Q2. What do you mean by discharge of contract? What are the various ways in, which a contract may be discharged? Or explain illustrate various modes in which a contract may be discharged.
DISCHARGE OF CONTRACT
Discharge of a contract means to get free from the obligation and rights created by law under a contract. When two parties enter into an agreement, one party has to do something or to perform an act for the other party. The performance of such act is obligation for the one party and is a right for the party for whom such act or thing is done. So discharge of contract means to put to and end all the obligations and rights created by the contract.
MODES OF DISCHARGE
- BY PERFORMANCE:
When all the parties to a contract perform their part of obligations according to the way prescribed or required by law the contract is said to be discharged by performance.
A agrees to sell horse to B for Rs 50,000. Under this contract when B will pay Rs 5000 to A and A will over the horse to B, the contract will be discharged by performance.
- BY MUTUAL CONSENT:
When the parties to a contract by mutual consent agree to substitute a new contract for the old one or rescind it or alter it, the original contract need not be performed and parties are discharged from their part of obligations. This discharge may be in any one of the following ways:
When the parties to a contract substitute a new contract for the old one it is called novation. Under novation parties to the contract may be charged.
When any condition of the contract is changed, it is called alteration of the contract.
Rescission means cancellation of the terms of the contract. When any one or all the terms of the contract are cancelled, it is called the rescission of the contract and it discharges the parties from the obligation of the original contract.
Remission means it leave wholly or a party of the performance at the contract something the promisee himself dispenses or remits the performance of the contract or gets satisfaction other than its performance is called remission of contract.
- By Waiver:
Sometimes the promisee himself waives his right to the contract and promisor is released from his part of obligations.
- BY LAPSE OF TIME
A contract must be performed with in a prescribed time and manner. If it is not performed, the injured party should bring suit within the time performed by the limitation act for breach of contract.
“A” took loan from “B”. the last date of repayment of loan has expired but “B” filed no suit for 3 years. “A” is discharged from his liability.
- BY BREACH OF CONTACT
When any of the parties to a contact fails to perform its part of obligation, it is said to be breach of the contract. In case of breach of contract, the injured party has not only the right to claim for damages but is also discharged from its parts of obligation.
- BY OPERATION OF LAW
A contract may be discharged by operation of law in any of the following ways.
- By Death:
When the performance of the contract depends on the personal skills of the promsior and he dies the legal representatives of the promises are discharged from obligation.
- By Unauthorized Alteration:
When a written contract is alterted in its material part without the mutual consent, law discharges the contract.
- By Insolvency:
When any one of the contracting parties is declared insolvent by court, he is released from all his debts payable to others.
d. By Merger:
When a smaller contracts is merged intro larger contract (as the higher security is accepted at the place of lower security) the smaller contract is discharged by law.
- By Impossibility:
When the performance of the contract is impossible, the contract is said to be void and parties are discharged from the part of obligation.
- VOID CONTRACT
When any contract is declared by law void, the parties such contracts are discharged form performance. For example case of wagering contracts and contracts in restraint of trade marriage. The parties are discharge without performance of the contract.
- VOIDABLE CONTRACT
When the person at whose option contract is void able rescinds the performance, the other party is discharged from obligation.