Various modes in which a contract may be discharged
Introduction
The discharge of a contract means that when the rights & obligations of the contract come to an end. When discharge occurs, all duties attached with a contract are detached. Discharge of the contract actually is the termination of the contractual relationship between the parties. And there are certain reasons which may discharge the contract. Contract act 1872 provides various modes of discharge of contract
Meaning of Discharge
Discharge of a contract means termination of the contractual relations between the parties of the contract. A contract is said to be discharged when the rights and obligations upon contract come to an end.
Modes of Discharge of Contract
Following are the five modes of discharge of the contract
- By Performance
- By Agreement
- By Impossibility
- By lapse of time
- By Breach of contract
By Performance
Performance is a common mode of discharge of the contract. It is a legal mode of discharge when the parties of a contract perform their duties according to the agreement then contract automatically gets discharge
Following are the two types of performance
Actual performance
When each party of the contract performs his legal duties according to the terms and conditions of the contract. It is called actual performance
Offer of performance
Offer is also equivalent to performance, when one party offers to another party for performance of legal duties according to the terms and conditions of the contract and it depends upon the discretion of the other party who can refuse to perform .
Essential of valid offer of performance
Following are the essential of valid offer of performance
- Offer of performance should be unconditional
- Offer of performance should be at proper time
- Offer of performance should be at a proper place
- Offer of performance must be presented to contractor or his agent
- Offer of performance presented to stranger is invalid offer
By Agreement
A contract can also discharge by the new agreement on the place of old agreement between the parties
Following are the ways of discharge of a contract by agreement
Novation
When the parties of the contract create a new contract in place of the old contract. It is called novation
Kinds of novation
Following are the kinds of novation
Sometime novation changes the party
Sometime novation creates a new contract
Rescission
When all or some of the terms of the contract are canceled. It is called rescission
Modes of rescission
Following are the modes of rescission
It may be by mutual consent of the party
When a party fails to perform his contractual obligation, the other party may rescind the contract
Alteration
When one or more of the terms of the contract are altered by mutual consent of the parties. It is called alteration
Remission
When a party discharges the contract without making a new agreement. It is called remission
Merger
When parties of the contract merge multiple lesser rights into superior rights. It is called merger
By Impossibility
A contract also can discharge by Impossibility of performance. If the act becomes impossible to perform after the formation of contract, in this case contract becomes void
Following are the impossibilities
Initial impossibility
When one or both the parties do not have the knowledge that a promise is impossible to perform even they enter into an agreement
Subsequent impossibility
Sometimes a contract is capable of being performed when entered into. But later on under some circumstances it becomes impossible to perform
Factors of impossibility
Following are the factors causing impossible to performance of the contract
- Destruction of the subject matter
- Death of the person
- Personal incapacity
- Change of the law
- Declaration of the war
- By lapse of time
A contract can also discharge by the laps of time because the contract should be performed within the specified time if it is not performed within the time then it will be discharged
By operation of law
A contract can also discharge by the operation of law
Following are the ways of discharge the contract under operation of law
Bankruptcy
When court declares a person as insolvent (Bankrupt) the contract automatically will be discharged and all rights and obligation will be removed and contract will come to an end
By unauthorized alteration
When one party alters the written terms of the contract without the consent of the other party. In this case contract is discharged
By Breach of contract
Contract can also discharge by breach. When one of the parties fails to perform any term of the contract and does not fulfill his contractual responsibilities, in this case contract is discharged
Actual breach
When a party fails to perform a contract, at that time when performance is needed
Anticipatory breach
An action that shows a party's intention to fail to perform its contractual obligations to another party
Express breach
When one of the parties of the contract clearly refuses to perform a contract, in this case contract gets discharge
Implied breach
When one of the parties of the contract not clearly refuses to perform a contract, in this case contract gets discharge
Conclusion
When the rights and obligations of the contract are removed even by failure of performance , operation of law, breach of contract, by agreement or whatever the reason in above cases the contract gets discharged. Under contract act 1872 there are a lot of reason which may discharge the contract or terminate it by failure of required procedures