Discharge of Contract under the Law of Contract in Pakistan: A Critical

Appraisal

Amr Ibn Munir

Abstract

This paper discusses what do we mean by discharge of contract? How can a contract be

discharged? Can a contract be discharged by performance? What do we mean by breach of

contract? What do we mean by repudiation? What do mean by simultaneous obligations? What is

fundamental breach? What is anticipatory breach? What other ways can a contract be discharged?

Can a contract be discharged if it becomes null and void? Can a contract be discharged if it is

frustrated? Can contingent contracts which fail be considered to be discharged? Can it be

discharged by the principle of time is of the essence? What do we mean by novation of a contract?

What do we mean by discharge of contract by agreement? Can discharge of contract by agreement

be both express or implied? The main findings of this paper are that discharge of contract means

to end it or to terminate it or to extinguish it. There are many ways of terminating a contract, such

as performing the terms and conditions in the contract, or by breaching the contract by not

performing the terms and conditions stipulated within or by substituting it with a new contract or

by rescinding it or altering/modifying it. A breach of contract means to violate the terms of the

contract or not honouring the terms or conditions of the contract, thus not fulfilling your obligations

and thereby breaching the contract. A repudiation of a contract occurs when a party intimates by


LLB student at the Department of Law, International Islamic University, Islamabad. Email:
[email protected].
He is very thankful to Dr. Asim Cheema, Senior Research Officer, Lahore High Court for providing substantial
caselaw.

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words or conduct that he does not intend to honour his obligations when they fall due in the future.

Simultaneous obligations refer to those obligations in a contract that have to simultaneously

fulfilled by both parties at the same time. Fundamental breach of contract refers to when a party

to a contract is discharged from all obligations of the contract should the other party commit a

fundamental breach of contract without repudiating his obligation either expressly or implicitly.

An anticipatory breach refers to where a contract is to be performed at a future date and before the

time for performance arrives, one of the parties gives notice to the other party that he is not willing

to perform his part of the agreement. A contract can be discharged when it becomes null and void,

or it was void ab initio or if it was rescinded by the innocent party when it became voidable.

Contingent contracts can be discharged when the event it is contingent on does not occur. Novation

of a contract simply refers to substituting the original contract with a new one, thereby terminating

it. Other ways of discharging include by altering/modifying, by frustrating the contract, by

rescinding it or by both parties agreeing either expressly or implicitly that the contract shall be

discharged. The contract can also be discharged if there is a time limit added to the stipulation and

the same is not performed. The methodology used in this paper is doctrinal.

Keywords:

Discharge, Performance, Breach, Fundamental Breach, Anticipatory Breach, Frustration, Void,

Voidable, Void Ab Initio, Contingent

Introduction

This paper discusses what do we mean by discharge of contract; how can a contract be discharged;

can a contract be discharged by performance; what do we mean by breach of contract; what do we

mean by repudiation; what do we mean by simultaneous obligations; what is fundamental breach;

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what is anticipatory breach; what other ways can a contract be discharged; can a contract be

discharged if it becomes null and void; can a contract be discharged if it is frustrated; can it be

discharged by the principle of time is of the essence; can contingent contracts which fail be

considered to be discharged; what do we mean by novation of a contract; what do we mean by

discharge of contract by agreement; can discharge of contract by agreement be both express or

implied; The methodology used in this paper is doctrinal.

Discharge of Contract

Discharge literally means to “to liberate or free; to terminate or extinguish.”1 It is “the act or

instrument by which a contract or agreement is ended.”2 Hence, to discharge a contract means to

end it, to terminate or extinguish it. Thus, when we say, that a contract has been discharged, we

mean to say that the parties of the contract have been discharged of their respective liabilities or

obligations in the contract, that is to say they are no longer bound by the terms and conditions of

the contract. There are many ways of discharging a contract. It can be discharged by the parties

performing the contract, that is to say, if the parties were to perform the terms and conditions

stipulated in the contract, then the contract shall be completed and thus it shall have been

discharged. Another way of discharging a contract is if the contract becomes null and void, that is

to say, it comes unenforceable or of no legal effect. In such a case, a contract would have been

discharged. We shall discuss all of these aspects hereinbelow.

Performance of the Contract

As briefly discussed hereinabove, if the parties of the contract perform the terms and conditions

stipulated in a contract, then the contract would be discharged. The parties to a contract are

1
West’s Encyclopedia of American Law, (Thomson Gale, 2nd ed., Vol. 3., 2005), p. 446.
2
Ibid.

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obligated to perform their contract as the same is binding on them. Section 37 of the Contract Act

1872 (hereinafter referred to as the “Act”) provides that

“The parties to a contract must either perform, or offer to perform, their respective

promises, unless such performance is dispensed with or excused under the provisions of

this Act, or of any other law. Promises bind the representatives of the promisors in case of

the death of such promisors before performance, unless a contrary intention appears from

the contract

Illustrations

(a) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before

that day. A’s representatives are bound to deliver the goods to B, and B is bound to pay the

Rs. 1,000 to A’s representatives.

(b) A promises to paint a picture for B by a certain day, at a certain price. A dies before the

day. The contract cannot be enforced either by A’s representatives or by B.”

Thus, the parties of the contract are obligated to perform or are obligated to at least offer to perform

their respective obligations in the contract unless such obligations have been dispensed or excused

under the provisions of the Act or of any under law in force in Pakistan.3 Should one of the parties

face a sudden demise before the performance of the contract, then those same obligations of the

contract are now imposed on the representatives of the demised party, provided that there is no

contrary intention provided in the contract itself.4 This includes cases where the estate of the

deceased are passed down to the legal representatives where a pecuniary obligation arising out of

3
See, Rehman Feeds (Pvt.) Ltd. v. Agricultural Development Bank of Pakistan, 2001 YLR 2240 [Karachi], 2251.
4
See, Agricultural Development Bank of Pakistan v. Sanaullah Khan, 1988 PLD Supreme Court 67, at para 11. See
also, Messrs Qasim & Co. v. Messrs Bolan Bank Limited, 2001 YLR 1955 [Quetta], 1964.

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such a contract by a deceased party will bind his legal representative to the extent of the estate of

the deceased coming to his hands.5

A contract must be performed. A party cannot walk out of a contract or reject the contract unless

the other party also consents to the same.6 A contract cannot be cancelled by one of the parties

without providing any show-cause notice or prior intimation to the other party and without any

coherent reason justifying the same.7 Political pressure is not a sufficient excuse for one of the

parties to cancel the contract.8 Performance of the contract is required by both parties.9 Merely

signing by one of the parties of the contract shall not make it enforceable.10 A person cannot escape

from his obligations of the contract due to any sort of events or activities happening outside the

contract area especially when the same is not mentioned in the contract or is even relevant to the

contract in question.11

An obligation must be fulfilled by the party themselves if that is what the intention of parties were

and what the nature of the contract itself entails, otherwise, if this is not the case, then the party or

his representatives may employ another person to fulfill the obligation provided he is competent

to do so. This is incorporated within Section 40 of the Act which provides 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,

5
Ibid. See also, Nazeer Ahmad v. House Building Finance Corporation, Karachi, PLD 2005 Lahore 228, at para 5.
6
See, Haji Mehboob Ali Bhayo v. Junaid Ahmed Soomro, 1986 CLC 987 [Sind Election Tribunal], at 898.
7
See, Qurban Ali Shaikh v. Province of Sindh, 2009 YLR 1575 [Karachi], 1577.
8
Ibid.
9
See, Sher Shah v. Muhammad Suleman, 2013 YLR 1017 [Lahore], at para 6.
10
Ibid.
11
Muhammad Ibrahim v. Province of Sindh, 2016 YLR 2393 [Sindh], at para 13.

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 such promise must be performed by the promisor. In other case, the promisor or his

representatives may employ a competent person to perform it.”

Should the other party accept the fulfillment of the obligation by the appointed third party, then he

cannot try to enforce it against the first party later on. This finds force in Section 41 of the Act

which provides that “when a promisee accepts performance of the promise from a third person, he

cannot afterwards enforce it against the promisor.”.

In “Lakhsman Mandal v. Moslem Uddin Sardar’ having died, his heirs and legal representatives

Shamsul Huda, minor”12, where there was a suit for specific performance for the reconveyance of

the land from the appellants who were the legal heirs of the original party. The respondents opposed

the same with one of the grounds being that the assignees of the parties to the reconveyance

contract could not enforce this suit as the right was personal to the original parties of the document.

The court rejected this view, citing that as a general rule, the benefits of a contract are assignable

subject to any contrary intention exhibited in the contract or in the document itself in terms of

Section 40 read with Section 23(b) of the Specific Relief Act 1877.13

In a case where the supply of natural gas, electricity and telephone connection was cut off due to

clause in the contract which stipulated that all of these will be cut off as soon as the property is

sold to a third person, the court held this clause was illegal and should be struck down.14 The court

also held that this clause cannot be construed to as to arm the supplier with a sword to disconnect

the supplies of essential services to the customer nor can the supplier use the same as a shield to

defend the illegal disconnections.15 In an oral contract for a sale of land, where a suit of specific

12
PLD 1958 Dacca 336.
13
Ibid, 340.
14
Sui Northern Gas Pipelines Ltd. v. Muhammad Sarwar, 2011 YLR 258 [Lahore], at para 3.
15
Ibid.

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performance was instituted by one of the parties and the property was bought by a third party from

the ostensible owners, the court held that the purchasers had bought the said land for

consideration and ‘in good faith’ in terms of section 41 of the Act and Section 23(b) of the

Specific Relief Act 1877.16

The promisee has the discretion to either cancel the obligation either wholly or partly of the

promisor or to extend the time for the fulfillment of such obligation or even accept the

fulfillment of such obligation if it is to his satisfaction.17 This is incorporated within Section

63 of the Act which provides that “every promisee may dispense with or remit, wholly or in part,

the performance of the promise made to him, or may extend the time for such performance, or may

accept instead of it any satisfaction which he thinks fit.” In “Mutthaya Maniagaran vs Lekku

Reddiar”18, the court held that “section 63 does not entitle a promisee, for his own purposes and

without the consent of the promisor to extend the time for performance which had been agreed to

by the parties to the contract.”19 This observation is laudable to a certain extent. While section 63

does not entitle the promisee to extend the time of performance for his own purposes but upon

plain reading of the provision itself, it becomes clear that there is no mention of the promisor’s

consent being necessary for the promisee to extend such performance. However, the judge may

have been applying the principles of equity and must have seen that this provision applies to

situations in which the promisor has already failed to perform their promise and thus their consent

16
See, Muhammad Shafiq Ullah v. Allah Bakhsh (Deceased), 2021 SCMR 763, at para 8.
17
See, Hoosen Brothers Ltd. v. Pakistan Textile Mills Ltd., PLD 1954 Sindh 1, 18. See also, Karachi Gas Co. Ltd. v.
Dawood Cotton Mills Ltd., PLD 1975 SC 193, 205, Mian Salim-Ud-Din v. Pak Wheat Products Ltd., 1988 CLC
2147 [Lahore], at para 19, Muhammad Yousuf v. Badruddin Ahmed, 2007 CLC 427 [Karachi], at para 25,
18
(1914) ILR 37 Mad 412.
19
Ibid, at para 2.

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must be acquired for any extension of performance to see whether they are willing and have the

ability to carry out their promise in the first place, in which case, the court’s observation is correct.

A similar observation was also made in the cases of “Abdul Jalil Chowdhury v. The Muhammadi

Steamship Company Ltd.”20 and “Messrs MSC Textiles (Private) Limited v. Asian Pollux”21 and

also in the concurring opinion of Zaffar J. in “Junaid Ahmad Soomro v. Haji Mehboob Ali Bhayo”22

Section 63 of the Act is not just a pure question of law.23

Contingent Contracts

Another way of discharging a contract is imposing a condition on it, or having the contract become

dependent or contingent on the occurrence of a future event. Contingent contracts refer to those

contracts whose performance is dependent or is conditional on the possible occurrence of a future

event. A contingent contract is not enforceable till the event on which it depends has occurred.

Should the specified event not occur, then the contract shall become null and void. The uncertain

event on the happening of which the contract is conditional must be collateral to the contract. In

the circumstance that the occurrence of said event becomes impossible, then the contract can be

enforced in such a case. These events becoming impossible could be due to an Act of God or due

to even the conduct of human beings. A contingent contract becomes void when the event it is

dependent on does not occur or where if the unspecified future event which is set to occur at a

specified time period does not occur at the expiration of said time period or when the event

becomes impossible to occur before the specified time period expires. It does not matter whether

20
PLD 1964 SC 340, 345.
21
2007 CLD 1465 [Karachi], 1471. See also, Messrs Hafiz Abdul Aziz Yusufani & Co. v. Burma Oil Mills Ltd., PLD
1967 Karachi 318¸ at paras 15-16.
22
PLD 1986 SC 698, 718 per Zaffar J.
23
PLD 1972 Karachi 507, at para 9. It should be noted that the judgement does not provide the title of the parties.

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at the time the contract was made and the stipulation of the specified uncertain event was added

and its impossibility to occur was known to parties or not, the contract will still be deemed null

and void. This much should suffice for our purposes as anything more would be beyond the scope

of this paper.24

Breach of Contract

Breach literally refers to the “the breaking or violating of a law, right, or duty, either by commission

or omission.”25 A breach of contract means “the violation or non-fulfilment of an obligation,

contract, or duty”26 Hence, a breach of contract means to violate the terms of the contract or not

honouring the terms or conditions of the contract, thus not fulfilling your obligations and thereby

breaching the contract. Aftab Ahmed writes that “where the promisor has neither performed his

contract nor tendered performance and the performance is not excused by consent, express or

implied, there is a breach of contract”27

Where the other party does not accept the promise of the party, that is to say, the promisee does

not accept the promise of the promisor for the performance of the contract, then in such a case, the

promisor does not become liable for any non-performance of the contract and will also not lose

any rights under the contract. There are also conditions for this offer of performance to be

considered a valid. The first is that it must unconditional, that is to say, if any conditions of the

offer changes, then the offer shall expire.28 The second is that it must be made at a reasonable time

and place and should also be made under proper circumstances that the promisee may have a

24
For more information on this, see the author’s, “A Critical Exposition of Contingent and Indemnity Contracts
under the Law of Contract in Pakistan”. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4550748
(Last visited 28th August 2023).
25
Henry Campbell Black, Black’s Law Dictionary, (St. Paul, Minn. West Publishing Co., 2nd ed. 1910), p. 149.
26
Ibid.
27
Aftab Ahmed, “Law of Contract and Agency in Pakistan”, (Aamir & Aasim Publications, 1987.), p. 115.
28
See, Nadershaw Sheriarji Rabadi vs Shirinbai Bapuji Musa, (1923) 25 BOMLR 839, 87 Ind Cas 129, at para 13.

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reasonable opportunity to ascertain that the promisor is both willing and able then and there to do

what he is bound by his promise to do completely and wholly. Also, should the offer of

performance be an offer to deliver something to the promisee, the promisee must also have a

reasonable opportunity to ascertain that the thing that is being offered is the same thing that the

promisor is bound by his promise to deliver.29 Thus, the promisee has a right to examine or inspect

the subject-matter that is offered for performance in case of delivery of the same. It should also be

noted that should the promisor make an offer of performance to one of several joint promisees,

then it shall be considered as an offer to all of them. This finds force in Section 38 of the Act,

which provides that

“where a promisor has made an offer of performance to the promisee, and the offer has not

been accepted the promisor is not responsible for nonperformance, nor does he thereby

lose his rights under the contract.

Every such offer must fulfil the following conditions:__

(1) it must be unconditional:

(2) it must be made at a proper time and place, and under such circumstances that the

person to whom it is made may have a reasonable opportunity of ascertaining that the

person by whom it is made is able and willing there and then to do the whole of what he is

bound by his promise to do:

29
See, In Re: Andrew, Yule and Co. vs Unknown, AIR 1932 Cal 879, 140 Ind Cas 877, at para 17, See also, Re:
Beharilal Baldeoprasad v. Unknown, AIR 1955 Mad 271, at para 10.

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 (3) if the offer is an offer to deliver anything to the promisee, the promisee must have a

reasonable opportunity of seeing that the thing offered is the thing which the promisor is

bound by his promise to deliver.

An offer to one of several joint promisees has the same legal consequences as an offer to

all of them.”

Repudiation

When there is a breach of contract by the promisor, the promisee also has the right to terminate the

contract. This occurs when the promisor refuses to or is unable to perform his promise. Where the

promisor refuses to fulfil his obligation, this is called the repudiation of a contract, which occurs

when a party intimates by words or conduct that he does not intend to honour his obligations when

they fall due in the future.30 The second part refers to when there are circumstances that causes the

promisor to be unable to fulfill his obligation. Thus, when the promisor refuses to or in unable to

fulfill his obligation, then the contract shall be terminated due to breach on the part of the promisor,

unless of course the promisee either expressly or by implication, that is to either by words or

conduct signifies that he reluctantly accepts the continuance of the same contract. This is

incorporated within Section 39 of the Act which provides that

“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”

30
Ibid, p. 116. See also, Syed Muhammad Saleem v. Ashfaq Ahmad Khan, 1989 CLC 1883 [Karachi], at para 41.

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The significant aspect of this provision are the words “in its entirety”.31 This refers to the promise

or obligation as a whole, that is to say, the party is unable to fulfill the obligation as a whole, a

partial non-fulfillment of the obligation does not count. Thus, in order to attract this provision,

there are two conditions that have to be fulfilled. The first is whether the promisor has refused to

perform his promises “in its entirety” and the second is whether the promisee has put an end to the

contract or has signified by words or conduct his acquiescence in its continuance.32 The refusal

discussed in this provision is one which affects the vital/significant part of the contract and

prevents the promisee from getting in substance what he bargained for and it must also be shown

that the party to the contract has made it quite plain that his own intention is not to perform the

contract.33

In “Sultanchand v. Schiller”34, Garth C.J. while contemplating on the scope of Section 39 of the

Act and relying on the cases of “Cutler v. Powell”35 and “Freeth v. Burr”36 observed that “this

section only means to indicate what was the law in England and the law here before the Act was

passed, namely, that where a party to a contract refuses altogether to perform or is disabled from

performing his part of it the other side has a right to rescind it.”37 This observation is laudable.

In the case of “Fazal D. Allana vs Mangaldas M. Pakvasa”38, where there was an alleged breach

of contract for the failure of the deliverance of the share certificates, the Bombay High Court while

contemplating on the scope of Section 39 of the Act observed that

31
See, West Bengal Financial v. Gluco Series Private Ltd., AIR 1973 Cal 268, at para 43.
32
Ibid.
33
West Bengal Financial v. Gluco Series Private Ltd., AIR 1973 Cal 268, at para 44.
34
(1879) ILR 4 Cal 252.
35
2 Smith's L.C., 1, at p. 12.
36
L.R., 9 C.P., 208.
37
Ibid, at para 2.
38
(1921) 23 BOMLR 1144, 66 Ind Cas 726

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 “Section 39 deals with the two cases in which a party to a contract before or at the time

fixed for its performance (a) refuses to perform his promise, and (b) disables himself from

performing his promise. In either case the promisee may put an end to the contract unless

he has signified by his words or conduct his acquiescence in its continuance. Where a party

to a contract refuses to perform or disables himself from performing his promise before the

contractual time for performance has arrived, the promisee may put an end to the contract

and if he does so, an anticipatory breach of the contract occurs. When a party to a contract

refuses to perform or disables himself from performing his promise at the time fixed for its

performance, he commits a breach of the contract unless, by agreement between the

parties, further time is given and the contract is kept alive.”39

This observation is laudable as it has accurately described the situations in which a breach of

contract occurs on either the promisor or promisee’s part. One of the most interesting observations

from the court was that the Indian law of breach of contract is incorporated within Sections 39, 51,

53, 54 and 57 of the Indian Contract Act.40 It should be noted however that this judgement is from

the time India was still British India, thus this rationale comes from Anglo-Indian jurisprudence

just like the case discussed directly prior to it.

When a contract is breached, it is discharged, thus giving rise to a new obligation which the law

imposes on the party in default to pay damages.41 When a contract has been breached, it is dead

and thus cannot be brought back alive.42 The principle that it is open to one of the parties to keep

the contract alive is only applicable when the contract is executory or when there is still something

39
Ibid, at para 33.
40
Ibid.
41
See, V.K. Kumaraswami Chettiar v. P.A.S.V. Karuppuswami Mooppanar, AIR 1953 Mad 380, (1952) 2 MLJ 785,
at para 11.
42
Ibid, at para 12.

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to be performed under the contract, it has no application where the time for performance has

arrived and there has been a breach.43 Even if the parties subsequently come to an agreement in

respect of the same subject-matter it is in law a new contract.44 Thus, the innocent party has a

choice of either regarding the contract as continuing and thereby affirming it or it can accept the

repudiation and consider the contract as having come to an end. 45 The innocent party thus has to

invoke the doctrine of election, if he elects to continue with the contract, that is to say affirms it,

then such affirmation is irrevocable.46 Furthermore, the contract then continues as a whole, that is

to say, the innocent party cannot regard the provision breached as terminated while continuing

with the rest of the contract.47

In “Haji Mehboob Ali Bhayo v. Junaid Ahmed Soomro”48, the court observed that

“It cannot be said that the moment a contract is fully executed on one side and all that

remains is to receive payment from the other, then the contract is terminated. There was

always possibility of the liability being disputed before actual payment was made. It was

true that the contractor might abandon the contract and sue on ‘quantum meruit’, but if

the other side contested and relied on the terms of the contract, the decision would have to

rest on that basis.”49

This observation is laudable.

Fundamental Breach

43
Ibid.
44
Ibid.
45
Karachi Water and Sewage Board v. Messrs Karachi Electric Supply Corporation, PLD 2012 Sindh 349, 2012
CLD 1225 [Sindh], at para 48.
46
Ibid.
47
Ibid.
48
1986 CLC 987 [Sind Election Tribunal].
49
Ibid, 998.

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Fundamental breach of contract refers to when a party to a contract is discharged from all

obligations of the contract should the other party commit a fundamental breach of contract without

repudiating his obligation either expressly or implicitly.50 Hence, a party who does not expressly

or implicitly repudiate his obligations in the contract but still nonetheless fails to fulfill his

obligations anyway is considered to have committed a fundamental breach of contract. It should

also be noted that the obligation in question must be one that is fundamental to the contract, one

that is material or significant to the contract as a whole. That is to say, the obligation should be of

that fundamental term that makes up the core of the contract, whose non-fulfilment will destroy

the very substance of the contract as it is something which underlies the whole contract so that if

it is not complied with, the performance/fulfillment becomes totally different from that which the

contract originally contemplated.51

Anticipatory Breach

Where a contract is to be performed at a future date and before the time for performance arrives,

one of the parties gives notice to the other party that he is not willing to perform his part of the

agreement, then there is what has been called an “anticipatory breach” of the contract by

him.52 Thus, where one of the parties of the contract were to refuse to perform the terms of the

contract which were binding on him before the due date of performing such terms or conditions,

he thus discharges the contract. This is called anticipatory breach. The other party in such a case

may accept the repudiation and treat the contract as broken then and there and proceed to claim

damages53 or he might, notwithstanding the repudiation by the other party, get ready for performing

50
Ahmed, Contract, p. 118, (n 17).
51
See, Suisse Atlantique Société d’ Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale, (1967) A.C 361.
52
See, Bradley v. Newsom, (1919) AC 16, per Lord Wrenburv.
53
See, Ramgopal vs Dhanji Jadhavji Bhatia, (1928) 30 BOMLR 1389, at para 6. See also, Bengal Oil Mills v. Dada
Sons, PLD 1964 (W. P.) Karachi 18, at para 16.

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his part of the contract in due course, offer performance when the time for it arrives and on the

refusal by the other party claim damages for breach of the contract by him in which case, he keeps

the contract alive for the benefit of both the parties.54 Where an anticipatory breach occurs, it is

not necessary to wait until performance of the contract falls due to sue for breach of contract, the

party can sue right away.55 However, there are some cases where the innocent party waits to sue

the other party until the date of performance falls through, which would put them in a position

worse off had they actually sued immediately.56

Simultaneous Obligations/Reciprocal Promises

Where a contract is made where the obligations of both parties are to be simultaneously fulfilled,

then in such a case, the promisor is not bound to perform his obligation unless and until the

promisee also fulfills his respective obligation.57 This is incorporated within Section 51 of the Act

which provides that “when a contract consists of reciprocal promises to be simultaneously

performed, no promisor need perform his promise unless the promisee is ready and willing to

perform his reciprocal promise.” Thus, this provision provides a situation in which the promisor

does not breach the contract due to non-performance on his part, rather it provides for a situation

in which the contract is breached due to non-performance on the part of promisee where there are

obligations on both parties which have to be simultaneously performed by both. In such a case, a

proper appraisal of evidence is required to see whether the promisee has failed to fulfill his

54
See, Frost v. Knight, (1872) 7 Ex. 111, Hochster v. De La Tour, (1853) 2 El & Bl 678, Avery v. Bowden, (1856) 6
E & B 953, 26 LJBQ 3, Ex, John-stone v. Milling, (1836) 16 QBD 480, Millet v. Van Heek & Co., (1921) 2 KB 369,
Heyman v. Darwins Ltd., 1942 AC 355, Steel Bros and Co. Ltd. v. Dayal Khatav & Co., 47 Bom 924
55
See, Frost v. Knight, [1871-72] LR 7 Ex. 111, Hochster v. De La Tour, (1853) 2 El & Bl 678, the court held that
the claimant could commence proceedings for damages immediately despite the fact that the date of performance
had not yet arrived.
56
See, Avery v. Bowden, (1856) 6 E & B 953, 26 LJBQ 3, Ex.
57
See, Said Muhammad v. Abdur Rehman, 1996 MLD 60, Muhammad Hussain v. Federation of Pakistan, 2003
YLR 2793 [Lahore], at para 4.

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obligations, thereby causing a breach of contract or not in terms of Section 51 of the Act.58 The

court has to determine whether the party was ready and willing to perform the essential terms of

the contract.59

When the contract expressly fixes the order in which the obligations have to fulfilled, then they

must be fulfilled in that specified order, otherwise, if such order is not specified expressly in the

contract, then the obligations shall be fulfilled in the order in which the nature of the transaction

requires.60 This finds force in Section 52 of the Act which provides that

“where the order in which reciprocal promises are to be performed is expressly fixed by the

contract, they shall be performed in that order; and, where the order is not expressly fixed

by the contract, they shall be performed in that order which the nature of the transaction

requires.”

In a contract of simultaneous obligations, when one party of the contract prevents the other party

from fulfilling their obligations, then the contract becomes voidable at the option of the other party

who was unable to fulfill the contract due to the first party preventing them from doing so.61 The

other party is also entitled to any compensation that arises due to any loss sustained by the non-

fulfillment of the contract by the party.62 This finds force in Section 53 of the Act which provides

that

58
See, Mehmood Alam Sher v. HEC, 2022 CLC 1337 [Islamabad], at para 16.
59
See, Sabira Khatun vs Mustt. Syeda Fatema Khatoon, AIR 1995 Gau 104.
60
See, Mian Muhammad Amjad v. Habib Bank Limited, 2015 CLD 1555 [Lahore], at para 11. See also, Mehmood
Alam Sher v. HEC, 2022 CLC 1337 [Islamabad], at paras 15-16.
61
See, Muhammad Abdul Ghani v. Muhammad Ibrahim Jalil, 1985 MLD 1510, 1512. See also,
Nama Lika Silk Industries v. Messrs Ultimate Driving Machine, PLD 2014 Sindh 100, at para 20.
62
See Nama Lika, para 20, (n42). See also, Rafiq Ahmed v. Messrs Joint Venture, Basrah International Airport, PLD
1987 Karachi 552, at para 10.

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 “When a contract contains reciprocal promises, and one party to the contract prevents the

other from performing his promise, the contract becomes voidable at the option of the party

so prevented ; and he is entitled to compensation from the other party for any loss which

he may sustain in consequence of the nonperformance of the contract.”

In “Mian Muhammad Amjad v. Habib Bank Limited”63, where the respondents, who were a bank

initiated a suit for recovery for an outstanding loan that had been provided to the appellants. The

court held that Section 53 of the Act did not apply to the instant case as the appellants had not yet

fulfilled their obligations of the contract which were to provide additional securities for availing

the financial facilities of the bank as per the contract.64 This observation is laudable as both of the

obligations were to simultaneously fulfilled and while the bank fulfilled theirs, the appellants did

not, thus making the contract voidable and also making the bank entitled for any loss that was

incurred due to failure of fulfillment of the obligation from the appellant’s part. In a suit for specific

performance of a reciprocal promise/simultaneous obligation, the party seeking relief has to show

that he was ready and willing to do his part of the contract.65 An offer to perform a reciprocal

promise in different terms than contemplated by the contract cannot be considered a valid

performance so as to demand performance from the other party.66

In a contract where one of the obligations cannot be fulfilled or the obligation is such that it cannot

be fulfilled unless the other obligation has been fulfilled first and thus causes the party to be unable

to fulfill their obligation, the first party cannot ask for the fulfillment of the obligation from the

63
2015 CLD 1555 [Lahore].
64
Ibid, at para 11.
65
See, Vairavan Chetliar v Kannappa Mudaliar, AIR 1925 Mad PC 91, Tan Ab Boon v. State of Johore, AIR 1936
PC 236, Abdullah Bey Chedid v Tenenbaum, AIR 1934 PC 91, Vegi Venkateswara Rao v Vegi Venkatarama Rao, AIR
1998 AP 6,
66
Vidya Vati v Devi Das, (1977) 1 SCC 293: AIR 1977 SC 397.

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other party and must also compensate the other party for any loss incurred by the party due to non-

fulfillment of the obligation from the first party.67 Thus, the promisor of a subsequent promise will

not be liable to perform his obligation until the promisor of the earlier promise has fulfilled their

obligation.68 This finds force in Section 54 of the Act which provides that

“When a contract consists of reciprocal promises, such that one of them cannot be

performed, or that its performance cannot be claimed till the other has been performed,

and the promisor of the promise last mentioned fails to perform it, such promisor cannot

claim the performance of the reciprocal promise, and must make compensation to the other

party to the contract for any loss which such other party may sustain by the non-

performance of the contract.”

In “LIPs Record (Private) Ltd. v. Ms. Hadiqa Mehmood Kiani”69, where the record studio claimed

compensation for loss incurred due to an alleged breach of contract for failure of delivering the

music album by the artist, Hadiqa Kiani. The record studio also prayed for an injunction to restrain

the artist from releasing the music album through another record studio. The court held that the

contract had been hit by Section 54 as the plaintiffs, the record studio failed to fulfill their

obligations, which was to pay the first installments within the time stipulated by the contract.70

67
See, Muhammadi Cotton Factory Ltd. v. Messrs Pakistani Industries Ltd., 1968 SCMR 1198, Saleem v. Ashfaq, (n
16) 1989 CLC 1883 [Karachi], at para 36, Messrs Burma Oil Mills Ltd v. Messrs Zamindar Cotton Factory, Karachi,
PLD 1981 Karachi 143, at para 7, Syed Nasir Ahmad Kazmi v. Syed Muhammad Zulfiqar Ali, PLD 1987 Karachi
261, 266, Bank Alfalah Limited, Lahore v. Punjab Small Industries Corporation, 2023 CLD 14 [Lahore], PLD 2023
Lahore 61, at paras 23-24. See also, Nathulal v Phoolchand, (1969) 3 SCC 120, AIR 1970 SC 546: (1970) 2 SCR
854, Pushkarnarayan S. Maheshwari vs Kubrabai Gulamali, (1969) 71 BOMLR 769, at para 3.
68
Muhammad Zubair Abbasi, Aimen Akhtar, Muhammad Usman Mumtaz, “Contract Law”, (Global Institute of
Law Press, Oxford, 2021), p. 229.
69
PLD 2002 Karachi 141.
70
Ibid, at para 6.

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In “Muhammad Ramzan v. Muhammad Ali”71, where there was a suit for specific performance of

a sale deed, the court while contemplating Section 54 of the Act observed that

“when things to be performed are dependant upon reciprocal promises then second promise

cannot be insisted to be done nor failure thereof can be claimed for damages or as a ground

to ‘fail’ the agreement unless it is established that the first promise was done. The

proposition can well be answered that in such eventuality the seller shall have no

advantage of his / her own failure to perform his / her part of reciprocal promises.”72

This observation is laudable.

A contract in which the parties have made reciprocal promises to perform certain things which are

legal at first and then secondly have made reciprocal promises to perform certain things that are

illegal, then only the first part of the contract is a valid contract, the second part becomes a void

contract. Section 57 of the Act provides that “where persons reciprocally promise, firstly, to do

certain things which are legal, and, secondly, under specified circumstances, to do certain other

things which are illegal, the first set of promises is a contract, but the second is a void agreement.”

In such a contract, it also needs to be seen whether the legal part of the contract can be separated

from the illegal part of the contract, if it cannot be separated, then the contract as a whole will be

71
2016 MLD 1255 [Sindh (Hyderabad Bench)].
72
Ibid, at para 10.

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null and void, but if it can be separated, then the illegal parts will be null and void while the legal

parts will be valid and enforceable.73

Effect of Breach

When a contract is breached, it is discharged, thus giving rise to a new obligation which the law

imposes on the party in default to pay damages.74 A breach of contract no matter what form it takes

always entitles the innocent party to maintain an action for damages.75 Any breach of contract

gives rise to a cause of action but not every breach gives a discharge from liability.76 However, a

breach of contract in itself does not alter the obligations of either party under the contract, what it

may do so is to justify the injured party, if he chooses, in regarding himself as absolved or

discharged from the further performance of a contract.77 It does not automatically terminate his

obligations, he has the option to either treat the contract as still in existence or to regard himself as

discharged, if he does not accept the discharge of the contract by the other party, he is entitled to

continue to insist on its performance.78 Thus, a breach of a contract causes the contract to become

voidable at the option of the injured party.

In “White and Carter (Councils), Ltd. v. McGregor”79, where an advertising contracting firm

entered into a contract with a garage proprietor to display advertisements for his garage for three

years. The garage proprietor repudiated the contract and requested the advertising firm to cancel

the contract. They refused to cancel it and instead treated it as if it were still in existence. They

73
Avtar Singh, “Law of Contract and Specific Relief”, (Eastern Book Company, 12th ed., 2017), p. 376. See also,
Mirza Muhammad Ahmad Beg v. Mirza Amjad Beg, PLD 1978 Lahore 421, PLD 1979 Lahore 865, at para 20.
74
See, V.K. Kumaraswami v. P.A.S.V. Karuppuswami, AIR 1953 Mad 380, (1952) 2 MLJ 785, at para 11, (n 27).
75
Ahmed, “Contract”, p. 115, (n 17).
76
Ibid.
77
Ahmed, “Contract”, pp. 115-116.
78
Ibid, p. 116.
79
(1962) A.C. 413.

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displayed the advertisements and instituted a suit for damages against the garage proprietor. The

court held that the advertising firm were entitled to sue for the full price of the contract as they

were under no obligation to accept the repudiation of the contract by the garage proprietor.

Where there are special circumstances that are beyond the contemplation of the parties at the time

of the contract and which results in a breach of contract, the same cannot be considered a direct

breach of contract and thus the other party cannot claim compensation of damages in such a case.80

Frustration

Another way in which a contract is discharged is through it being frustrated. Frustration refers to

when the promiser (the one who makes a promise) is unable to fulfill their promises to the promisee

(the one to whom the promise was made to) in a contract due to unforeseen circumstances beyond

their control. This is incorporated within Section 56 of the Act. It includes even when the

prospective act that the promisor promised to perform is unable to be performed due to the fact

that the act itself becomes impossible to perform or becomes unlawful after the initial contract was

made between both parties, provided that such impossibility or unlawfulness was not within the

knowledge of the promisor. Should the promiser with reasonable diligence had known that the act

that he has promised to perform would become impossible or unlawful to do so and the promisee

did not know about this, then in such a case, the promisee is entitled to compensation from the

promisor for any damage that arises whatsoever due to failure of performance of the promise by

the promisor’s part. Frustration does not apply to cases where the act that could have been made

impossible could have been avoided by proper foresight and necessary precautions which is called

80
See, Sadruddin v. Messrs Mitchell’s Fruit Farm Ltd., Karachi, PLD 1979 Karachi 694, at para 15. The court held
that the plaintiff could not be awarded any compensation for loss of profits by reselling the goods that were supplied
by the defendant as the defendants were unaware that the plaintiff intended to resell the goods that they would
supply.

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“self-imposed frustration”. A contract hit by frustration becomes void, however, even in such a

case, the promisee is entitled to receive compensation arising out of any loss incurred therewith

due to non-performance of the promise from the promisor. Frustration also does not apply to any

lease agreements. This much should suffice for our purposes for anything more is beyond the scope

of this paper.81

Novation

Novation refers to “the substitution of a new contract for an old one.”82 Thus, the novation of the

contract simply means to substitute the previous old contract for a new contract. If the parties to

the contract agree to substitute or to rescind or to alter the current contract, then the original

contract shall be terminated and will no longer be binding on both parties.83 Therefore when a

contract is novated, a fresh contract comes into existence directly or by implication in place of the

original contract.84 Section 62 of the Act provides that “if the parties to a contract agree to

substitute a new contract for it, or to rescind or alter it, the original contract need not be

performed.”. Hence, there are three situations contemplated by this provision, the first is

substituting the original contract with a new one, the second is to rescind it, that is to say, to

terminate it completely and third one is that the current contract is altered or modified, that is to

say, the terms and conditions of the contract is changed. Thus, in all three situations, the original

contract is terminated and is no longer binding on the parties. However, there is also an essential

condition that needs to be fulfilled in all three scenarios. That is that both the parties agree to this.

81
For more information on this, see the author’s, “The Doctrine of Frustration under the Law of Contract in
Pakistan: A Critical Evaluation”. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4549332 (Last
visited at 28th August 2023).
82
West’s Encyclopedia of American Law, (Thomson Gale, 2nd ed., Vol. 7., 2005), p. 274.
83
Maulana Abdul Haque Baloch v. Government of Balochistan, PLD 2013 Supreme Court 641, at 87. See also,
Nama Lika Silk Industries v. Messrs Ultimate Driving Machine, PLD 2014 Sindh 100, at para 15.
84
Muhammad Afaq Shamsi v. National Accountability Bureau, PLD 2011 Karachi 24, at para 11.

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This cannot be done by one of the parties. It must be done by both of the parties. And of course,

all the essential elements that form a contract will be required in this case as well.85 For any plea

of novation to succeed, there has to proper evidence provided by the parties and the same has to

appraised by the court.86 In a case where a public bank introduced a scheme called the Mahana

Munafa Certificate (MMC), in which the general public was invited for depositing their money for

a fixed period for a promise of fixed rate of profit/return every month. This period was to end on

November 2008, however the bank reduced the monthly profit rates on the profits from 14 percent

to 12 percent. The court held that the bank could not take the defense of the novation of the

contract.87 This observation is laudable as the novation of a contract cannot be done through one

of the parties. It can only be done by agreement between both parties on the same. In a case where

a party was sued for specific performance for sale of property as the other party had instead sold

the property to another person who took a plea of novation of the contract as they argued that the

plaintiff had been substituted by her son and the same was agreed between both the original parties.

The court after appraising the record held that there was no novation of the contract.88 Where an

agreement is void, all subsequent alterations, variations or novations based upon such agreement

will also be invalid.89 When a contract is unlawful or illegal as being prohibited by a specific

provision of the statute, it could not be enforced, although the parties might have entered into a

novation of the contract on the basis of such unlawful or illegal consideration.90 A collateral illegal

contract or an earlier illegal contract, in spite of a novation would, still remain illegal and a court

85
For more information on this, see the author’s, “Formation of a Contract with Special Focus on Offer and
Acceptance and their Interpretation and Application in Pakistan”. Available at
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4413537 (Last visited 29th August 2023).
86
Mst. Rasheeda Begum v. Muhammad Yousuf, 2002 SCMR 1089, at para 15.
87
Muhammad Javaid Anjum v. Industrial Development Bank of Pakistan, 2004 CLD 520 [Lahore], at para 18.
88
Fazal-Ur-Rehman v. Begum Sugra Haq, 2007 SCMR 564, at para 7.
89
See, Maulana Abdul Haque v. Balochistan, PLD 2013 Supreme Court 641, at 87, (n 76).
90
Ibid.

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of law would decline to grant any relief to any one of the parties even in respect of such a collateral

contract, or an earlier illegal contract, which is the basis of the suit contract and on which a cause

of action may be founded.91 In fact, even a perfectly innocent and legal contract where it arises out

of a collateral illegal contract or an immoral contract or any legal contract which has for its basis

an earlier illegal or immoral contract cannot be enforced, in spite of the fact that the parties may

have entered into a novation.92 A party who is not a signatory of novation agreement would not be

bound by it.93 Once the original contract had been novated, rights and obligations thereunder stood

extinguished and were replaced by rights and obligations under the novated contract. 94 Novation

of contract in fact creates a new contractual obligation and variation in terms of the original

contract.95 Novation would mean and be construed when contract already in existence is

extinguished and a new contract is created where under which new obligations would emerge in

favour of the parties.96 Unless the rights under the old contract are explicitly relinquished, no new

contract comes into force.97 The procrastination by a party to abide by terms of the contract, which

in the present context appears to gain benefit out of it, would not mean novation of the contract, it

comes about where parties to the contract mutually agree to substitute it with the new contract.98

These are the prerequisites in which a novation of a contract can be established.99 Thus, in order

to prove a novation of a contract, four elements must be shown, that is, (a) the existence of a

previous valid agreement; (b), the agreement of the parties to cancel the first agreement; (c) the

91
Ibid.
92
Ibid.
93
Messrs Sardar Muhammad Ashraf D. Baloch (Pvt.) Limited v. National Bank of Pakistan, 2013 CLD 550 [Sindh],
at para 8.
94
Messrs Ittefaq Foundries (Pvt.) Ltd. v. Federation of Pakistan, 2015 CLD 1274 [Lahore], 2015 P Cr. LJ 1240
[Lahore], at para 12.
95
Ibid.
96
Habib Ahmad v. Meezan Bank Limited, 2016 CLC 351 [Sindh], 2016 CLD 527 [Sindh], at para 7.
97
Ibid.
98
Ibid.
99
Ibid.

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agreement of the parties that the second agreement replaces the first one; and, (d) the validity of

the second agreement.100

Time is of the Essence

When one of the parties to a contract promises to perform a certain act at or before a specified time

to the other party or promises to perform certain acts at or before a specified time to the other party

and fails to do so at or before the specified time, the contract or the part of the contract which has

not been performed becomes a voidable contract at the option of the party to whom the promise

was made to, provided that the intention of both parties at the contract was that time is of the

essence.101 This is incorporated within Section 55 of the Act which provides that

“when a party to a contract promises to do a certain thing at or before a specified time, or

certain things at or before specified times, and fails to do any such thing at or before the

specified time, the contract, or so much of it as has not been performed, becomes voidable

at the option of the promisee, if the intention of the parties was that time should be of the

essence of the contract.

if it was not the intention of the parties that time should be of the essence of the contract,

the contract does not become voidable by the failure to do such thing at or before the

specified time; but the promisee is entitled to compensation from the promisor for any loss

occasioned to him by such failure

If, in case of a contract voidable on account of the promisor’s failure to perform his promise

at the time agreed, the promisee accepts performance of such promise at any time other

100
Mst. Waris Jan v. Liaqat Ali, PLD 2019 Lahore 333, at para 11. See also, Messrs Digital Link (Pvt.) Ltd. v.
Messrs Hangzhou Hikvision Digital Technology Co. Ltd., 2020 CLC 2108 [Lahore], at para 3.
101
Muhammad Habib-Ullah vs Bird And Company, (1921) ILR 43 All 257, at para 3.

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 than that agreed, the promisee cannot claim compensation for any loss occasioned by the

nonperformance of the promise at the time agreed, unless, at the time of such acceptance

he gives notice to the promisor of his intention to do so”

The principle, “time is of the essence” simply means that a timely or punctual performance of the

contract is an essential obligation. Thus, in such a case, a timely performance of the contract is

necessary in order for the contract to not become voidable. However, this is only in cases where a

timely performance of the contract was agreed by both parties to the contract, that is to say, both

parties had in mind the principle of “time is of the essence” at the time of making such promises

in a contract. Thus, when both parties did not have this principle in mind at the time such promises

were made, the contract will not become voidable. In a contract for the conveyance of an

immovable property for example, it is assumed that the added stipulated of time is of the essence

is incorporated within the contract unless and until the parties intend and specifically mention the

same in the contract.102 Merely mentioning the specific date for the performance of the contract is

not enough to make time the essence of the contract, but the same is to be gathered from the terms

agreed amongst the parties contained in the contract in the light of facts and circumstances of the

case.103 Neither does the mere mention period for completion of sale attract the principle of time

is of the essence.104 The performance of the contract which includes the stipulation of time is of

the essence depends upon various factors such as the attending circumstances, the unforeseen

eventualities and the intention of the parties which is to be ascertained from the contents of the

agreement executed between the parties.105 Thus, where there is no intention between both parties

of the applying the principle of time is of the essence in the contract, then the same shall not

102
Mst. Fayyaz Bano v. Tariq Mehmood, 2014 CLC 499 [Lahore], at para 7.
103
Muhammad Taj v. Arshad Mehmood, 2009 SCMR 114.
104
Muhammad Ayyub Khan v. Ch. Muhammad Aslam, 1984 CLC 2159.
105
Mst. Mehmooda Begum v. Syed Hassan Sajjad, PLD 2010 SC 952.

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become voidable. However, the other party is still entitled to claim compensation from the party

that caused him loss due to his non-performance, should the other party agree to any other time of

performance of the contract then he cannot claim any compensation caused by loss due to non-

performance unless he gives the other party his intention of claiming compensation at the time, he

accepts another time for the performance of the contract.

Contract becoming Unenforceable

A contract is also discharged when it becomes null and void, or it was void ab initio or it was

rescinded by one of the parties when the contract became voidable. A void contract is a contract

that has become of no legal effect and is thus enforceable and will be declared as such by a court

of law while a voidable contract is a contract that can either be a void contract or an enforceable

contract at the option of the concerned party and a contract which is void ab initio is a contract

which is unenforceable and of no legal effect since the time it was first made. A contract becomes

void when it lacks the essential elements of an offer, acceptance, free mutual consent (only in cases

where it has been vitiated by mistake), consideration (when the consideration or purpose is

unlawful, even if it is in part). Other circumstances which render a contract void include where a

person’s is restrained from being married (the same does not apply for minors), or it restrains

anyone from exercising a lawful profession, trade or business (the restraint will be subject to the

‘reasonable’ test by the courts to determine its validity owing to the facts and circumstances in

each case), or it restricts a party’s right to enforce his rights in a contract by initiating legal

proceedings in a court of law or which limits the time in which he may institute legal proceedings

in a court of law as long there is an absolute restraint of the rights of the parties (has its own set of

exceptions), or the contract is such that its meaning is uncertain or is not capable of being certain

shall become void or when wagers are made on a contract, or when a contract is made to execute

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a wager contract, (in such a case, the parties cannot even institute a suit for recovery of money in

wagering contracts, even if a person makes a lot of money out of a wagering contract and were to

die, the same cannot be claimed by his legal heirs, executor, guardian, administrator or any other

personal representative. (The same goes in the case of a minor.), or when the performance of a

contract is contingent or dependent upon a specified future event to occur and the same event

becomes impossible to occur, or when it is making the party to perform an impossible act, which

is called the doctrine of frustration, where as a result of unforeseen circumstances out of the parties’

control or when a contract specifies to perform certain legal acts and certain illegal acts thus

making the former a valid contract and the latter a void contract. Any contract which is obtained

by way of coercion, undue influence, fraud, misrepresentation is a voidable contract. The

concerned party can either declare it to be null and void and thus of no legal effect or if he believes

that the contract will be beneficial to him, he can thus enforce it. The same goes for

misrepresentation and fraud. A contract also becomes voidable is when one of the parties prevents

the other party from performing his promise despite the nature of the contract being that of a

reciprocal promise. A contract made by any person who is not competent by law or is legally

disqualified to enter into a contract becomes void ab initio. To rescind a contract simply means to

declare a contract to be null and void, to make it of no legal effect, to make it have no more legal

standing or legal validity. This much should suffice for our purposes as anything more would be

beyond the scope of this paper.106

Discharge by Agreement

106
For more information on this, see the author’s “Unenforceability of a Contract: A Comparative Analyses of the
Doctrines of Void, Voidable and Void Ab Initio Contracts in Pakistan”. Available at
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4548021 (Last visited at 29th August 2023).

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A contract can also be discharged if both parties agree to its termination, that is to say, both parties

agree to terminate the contract between them, thus discharging themselves out of the liabilities of

the contract as well.107 Although, whether the contract’s liabilities will be partially or wholly

discharged will depend entirely upon the terms and conditions of the contract.108 This is called

discharge by agreement. It can be either express or implied.109 An express consent to the

termination of the contract can be given at the time of the formation of the contract, that is to say,

the parties could agree to the contract becoming terminated due to a specific event occurring etc.110

It can also be given after the formation of the contract, by waiver, abandonment or by release by

one party to the contract or both reciprocally.111 Discharge by implied consent is when the contract

becomes void due to the impossibility of the obligation being fulfilled, that is to say, should the

fundamental assumption which the parties agreed to cease to exist, it would exonerate the parties

from their obligations.112 The obligation could become impossible to perform due to unforeseen

circumstances such as an Act of God or some other reason or the obligation itself became unlawful

either by law or by an order of a judge or any other legal authority acting in a judicial capacity.

Thus, this is the doctrine of frustration which we have discussed hereinabove.

Conclusion

From the discussion hereinabove, we can conclude that discharge of contract means to end it or to

terminate it or to extinguish it. There are many ways of terminating a contract, such as performing

the terms and conditions in the contract, or by breaching the contract by not performing the terms

107
Ahmed, Contract, p. 100.
108
Ibid.
109
Ibid.
110
Ahmed, Contract, p. 101.
111
Ibid.
112
Ibid.

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and conditions stipulated within or by substituting it with a new contract or by rescinding it or

altering/modifying it. The parties of the contract are obligated to perform or are obligated to at

least offer to perform their respective obligations in the contract unless such obligations have been

dispensed or excused under the provisions of the Act or of any under law in force in Pakistan.

Should one of the parties face a sudden demise before the performance of the contract, then those

same obligations of the contract are now imposed on the representatives of the demised party,

provided that there is no contrary intention provided in the contract itself. An obligation must be

fulfilled by the party themselves if that is what the intention of parties were and what the nature of

the contract itself entails, otherwise, if this is not the case, then the party or his representatives may

employ another person to fulfill the obligation provided he is competent to do so. Should the other

party accept the fulfillment of the obligation by the appointed third party, then he cannot try to

enforce it against the first party later on. The promisee has the discretion to either cancel the

obligation either wholly or partly of the promisor or to extend the time for the fulfillment of

such obligation or even accept the fulfillment of such obligation if it is to his satisfaction.

Another way of discharging a contract is imposing a condition on it, or having the contract become

dependent or contingent on the occurrence of a future event. This type of contract is called a

contingent contract. A breach of contract means to violate the terms of the contract or not

honouring the terms or conditions of the contract, thus not fulfilling your obligations and thereby

breaching the contract. Where the other party does not accept the promise of the party, that is to

say, the promisee does not accept the promise of the promisor for the performance of the contract,

then in such a case, the promisor does not become liable for any non-performance of the contract

and will also not lose any rights under the contract. There are also conditions for this offer of

performance to be considered a valid. The first is that it must unconditional, that is to say, if any

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conditions of the offer changes, then the offer shall expire. The second is that it must be made at a

reasonable time and place and should also be made under proper circumstances that the promisee

may have a reasonable opportunity to ascertain that the promisor is both willing and able then and

there to do what he is bound by his promise to do completely and wholly. Also, should the offer of

performance be an offer to deliver something to the promisee, the promisee must also have a

reasonable opportunity to ascertain that the thing that is being offered is the same thing that the

promisor is bound by his promise to deliver. Thus, the promisee has a right to examine or inspect

the subject-matter that is offered for performance in case of delivery of the same. It should also be

noted that should the promisor make an offer of performance to one of several joint promisees,

then it shall be considered as an offer to all of them. A repudiation of a contract occurs when a

party intimates by words or conduct that he does not intend to honour his obligations when they

fall due in the future. Fundamental breach of contract refers to when a party to a contract is

discharged from all obligations of the contract should the other party commit a fundamental breach

of contract without repudiating his obligation either expressly or implicitly. An anticipatory breach

refers to where a contract is to be performed at a future date and before the time for performance

arrives, one of the parties gives notice to the other party that he is not willing to perform his part

of the agreement. Where a contract is made where the obligations of both parties are to be

simultaneously fulfilled, then in such a case, the promisor is not bound to perform his obligation

unless and until the promisee also fulfills his respective obligation. When the contract expressly

fixes the order in which the obligations have to fulfilled, then they must be fulfilled in that specified

order, otherwise, if such order is not specified expressly in the contract, then the obligations shall

be fulfilled in the order in which the nature of the transaction requires. In a contract of simultaneous

obligations, when one party of the contract prevents the other party from fulfilling their

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obligations, then the contract becomes voidable at the option of the other party who was unable to

fulfill the contract due to the first party preventing them from doing so. In a contract where one of

the obligations cannot be fulfilled or the obligation is such that it cannot be fulfilled unless the

other obligation has been fulfilled first and thus causes the party to be unable to fulfill their

obligation, the first party cannot ask for the fulfillment of the obligation from the other party and

must also compensate the other party for any loss incurred by the party due to non-fulfillment of

the obligation from the first part. A contract in which the parties have made reciprocal promises to

perform certain things which are legal at first and then secondly have made reciprocal promises to

perform certain things that are illegal, then only the first part of the contract is a valid contract, the

second part becomes a void contract. When a contract is breached, it is discharged, thus giving rise

to a new obligation which the law imposes on the party in default to pay damages. However, it in

itself does not alter the obligations of either party under the contract, what it may do so is to justify

the injured party, if he chooses, in regarding himself as absolved or discharged from the further

performance of a contract. It does not automatically terminate his obligations, he has the option to

either treat the contract as still in existence or to regard himself as discharged, if he does not accept

the discharge of the contract by the other party, he is entitled to continue to insist on its

performance. Thus, a breach of a contract causes the contract to become voidable at the option of

the injured party. A contract can also be discharged by being frustrated. Frustration refers to when

the promiser (the one who makes a promise) is unable to fulfill their promises to the promisee (the

one to whom the promise was made to) in a contract due to unforeseen circumstances beyond their

control. If the parties to the contract agree to substitute or to rescind or to alter the current contract,

then the original contract shall be terminated and will no longer be binding on both parties.

Novation of a contract simply means the substitution of a contract. When one of the parties to a

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contract promises to perform a certain act at or before a specified time to the other party or

promises to perform certain acts at or before a specified time to the other party and fails to do so

at or before the specified time, the contract or the part of the contract which has not been performed

becomes a voidable contract at the option of the party to whom the promise was made to, provided

that the intention of both parties at the contract was that time is of the essence. This is called

discharge by time is of the essence. A contract is also discharged when it becomes null and void,

or it was void ab initio or it was rescinded by one of the parties when the contract became voidable.

A void contract is a contract that has become of no legal effect and is thus enforceable and will be

declared as such by a court of law while a voidable contract is a contract that can either be a void

contract or an enforceable contract at the option of the concerned party and a contract which is

void ab initio is a contract which is unenforceable and of no legal effect since the time it was first

made. A contract can also be discharged if both parties agree to its termination, that is to say, both

parties agree to terminate the contract between them, thus discharging themselves out of the

liabilities of the contract as well. Although, whether the contract’s liabilities will be partially or

wholly discharged will depend entirely upon the terms and conditions of the contract. This is called

discharge by agreement. It can be either express or implied. The latter is actually where the doctrine

of frustration originally originated from.

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