Discharge by Breach of Contract

Discharge by Breach of contract section 39 and 73
Introduction
Discharge of contract under the Indian Contract Act, 1872 means when the
party to the contract fulfills their obligations, the contract is to be executed. It
implies termination of the contractual obligation. The discharge of contract
means that the obligations of the contract come to an end, when the discharge
of course all duties which arose under the contract are terminated. Let us take
for example, person X owes Rs 500,000 to person Y and agrees to repay the
same within one year. The debt owed is documented by the parties by means of
a contract. Subsequently, person X encountered an unfortunate event that
resulted in him losing a job and thereby asking to settle the final amount at Rs
100,000. Person Y accepted the same and thereby the contract between them
had come into effect. This article discusses the aspect of discharge of contract
by means of breach of contract.
What is a breach of contract

Contracts impose a set of performance obligations on all parties to the
agreement. Failure to comply with these requirements of a contract without
legal excuse is called a breach of the contract. Breach of contract is also the
name of a civil cause of action pursued in court against the breaching party.
If a party to a contract does not perform his obligations or expressly refuses to

perform the contract, it is called a breach of contract. In the case of breach of
contract, the party who does not or refuses to perform his obligations is called
the defaulting party. Whereas the other is called an aggrieved party.
Examples for breach of contract-
1. The failure of a party to make payments as required by the

contract: A tenant stops paying the rent.
2. The failure to perform a task or the alleged timeliness of
performance: A painter starts painting in an office building, but does
not finish the job by the agreed-upon completion date.
Various modes of discharge of contract
1. Discharge of contract by performance: Discharge by means of
person involves the obligation of a party coming to an end, at the time
he performs his promise. The contract completely comes to an end by
means of performance of respective obligations by all the parties. This
is termed to be the normal and natural mode of discharging a contract.
2. Discharge of contract by mutual consent or agreement: When every
party involved in an agreement by mutually consenting to discharge
the contract they have entered into, cancels the same or alters its
terms or enters into a new agreement substituted for it, the same is
said to be discharge of contract by mutual consent.
3. Discharge of contract by the impossibility of performance: Discharge of
contract by the impossibility of performing a laid down task in the
contract with reasons for the same being death, illness, or a reason
caused by the other party, is termed to be discharge of contract by the
impossibility of performance.
4. Discharge of contract by lapse of time: If the promisor fails to perform
and the promisee fails to take action in regards to such failed action,
then the latter fails to seek remedy by means of statutory promises.
Thus the contract gets discharged because of a lapse of time.
5. Discharge of contract by the operation of law: The contract is said to
be discharged by the legal operation when the contractual duties of the
parties come to an end due to legal involvement. The term operation of
law can be simplified to mean legal components that are given
automatically.
Section 39 of the Indian Contract Act, 1872 states that if a party to the contract
without a valid or unlawful reason, refuses to perform his obligations under the
contract, the other party has the right to repudiate the contract.
Discharge by breach of contract

There are two types of breach, namely,
1. Actual breach: If a party fails to perform his obligations under the

contract in the stipulated time or refuses to perform such obligation,
then such breach of contract is called as actual Breach.
Example- Vinod promises to deliver flowers to Dheeraj. On the 19th of April,
the appointment day, he refuses to deliver the flowers. In this case, it is an
actual breach.
2. Anticipatory breach/ constructive breach: If a party to a contract,

before the stipulated time of his performance, by word or mouth or by
behaviour makes known or his intention, not to perform the promise. It
is deemed to be an anticipatory or constructive breach of the contract.
Example- If Vinod informs Dheeraj before 19th of April, his intention not to
deliver the flowers and sells the flowers to Trishul before that date it will be a
case of anticipatory or constructive breach of contract on the part of Vinod.
In a situation of anticipatory or constructive breach of the contract, the

aggrieved party has the right to
• Assume the anticipatory breach to be an actual breach of contract and

sue for breach of promise or
• Not to assume the anticipatory breach to be an actual breach and wait
for the performance of the contract on the stipulated date, and sue for
breach of promise if the promisor fails to perform
Remedies available in discharge by breach of

contract to the aggrieved party
1. Cancellation/Exoneration/Rescission
2. Claim for Quantum meruit
3. Claim for injunction
4. Claim for Restitution
5. Claim for specific performance
6. Claim for damages.
• (1) cancellation/exoneration/recession: When one party commits

a breach of contract, the aggrieved party can assume that the contract
is terminated and resend the contract, and is exempted from the
further performance
Example- Suresh makes a contract to sell certain goods to Rajesh for Rs.15,000
and Rajesh promises to make the payment on the delivery of the goods
If Suresh refuses to deliver the goods at the promised time Rajesh can assure
the contract is terminated. In this case, he is freed from his commitment to pay
the amount of Rs.15,000.
Exceptions: where the aggrieved party cannot rescind the contract
i. When the aggrieved party who wants to cancel, the contract has given his
express or tacit confirmation to the contract.
ii. When the contract is in a state of change with the entrance of a third party,
and a third party has, lawfully in good faith, acquired the right of performance
of the whole or part of the contract so the aggrieved party cannot be
exonerated
iii. When the contract is not divisible, the aggrieved party cannot rescind one
part of the contract.
iv. When without the fault of the parties to the contract, the circumstances
change and it is no more possible for the parties to go back to the old state. The
aggrieved party cannot be exonerated from the performance.
• (2) Claim for Quantum meruit: Quantum Meruit literally means “as
much as earned“. When one party at the request of another party does
something or supply some goods to the other party and the
compensation of such goods or services has not been decided the time
of the contract then the law decides what should be adequate
compensation for such goods or services, is called as Quantum meruit
How much or what would be the compensation depends upon the circumstances
of the case of;
Example- A promises to construct a house for B for Rs.1,00,00. After A has

started the construction, but before its completion, B abrogates the contract
and stops A from work in such a situation. A can sue for adequate compensation
for the work that he has already been done, and also sue for damages.
Essentials for the law of quantum meruit to be operative –
i. It is necessary for the contract to be divisible in the sense that it is possible to

estimate the value of the path that has been executed.
ii. It is also essential that the contract is not abrogated by the party, making the
demand for compensation.
Example- A is in a contract to write a book for a publisher. After writing two
chapters, he refuses to complete the book in this case. A cannot claim to be
paid for the two chapters he has written.
• (3) Claim for an injunction: It is a negative order given by the court

that restrains a party from doing something
In the case of Warner Bros. vs Nelson (1937), a film actress agreed to act
exclusively for Warner Bros for a year and for no other producer. During the
year she contracted to act for another producer. It was held that she could be
restrained by injection for doing so.
• (4) Claim for restitution: Section 65 provides that when a contract

becomes void, Any person who has received any advantage under such
contract, is bound to restore it or make compensation for it to the
other person from whom he received it.
Application of claim of restitution- This section applies to contracts that become
void. It does not apply to contracts which are known to be void ab initio.
Example- If Rajesh pays Rs.200 to Suresh to beat Dixit, the money is not
recoverable as the contract is void ab initio.
•(5) Claim for specific performance: when in the case of a breach of

contract, damages or not deemed to be adequate remedy, the
aggrieved party can sue the party in breach to carry out his promise.
This is a direction by the court for specific performance of the contract
at the suit of the aggrieved party.
Example- A agreed to deliver goods to B, On 21st of August 2023.
But backed out to deliver the goods due to which, A will face a huge loss and
also would lose an important client. A can appeal to the court for specific
performance of the contract specific performance shall not be granted in the
following cases:
i) When it relates to personal skill.
ii) Where continuous supervision from the court is required.
iii) When he was ready to perform earlier, but the other party was not ready.
iv) Such an act has a strict ban from law to perform ( eg- lunatic ,insolvent).
-(6) Claim for damages: Damages or a monetary compensation allowed to the
aggrieved party by law for the loss or injury suffered by him for the breach of
contract . The purpose here is to help the party who has suffered a loss to
retain the position. It had before the loss was imposed upon the party by the
breach of contract.
Example- Suresh promises to deliver hundred cycle tyres at Rs.50 each to

Mahesh on 1 May 2020, but does not perform his promise on that date . In such
circumstances, if the price of the tire on 1st May is Rs.55 per the tyre ,
then Mahesh is entitled to claim damages at Rs.5 per tyre from Suresh and can
sue for damages.
Kinds of damages
1. Compensatory damages:
i) General damages- When a contract is broken, the nature and direct loss
suffered by the aggrieved party is called as general damage.
ii) Special damages- A loss that arises out of special circumstances, prevailing
at the time of breach of contract is called a special damages.
iii) Punitive damages- This kind of damages deals with mentary compensation
and is generally provided in cases involving grave disappointment, mental
agony, for example sexual harassment.
2. Nominal damages:
When the aggrieved party has not in fact suffered any loss by reason of the
breach of contract, the damage recoverable by him is nominal i.e very small but
wants to teach a lesson.
Conclusion
As we come to the end of the article, we can understand that discharge of
contract refers to the end of a contractual relationship with the obligations
duties fulfilled by the parties in the contract. In this case the discharge of
contract of cause due to the breach done by the defaulting party and there are
various is available to the aggrieved party. The defaulter can be sued for breach
of damages, injunction, quantum meruit or specific performance. Also, there are
various modes of discharging a contract but the best way to do it is by
performing the promise within the stipulated time and as stated in the contract
by the parties to avoid unpleasant ways.

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Discharge by Breach of contract section 39 and 73

What is a breach of contract

If a party to a contract does not perform his obligations or expressly refuses to

Examples for breach of contract-

1. The failure of a party to make payments as required by the

Discharge by breach of contract

1. Actual breach: If a party fails to perform his obligations under the

2. Anticipatory breach/ constructive breach: If a party to a contract,

In a situation of anticipatory or constructive breach of the contract, the

• Assume the anticipatory breach to be an actual breach of contract and

Remedies available in discharge by breach of

• (1) cancellation/exoneration/recession: When one party commits

Exceptions: where the aggrieved party cannot rescind the contract

Example- A promises to construct a house for B for Rs.1,00,00. After A has

Essentials for the law of quantum meruit to be operative –

i. It is necessary for the contract to be divisible in the sense that it is possible to

• (3) Claim for an injunction: It is a negative order given by the court

• (4) Claim for restitution: Section 65 provides that when a contract

•(5) Claim for specific performance: when in the case of a breach of

i) When it relates to personal skill.

ii) Where continuous supervision from the court is required.

Example- Suresh promises to deliver hundred cycle tyres at Rs.50 each to

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