MODES OF DISCHARGE OF CONTRACT

1. Discharge by performance
2. Discharge by impossibility of performance
3. Discharge by breach
4. Discharge by mutual agreement

DISCHARGE BY PERFORMANCE
Discharge by the performance is clearly defined in the following sections

SECTION 37 (Obligation to Perform)

 It defines the obligation of the parties to contract
 It provides that the parties to a contract must either perform the contract or offer to
perform the contract.
 It provide that the representatives of the promisors in case of death of promsiors before
performance of contract shall be liable, unless it is specifically denied under the contract.

SECTION 38 ( Refusal to accept offer of performance)

 It deals with effect of refusal to accept offer of performance.
 Offer of performance is also known as tender.
 It provides that when the promisor is willing to perform the contract and he offer to
performs the same, the promisee has a duty to accept the performance of contract. If the
offer of performance is not accepted by the promise, the promisor can not be blamed for
the non performance of the contract.

Essentials of offer of performance/ tender

1. It must be unconditional- The offer of performance must be unconditional. If the

promisor offers to pay only a part of the sum due but says that it should be considered as
a full payment, he is imposing a condition, therefore he cannot be considered to be a valid
offer of performance

Case- Navin Chandra vs Yogendra Nath- In this case the tenant sent two cheques in payment
of rent to landlord. The landlord returned the cheque and insisted payment to be made by cheque.
The landlord then sued him for ejectment on non payment in cash. Then, tenant contended he
make a valid offer of performance, but the court held that it is not valid offer of performance
because the debtor cannot put condition on offer of performace.

2. It should be at proper time and place- The offer of performance should be made at
proper time and place with an opportunity to promisee to ascertain that the promisor will
make proper performance. If the tender is made at the proper time and place as required
 by the contract, and the promisee has reasonable opportunity of examining that the
performance is otherwise in order, it is a valid offer of performance.

Case- Startup vs Macdonald- In this case the plantiff agreed to supply 10 tons of linseed oil to
the defendant. The delivery was agreed to be made within the last 14 days of march. The plantiff
tendered the oil on last day of month on around 9.00 PM. But the defendant refused to take the
oil as it was late in night. It was held by the court that defendant had full opportunity to examine,
weigh and receive oil till 12’o clock and therefore tender is valid.

3. The promise must be given an opportunity to ascertain that the goods are according
to the contract- If the offer is to deliver anything to promise, the promisee must have
reasonable opportunity of seeing that the thing offered is the thing which the promisor is
bound to deliver.
4. An offer of performance to one of the joint promises is a valid offer of performance-
When there are several joint promises, an offer to one of several joint promises has the
same legal consequences as an offer to all of them. It means that when there are more
than one joint promises, on offer of performance to one of them is valid.

SECTION 40
 It states that, “If it appears from the nature of the case that it was the intention of the
parties to any contract that any promise contained in it should be performed by the
promisor himself, such promise must be performed by the promisor. In other cases, the
promisor or his representatives may employ a competent person to perform it.”
 It simply means that if the contract is one which is based on personal confidence,
dancing, singing, marrying etc., it would be apparent that the intention of the parties
would be apparent that it should be performed by the promisor himself and nobody else.
In remaining cases the representative or a competent person can perform it.

SECTION 41
This section states that, “When a promisee accepts performance of the promise from a third
person, he cannot afterwards enforce it against the promisor.”

SECTION 42
This section provides that if two or more persons have made a joint promise , then they should
fulfil the promise during their lifes, or there representatives would be liable to fulfil their promise
after their death.

SECTION 43
  This section provides that when two person makes promise then the promise may compel
any of the person or both of them to fulfil the promise.
 This section provides that in case of joint promisors, each promisor can compel other
joint promisor to contribute equally with himself.
 This section provides that if any of the joint promisors default in the contribution, then
the remaining joint promisors must bear the loss from such default in equal share.

SECTION 44
This section provides that release of one of joint promisors by the promisee does not release
other joint promisors neither does it free the joint promisor so released, from responsibility
towards other joint promisors.

For example- If A,B and C jointly promise to pay D the sum of 3000 rupees. D demands
payment only from A and B. Then in such case A and B can claim the C `s share from him.

DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE

According to the Section 56 of the Indian Contract Act 1872, “an agreement to do an act which
is impossible in itself, such agreement is declared void”. This section deals with initial
impossibility and subsequent impossibility.

1. Initial impossibility- If the contract is unable to be performed the parties to the contract
can never be able to achieve the object and hence such an agreement is void. For example
A agrees with B to discover treasure by magic.
2. Subsequent impossibility- The performance of the contract may be possible at the time
of performing contract but later on because of some event, becomes impossible.

DOCTRINE OF FRUSTRATION
When the performance of the contract becomes impossible, the purpose which the parties have in
mind is frustrated. If the performance becomes impossible, because of a supervening event, the
promisor is excused from the performance of contract. This is known as doctrine of frustration in
English law and is covered under section 56 of the Indian Contract Act.

Case- Har Prasad Choubey vs Union of India- In this case the appellant was the highest bidder
for slack coal belonging to the respondents railways. The appellant made full payment for the
same. When he applied for the wagons for transporting coal to ferozabad. Then the coal
commissioner denied stating that coal should only be used for local purpose. So due to the
impossibility of performance of contract the appellant filed suit to get the payment back and it
was held that it is impossibility to perform under section 56 of Indian Contract Act.

DISCHARGE BY BREACH
When a party having a duty to perform a contract fails to do that, or does an act whereby the
party refuses to perform the contract, there is said to be breach of contract on its part.

The breach of contract may be either (i) Actual i.e. non performance of contract on the due date
of performance. (ii) Anticipatory breach

Anticipatory breach- Anticipatory breach of contract refers to the repudiation of contract by

one party to it before the due date of its performance has arrived.

Section 39 of Indian Contract Act deals with the anticipatory breach, “When a party to a contract
has refused to perform, or disabled himself from performing, his promise in its entirety, the
promisee may put an end to the contract, unless he has signified, by words or conduct, his
acquiescence in its continuance.”

Effect of anticipatory breach of contract- It means that on the anticipatory breach of contract
by one party, the other party has two alternatives open to him.

1. To rescind the contract- On anticipatory breach of contract by the promisor, the

promisee has a right to treat the contract at an end, even though the due date of
performance not arrived.
2. To keep the contract alive- On anticipatory breach of contract, the promisee has the
right to keep the contract alive till the due date of performance.

DISCHARGE BY MUTUAL AGREEMENT

Just as a contract is created by means of an agreement, it can be terminated or discharged by
mutual agreement. If the parties to a contract agree to make a fresh contract in place of the
original contract, the original contract is discharged. A contract can be discharged by mutual
agreement in any of the following ways.

1. Novation- The term 'novation' means the substitution of a new contract for the existing
one. This arrangement may be either between the same parties or between different
parties. The consideration for the new contract is the discharge of the original contract.
2. Rescission- Rescission means cancellation of the contract. If by mutual agreement the
contracting parties agree to rescind the contract, the contract is discharged. A contract can
be rescinded before the performance becomes due. Non-performance of a contract by
both the parties for a long period, without complaint, amounts to implied rescission.
3. Alteration- It means a change in one or more of the terms of a contract with consent of
all the parties. Alteration has the effect of terminating the original contract. In an
alteration there is a change in the terms of a contract but no change of parties to it. In
novation there may be change of parties.