DISCHARGE
OF CONTRACT
It means termination of the contractual
relationship between the parties. In other words, a contract is said to be discharged when it ceases to operate i.e when
the rights and obligations created by it comes to an end.
MODES OF
DISCHARGE OF A CONTRACT
1. BY PERFORMANCE: It implies doing what is mentioned in the
contract. Discharge takes place when the parties fulfil their obligation within
the time and in a manner prescribed in the contract. For eg. A makes a contract to sell his house to B for Rs 1000000
and B pays Rs 1000000 and takes the possession of the house then the contract
deemed to be complete because both the parties have fulfilled their promises.
2.
BY MUTUAL CONSENT
a) Novation: when both parties by mutual consent agree
to make a new contract to replace the existing one b/w the parties, novation is
said to take place. It implies not only a change in the parties to a contract
but also a change in nature of a contract.For
eg. A makes an agreement with B to supply him 500 quintals of rice at Rs
900 per quintal on a certain date but before the date of delivery B wants to
buy 800 quintals of wheat from A at Rs 250 per quintal instead of rice, to
which A agrees.
b) Alteration: parties to a contract have a right to alter
the terms of the original contract by mutual consent. It can be regarding time,
place ,quantity or price etc. For eg.
A promises to supply 3000 mtrs of certain cloth at Rs 10 per metre to B within
3 months. Later A and B makes an alteration in the contract that A will supply
200 mtrs of a superior quality of cloth at another price within 4 months.
c) Remission or waiver: a promise has the right to dispense with or
remit the performance of a promise by the promisor or to extend the time for
performance or accept any other satisfaction instead of performance. Such
acceptance of a lesser or delayed fulfilment of a promise by the promise is
called remission or waiver .For eg A
owes B RS 5000. A pays to B Rs 2000 only and B accepts it satisfactory. Then
the whole debt is discharged.
3.
BY IMPOSSIBILITY OF
PERFORMANCE
a) Destruction of subject matter: when the subject matter
of a contract is destroyed after the contract is made and neither of the
parties to a contract can be blamed for its destruction then the contract
becomes void .For eg a theatre was
booked for a musical performance but there was afire and it was completely
destroyed. The court held the contract as void and released the promisor from
performing.
b) Change of law: if a person makes a contract to perform an
act which is within law when the contract is made but later becomes unlawful
because of change in law or a new law the contract is discharged. For eg. A makes a contract to supply a
particular variety of wood from a forest. After the contract is made a new law
prohibits the cutting of wood from the forest then the contract is void.
c)
Personal incapacity or
death: when the execution of contract is dependant on
the personal skill or qualification of a person then the contract is discharged
on the incapacity or death of that person.
d)
Non- occurrence of an
event: if
a contract is based on the occurrence of an event, the non-occurence of such
event will make the contract void.
4.
BY LAPSE OF TIME
If a contract is to be performed within a
specified time each party to it must perform his promise within that time. On
the completion of the stipulated time the contract is discharged. For eg. If a
debtor does not pay his debt by the agreed date the creditor must file a case
within 3 years and if he does not sue within that period then he loses the
legal right to claim the debt and debtor is not legally bound to pay .
5. BY UNAUTHORISED ALTERATION: when a material
alteration is made in the terms of original contract by one party without the
knowledge and consent of the other then the contract is discharged and can be
avoided.
6. BY INSOLVENCY: If a debtor is declared insolvent under the
provision of law then he is absolved of all obligations under the contract and
contract terminates.
7. BY BREACH: If a party to a contract refuses to perform
his obligation under the contract, or makes the contract impossible to perform
then the other party has a right to repudiate the contract.
BREACH OF CONTRACT
When one party to a contract does not perform
his obligations or expressly refuses to perform the contract ,then it is called
as breach of contract. In the case of breach of contract, the party who refuses
to perform the contract called as defaulting
party and the other party is the
aggrieved party.
TYPES
OF BREACH OF CONTRACT
1)
ANTICIPATORY BREACH(SEC 39)
It occurs before the time fixed for
performance has arrived. In other words, when one party of a contract denies to
perform his obligations before the actual fixed date then it is known as
anticipatory breach of contract. It may take place in two ways:
a)
Expressly by words spoken
or written:
where one party communicates with the other party before the fixed time about
his intention of not performing his duty .For
eg. A contracts with B to supply 100
bags of rice on 1st june but on 31st march A inform B
that he will not be able to supply him the required rice. So this is the
express breach of a contract.
b) Impliedly by the conduct of one of the parties: where a party by his own
voluntary act disables himself from performing the contract. For eg. A person contracts to sell a
particular car to other on 1st june and before that day he sells the
car to somebody else.
2)
ACTUAL BREACH
It may take place in two ways:
a)
On due date of performance :When one party refuses or
fails to perform his part of the contract at the time fixed for performance is
called actual breach. For eg. A
agrees to sell 100 tonnes of wheat to B on 21st march but refuses to
deliver on that date so it is a actual breach on due date of performance.
b) During the course of performance: when one party has
performed one part of the contract and then refuses or fails to perform the
remaining part of the contract then it is called as breach of contract during
the course of performance. For eg. A
agrees to sell 100 tonnes of wheat in two equal instalments on 20 and 21 march.
But after delivering 5o tonnes on 20 march he refuses to deliver the remaining
50 tonnes of wheat.
REMEDIES FOR BREACH OF CONTRACT
1) Exoneration: when one party to a
contract refuses to perform his obligation ie. Commits a breach of contract
then the aggrieved party can assume the contract to terminate and exempted
himself from the further performance. For
eg. If A makes a contract to B to deliver some goods and B promises to pay
him when he will get the goods but then A fails to deliver him the goods so in
that case B can free himself to pay for those goods which he is not getting.
2) Claim for damages: Damages are the monetary compensation allowed
to the aggrieved party by law for the loss or injury suffered by him for the
breach of contract. The aggrieved party can sue for claiming such right under
the contract .For eg. If A promises
to deliver 100 cycles at Rs 1000 each to B on 1st may but does not
perform his promise on that date. In such circumstances if the price of the
cycle on 1st may is Rs 1500 then B is entitled to claim damages at
Rs 500 per cycle from A and can sue for such damages.
Kinds
of damages:
a) General damages: when the contract is broken the natural and
direct loss suffered by the aggrieved party is called ‘general damage’ and the
aggrieved party can claim for such
damages. For eg. A makes a contract with
B that he will procure 50 bags of wheat from B but on the date of delivery B
refuses to deliver and A has to procure the wheat from the open market where he
has to pay Rs 200 more than he would have paid to B for the same quantity. So
the loss of Rs 200 is a general loss and A is entitled to claim the same from
B.
b) Special damages: A loss that arises out of special
circumstances prevailing at the time of breach of contract. For eg. If A contracts with a railway
company to transport fodder to a destination where a cattle fair is going to be
held. He also informs the rail company that the fodder is meant for the cattle
fair. But if the fodder does not reach in time, there will be a special loss to
A. If the delivery is delayed then A is entitled not only to loss he suffers
but can also claim the profit which he would earn by selling the fodder in
cattle fair.
c) Exemplary or Vindictive damages: It is the loss of the
credibility of a party and may hurt the party reputation. The party goodwill is
damaged and there is a emotional shock .For
eg. In a case, Addis vs. Gramophone co., a bank returns a trader cheque
unpaid even when there is enough money in the account holder balance for no
valid reason the bank is liable to exemplary damages because the trader loses his
credibility in trade especially if the amt of the cheque is not large.
d) Nominal damages: when the aggrieved party has not in fact
suffered any loss by reason of breach of contract, the damage recoverable by
him are nominal ie very small.
3) Claim for ‘Quantum Merit’: It means ‘As much as earned’. When one party at the
request of another does something or supplies some goods to the other party and
if the compensation for such goods or services has not been defined at the time
of contract then the law decides what should be the adequate amt of
compensation for such goods, which is called ‘Quantum Merit’. For eg. A promise to construct a
house for B for Rs 50000. After A has started construction but before its
completion B abrogates the contract and stop A from work. In such situation, A
can sue for an adequate compensation for the work that he has already done and
can also sue for damages.
4) Claim for specific performance: In this damages are not
deemed to be an adequate remedy, the aggrieved party can also sue the other
party to carry out his promise. For eg.
A is looking for a house in a particular locality and finds one. He contracts
with the owner of the house to buy but later owner refuses to sell the house to
A. In this case A cannot only claim for damages because damages will not enable
A to have the type of house he wants in the locality. In such situation A can
appeal to the court for the specific performance of the contract.
5) Claim for Injunction: It means an order of the court which
prohibits a person to do a particular act. For
eg. A agreed to sing at B theatre only during the contract period. During
the contract period A make contract with C to sing at another theatre and
refused to perform the contract with B. It was held that A would be stopped by
injunction from singing for C.
