Introduction
There are many whys for a discharge of contract. Often, a contract makes certain obligations because of one or all parties’ involvement. When the obligation comes to an end, the contract is discharged. The thing is that there are many reasons for which a contract is discharged. To know the reasons, you read the article and take some time.
Discharge by Performance
Suppose the parties come close to a contract to fulfill the obligations arising under the agreement at a particular time and in the manner mentioned. In that case, the contract is discharged by performance.
Example: Peter needs to sell his cycle to John at an amount of Rs. 12,000, which is to be paid by John during the delivery of the cycle. As the cycle is delivered, John spends the amount. As both parties involved in the contract fulfill their obligation to the contract, then the discharge of the contract happens based on performance. Now, the discharge by the performance of the contract can be under two processes:
- Actual Performance—According to the example shown above, actual performance occurs when all the parties connected with the contract finish doing what they agreed to under the contract.
- Attempted Performance – On the other hand, it is possible that when the promisor takes steps to perform his promise, the promisee refuses its acceptance. In such cases, it’s known as attempted performance.
Discharged by Mutual Agreement
If all parties come to a contract mutually to replace the arrangement with a new one or remit annul or alter it, it comes as a discharge of the original contract due to a mutual agreement.
Example: Peter owes Rs. 2,00,000 to John and agrees to repay within one year. Both of them make a document under a contract. But Peter lost his job and requested John to accept Rs. 75,000 as the final settlement. John makes that decision correctly, and both make a contract with full effect. This contract is discharged under mutual consent.
Discharge by the Impossibility of Performance
When the parties can’t perform their obligations in the contract, the impossibility regarding performance leads to a discharge of the contract. If the impossibility starts from the root, it becomes an impossibility ab initio. However, the impossibility comes later due to
- Change in the Law
- Destruction of the subject matter in need of performance
- The non-occurrence or non-existence of a particular state of things is considered a given contract performance.
- A declaration of War.
Example: Peter contracts with John to marry his sister Olivia in a year. But Peter becomes insane due to an accident. In that case, the impossibility of performance leads to a discharge of the contract.
Discharge of a Contract with Lapse of Time
The Limitation Act of 1963 prescribes a period for the performance of a contract. If the promisor fails to take action within the scheduled period, the latter cannot wish to remedy through law. Then, the contract is discharged because of time-lapse.
Example: Suppose Peter takes a loan from John and agrees to pay monthly installments for the next five years. But he does not have a single installment. Then John calls him a few times but gets him busy and takes no action. After three years, he approaches the court in need of help recovering his money, but the court rejects his suit as he has crossed the time limit of three years to claim his debts.
Discharge of a Contract under the Operation of Law
A contract may be discharged by law, including the promisor’s insolvency or death. The causes mentioned below include many more.
(a) Death – Contracts related to personal skills or ability; death terminates the contract. In other cases, liabilities and rights go to the legal representatives of a dead man.
(b) Insolvency—If a person is adjudged insolvent, he is discharged from all liabilities. Under insolvency, the insolvent’s rights and liabilities go to the court’s officer.
(c) Lapse of Time—The contract may be terminated under the rules of lapse time. In civil cases, obligations and liabilities are barred by limitation.
(d) Unauthorised material alteration—If a party alters the terms of a contract materially without the consent of other parties, the contract is recognized as a discharged contract and is no longer enforced.
Discharge by Breach of Contract
When a party to a contract fails to perform his obligation within a specified time frame and place, he is said to have committed a breach of contract.
Even if a party repudiates a contract before the scheduled performance time, he is told that he is committed to an anticipatory breach of contract.
In both cases, the breach comes to the discharge of the contract. For examples,
- It is an actual breach where the promise retains his right in need of action of damages.
- In an anticipatory breach of contract, the promisee cannot file a suit for damages. It even damages the promisor from fulfilling his contract obligations.
Discharge of a Contract by Remission
The promisee can waive or remit the fulfillment of a promise. A promise in a contract, entirely or partly, can also extend the time scheduled for the performance.
Example: Peter repays part of the money to John. John agrees to accept it as the final settlement of the debt. John’s act here is considered a discharge contract by remission.
Discharge by Non-Provisioning Facilities
In contracts, the promisee agrees to give reasonable facilities to the promisor in need of good performance of the contract. If the promisee fails to do that, the promisor comes to be discharged of all liabilities caused by non-performance of the contract.
Example: Peter agrees to clean John’s garage floor. For that, he must leave his car for at least 6 hours. Peter approaches John several times, but John refuses to get out of his car. That means John fails to give him the agreed-upon services to get his car out. Non-provisioning facilities discharge it.
Discharge of a Contract due to the Merger of Rights
In some cases, inferior and superior rights may belong to the same person. In that case, both rights come into play.
Example: Peter takes John’s apartment for rent for two years. After a year, he offers to buy the property from John, and John also agrees to do that. It is a sale contract between Peter and John, and Peter becomes the property owner. Peter has two rights: (a) He goes with a lease agreement as a renter and (b) by the sale agreement, which makes him the owner. The former is an inferior right that merges with the superior one, discharging the lease contract.
When you want to be attached to someone or a company by a contract, you need to be safe and know every drawback and facility mentioned above. Take your time and go through the details.
