERFORMANCE:


    If an agreement contains an undertaking to perform a certain act which is impossible, it is void ab initio. Impossibilities are of following types: 1. Inherent impossibility (Impossibility existing at the time of agreement): According to Sec. 56 an agreement to do certain act which is impossible in itself is void. e.g. A promises to pay B Rs. 40000 if B discovers treasure by magic. This agreement is void. 2. Subsequent impossibility (Impossibility arising after the formation of contract): A contract which was capable of performance when it originates but later its performance become impossible due to change of circumstances is known as become void by supervening or subsequent impossibility. Subsequent impossibilities are of following types: a) Destruction of subject matter of contract: When the subject matter of contract is destroyed for no fault of the promisor, the contract becomes void. E.g. A agreed to give his car to B for Rs 200000 on a certain date. But before the date the car got stolen. In this case A is not liable to B as the subject matter i.e. car was destroyed for no fault of him. b) By death or incapability of the parties: Death or physical disablement of any of the parties of the contract renders the contract void. E.g. A contracts to sing in the birthday party of B. But before the date of the party A dies. The contract becomes void. c) Subsequent illegality: By change in the laws of the country if the act of the contract becomes illegal, the parties are absolved from liability to perform it.

    d) Declaration of war: If war is declared between two countries after the formation of the contract, the parties would be exonerated from its performance. e) Non-existence of a particular state of things: When certain things necessary for performance of the contract becomes impossible the contract becomes void. E.g. A and B contracts to marry each other on certain dat. But before the date of the marriage B gets mad. The contract becomes void.

    DISCHARAGE BY LAPSE OF TIME:


    According to the Limitation Act (1963), a contract should be performed within a specific period called period of limitation. If no action is taken by the promisee within the period of limitation, he is deprived of his remedy at law.

    DISCHARGE OF CONTRACT BY OPERATIONS OF LAW:


    A contract may be termed as discharge by operations of law, when there is unauthorized alteration in contract or death of promisor or by the insolvency or by merger between the same parties. 1. By death: A contract may be discharge by death when there is a promise made by the promisor to render the personal service involving the personal skills and ability. 2. By insolvency: Under the certain circumstances the insolvency Acts provide discharge of contract. Where an insolvency court pass the order of discharge of contract and the insolvent is set to be free from liability of all debts he has incurred previously to his adjudication. 3. By merger: When the same parties entered into the new contract and mutually agree to merge the previous contract into the new contract. 4. By unauthorized alteration of terms of a written document: Discharge of contract takes place when one of the concerned parties alters the terms of the contract without the permission of the other concerned party (Tulsian, 2007).

    BY BREACH OF CONTRACT:
    Breach of contract means breaking the obligation impose by the contract. It usually means that one of the parties has either without lawful excuse or impliedly refused to perform their part of contract. Breach of contract may arise in two ways a) Anticipatory breach of contract: When one of the party deny or reject their obligation to perform future promise and in such a case the innocent party is entitled to cancel the contract and can also sue the promisor for the breach of contract. When the promisor refuse to complete the promise in that case the promisee may cancel the contract and treat it as an end of contract and can sue the promisor for damages. The promisee may also

    choose not to cancel the contract but believe that contract is still operative and wait for the time of performance and then hold the liable party for the consequences of nonperformance. The contract is discharge only when the both the party accepts the cancelation of the contract i.e., electing to cancel the contract, notice that if repudiation is not accepted and later an event happen then discharging the contract is legal and the other party lose his right to sue for damages (Gulshan & Kapoor, 2013). b) Actual Breach of contract: Actual breach of contract occurs where either of the party involve in contract refuse to form his side of negotiate on the date or not performing at all. 1. Actual breach of contract, at the time when performance is due: If a person does not complete his part of contract at the stipulated time he will be liable for breach of contract. Time 2. Breach during the performance of the contract: Actual breach of contract may also take place during the performance of the contract and any one party fails or refuses to perform his obligation under the contract (Dr. Sharma, 2010)

    REMEDIES FOR BREACH OF CONTRACT:


    Remedies are the measure or enforcement of right, which either of the parties can take it against the other party who has broken the contract. Following are the remedies: 1. 2. Rescission of the Contract: When a contract is broken by either of the party, the innocent party can sue the other party for not performing. Damages for the loss suffered: Damages are the monetary compensation given to the injured party to bring him in the position where he would have been if contract had not broken. Specific Performance: In certain cases of breach of a contract, damages are not an adequate remedy. The court may, in such cases, direct the party in beach to carry out his promise according to the terms of the contract. Quatum meruit: Quantum meruit means as much as earned. A right to sue on a quantum meruit arises where a contract, partly performed by one party has discharged by the breach of the contract by the other party. Injunction: Where a party is in breach of a negative term of a contract (i.e., where he is doing something which he promised not to do), the court may, by issuing an order, restrain him from doing what he promised not to do (Gulshan & kapoor, 2013).

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    REFERENCE:
    Saha, S. 2012. Indian Contract Act [online] [Cited on 1 Oct 2013] Available at URL:http :// www.preservearticles.com/2012012621529/short-notes-on-discharge-ofcontract-consiquency.html/> Singh, S. 2012. Indian contract act (online) (Accessed: 1 Oct 2013) Available at:URL: http://www.preservearticles.com/2012012621529/short-notes-on-discharge-of-contractconsiquency.html>/ Gulshan, S.S. & Kapoor, G. K. (2013) Businness law including Company law, New delhi, New Age International (P) Limited, Publishers Sharma, A. (2010) Business Law, New Delhi, V.K. (Inida) Enterprises Tulsian, P. C. (2007) Business and Industrial Law, New Delhi, Tata McGraw-Hill Publishing Company Limited.

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