Discharge of Contract

In general Discharge of Contract refers to the freedom of the parties to the

contract, from their mutual obligations.

There are four methods by which a contract can be discharged or terminated:

• Lawful discharge of contract by agreement

• Discharge by performance
• Discharge by frustration and
• Unlawful discharge by breach.

Where at the outset, the parties to the contract have agreed upon the condition
that the contract would stand terminated on the expiration of a given time, the
contract is said to be discharged out of the original agreement. Discharge of
Contract may take place when both parties have performed their obligations
placed upon them by the contract. In some cases, it is impossible to perform an
agreement at the outset and is void. However, there are some contracts which
are possible to be performed when they are made but subsequently, it
becomes impossible to execute them in whole or in part which are then referred
to as frustrated. It would not be a frustration if the contract has been made
impossible to perform by any voluntary act of the parties to the contract. A
contract is said to be discharged by breach when a party to it violates one or
more terms of the contract and fails to discharge it lawfully, e.g., where a seller
fails to deliver the goods by the appointed time or where although, delivered,
they are not up to the quality or quantity. In order to constitute a breach of
contract, the breach must a vital part of the contract.

A Contract is deemed to be discharged, that is, completed and no longer binding,

in the following circumstances.

 Performance. That is, all parties have satisfied the requirements of the
contract to the satisfaction of the other parties. The overwhelming majority of
contracts are discharged this way. However, it not always clear when a
contract has been performed, or what should happen in the event of Part
performance of contract.
 Agreement. If the contract is still wholly executory (in progress) then there
is no problem here, as neither party is set to lose out. However, if one party
has fulfilled his obligation and the other has not, then the agreement to
discharge must be supported by fresh Consideration. For example, suppose I
hire someone to paint my house, with an agreement to pay on completion.
The painter does not turn up to do the job. If the painter and I agree to
abandon the work, then the contract is discharged. However, suppose I pay in
advance, and the painter does not turn up. I may decide that it is not worth my
while to compel the painter to work, or to take legal action, and agree to write
off the payment and discharge the contract. If I later decide to take legal
action against the painter, the agreement to discharge will not be binding,
because the painter offered no consideration
 Legal reasons for discharge without performance. There are few of these;
the most common is Frustration of contract; if a contract is frustrated (i.e.,
impossible to perform) then it may be considered discharged without legal
consequences.
 Breach. A Breach of contract is a refusal by one party to abide by its
terms, without legal excuse (e.g., frustration).