Chapter 3

Discharging Contract &

Remedies
Introduction
Once a contract formed, duties and obligations
must be carried out by the promisor and promisee
in fulfillment of their respective promises.
However, both (promisor and promisee) can be
freed from their obligations under the contract by
the discharge of the contract. (release the
contract)
 The way of discharging
a contract are as
follows; By
performance

Under the
doctrine of Discharge of
By breach
frustration a Contract

By consent or
agreement
Discharge by Performance
Most contract are discharged through performance.
PERFORMANCE can be define as the completion of an act
or an act which, in strict accordance of the terms of the contract,
discharge it.. or the carrying out of an obligation imposed by
contract or statute.
General rule: performance of a contract must be exact and
precise and should be in accordance with what the parties had
promised. (performance by both parties must be strictly in
accordance with the contract). Echoed/recalled in Section 38(1)
CA 1950.
Discharge by Performance
Complete discharge can be done when both parties
carry out exactly what they have promised to do.
If, only one party perform his side of the agreement,
under the law only he would be discharged
contractually.
In engineering/construction contracts, discharging
contract by performance is when;
The contractor has carried out all his obligations as
per contract.
The employer has discharged his obligations by
making all payments due, issued all necessary
certificates. (e.g. certificate of completion)
Discharge by Breach
It may happen that either one or both parties
without sufficient excuses or justifications fails to
perform the contract in accordance to the terms
of the agreement.
A failure to perform the terms of a contract cause
the contract to be breach.
A Dictionary of Law defines breach of contract as
the refusal or failure by a party to a contract to
fulfill an obligations imposed on him under that
contract..
 Discharge by Breach
Breach can occur in the following common situations:
before performance is due
i.e. promisor by words or conduct refuse/disabling
from performing before the actual time of
performance.
At the time performance is due
the performance under contract is due, but the
promisor fails to deliver the promise.
During the performance of the contract
promisor has started performing but fails to
complete the promise before the contract due.
Discharge by Agreement
Agreement created by the parties can be brought to
an end by a subsequent agreement of such parties.
(What has been created by agreement may be
extinguished by agreement).
Stipulate by the CA 1950, section 64 reminds that;
If the parties to a contract agree to substitute a
new contract for any promise, or to rescind or alter,
the original contract need not to be performed.
Section 45, CA 1950 clearly defines that;
An agreement can only be discharged by the consent
of all parties to the agreement.
The discharge of an agreement depends on the nature
of the agreement itself, either it is bilateral or
unilateral.
Discharge by Frustration
due to subsequent change in circumstances, or any
unforeseen condition, the parties may find it not
possible to perform, or it has become deprived of its
commercial purpose by an event not due to the act or
default of either party.
Examples of frustration:
Destruction of the specific object essential for
performance of the contract
Personal incapacity
The non occurrence of non specify events
Interface by the government
Supervening illegality
delay
Remedies of Breach of Contract
 Remedies for Breach of Contract
A remedy is the solution or reliving of a problem or
difficulty.
In law, a remedy is the legal means employed by a court
to help a party recover a right or obtain redress for a
wrong.
The innocent party, is entitle to one or the following
remedies:
Recession of the contract
Damages
Specific performance
Injunction.
Remedies for Breach of Contract
Damages is most common head of remedies
claimed by an innocent party for breach of
contract.
A legal remedy (also judicial relief) is the
means with which a court of law, usually in
the exercise of civil law jurisdiction,
enforces a right, imposes a penalty, or
makes some other court order to impose
its will.
Remedies for Breach of Contract
Rescission of contract
The innocent party stop from
proceeding the contract.
General,

Damages special,

Types of nominal,
Remedies substantial,
Injunction
exemplary
Preventive relief granted by courts on a
discretionary basis to enforce the
contract performance

Specific performance
Defaulting parties to perform the contract
specifically (perform what he had promise)
 Recession of The Contract
Recession of the contract means the cancellation of a
contract and the return of the parties to the positions
they would have had if the contract had not been made.
The contract is canceled and both sides are excused
from further performance and any money advanced is
returned.
If the innocent party rescind the contract:
Under section 65 CA 1950, he must restore to the
other party any benefit he may have received from
him.
He has to communicate the decision to rescind to the
other party as per Section 67 CA 1950.
Under section 76 CA 1950, he is entitle to
compensation for any damage which he has sustained
through the non-fulfillment of the contract;
 Damages
Most common head of remedies claimed by an innocent
party for breach of contract.
Intended to allow the innocent party to compensation.
Awarded to an innocent party as of right, for the damages,
loss or injury he has suffered for a breach of contract.
The consequences of breach of contract are amply covered
under Part VII in the Contract Act 1950 in the following
sections:
Sec 74-compensation for loss or damages cause by
breach of contract
Sec 75-compensation for breach of contract where
penalty is stipulated
Sec 76-party rightfully rescinding contract entitled to
compensation.
Categories of damage; GENERAL, SPECIFIC, NOMINAL,
SUBSTANTIAL, and EXAMPLARY (module page 68 and
69).
 Specific Performance
Some contracts, the remedy of damages is not enough or
suitable to compensate the innocent party for the loss
occasioned by the defaulting partys breach of contract.
Therefore, the defaulting party may be compelled by an
order by the court to perform what he has promised to
do in his agreement.
For example:
A is making a contract to sell a land to B, and B had
accepted A offer. Due to some reasons, A changed his
mind and decided not to sell the land to R. In this case,
R could seek for court order for A to sell the land to
him.
Specific performance is merely an equitable remedy that
is decreed at the discretion of the court; it is not
available as an automatic right to the innocent party.
Injunctions
A contract may contain a negative stipulation which is
broken. The appropriate remedy is an injunction.
Where someone refuses to perform a positive obligation.
Injunction cannot be used to stop an ordinary breach of
contract.
It is a form of preventive relief granted by the courts on
a discretionary basis to enforce the performance of a
contract.
Injunction can be define as an order of the court
directing a person to refrain from doing or continuing to
do an act complained of, or restraining him from
continuing an omission
Quiz 2 (Take Home)
Page 70, Module Contract and Estimation. Question No. 1
Answer (individual)
submission due: 11/10/2013 - 5.00pm
End of Chapter 3

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