Discharge of a Contract under Indian Contract Act
Discharge of a Contract
What does Discharge of Contract mean?
Discharge of a contract means the termination of the contractual obligations between the parties. Once discharged, the parties are no longer bound by the contract, and the contract comes to an end.
Modes of Discharge of a Contract
The Indian Contract Act recognizes several ways in which a contract can be discharged:
1. Discharge by Performance
The most common mode.
When both parties perform their respective obligations as agreed, the contract is discharged.
Example: If A contracts to sell goods to B, once A delivers the goods and B pays the price, the contract is discharged.
2. Discharge by Agreement
The parties can mutually agree to end or modify the contract.
Types include:
Novation: Replacing old contract with a new one.
Rescission: Cancelling the contract.
Alteration: Changing terms of the contract.
Remission: Forgiving part of the obligation.
3. Discharge by Impossibility (Doctrine of Frustration)
When performance becomes impossible due to unforeseen events, the contract is discharged.
Example: If a contract is to sell goods that are destroyed by fire before delivery.
This is covered under Section 56 of the Indian Contract Act.
4. Discharge by Lapse of Time
If the contract is not performed within the agreed or reasonable time, the contract may be discharged.
Also applies if the limitation period to sue expires.
5. Discharge by Operation of Law
Due to legal changes, bankruptcy, or death of parties (in case of personal contracts).
For example, death of a party in a contract for personal services discharges the contract.
6. Discharge by Breach of Contract
When one party fails to perform their obligation, the other party may treat the contract as discharged and claim damages.
Two types of breach:
Actual Breach: Non-performance on due date.
Anticipatory Breach: When a party refuses to perform before due date.
7. Discharge by Tender of Performance
If one party offers to perform their obligation but the other party refuses to accept, the contract can be discharged.
Important Case Laws
1. Hadley v. Baxendale (1854)
Laid down principles for damages for breach of contract.
Breach leading to discharge allows for damages.
2. Taylor v. Caldwell (1863)
Case illustrating impossibility of performance (frustration doctrine).
Contract to hire a music hall was discharged when the hall burned down.
3. Hochster v. De La Tour (1853)
Case on anticipatory breach.
If one party refuses to perform before time, other can treat contract as discharged.
Quick Summary Table:
| Mode of Discharge | Explanation |
|---|---|
| Performance | Both parties fulfill obligations |
| Agreement | Mutual consent to end/modify |
| Impossibility | Performance impossible/unlawful |
| Lapse of Time | Time expired or unreasonable delay |
| Operation of Law | Death, bankruptcy, or legal change |
| Breach | Failure to perform or anticipatory breach |
| Tender of Performance | Offer made but refused |
Checkpoint for You:
Can you think of an example where a contract might be discharged by agreement?
Or what might happen if a party dies during a contract for personal service?
RELATED Blog
0 comments