DISCHARGE OF CONTRACT

1.
2.
3.
4.

When an agreement, which was binding

on the parties to it, ceases to bind them,
the contact is said to be discharged. A
contract may be discharged in the
following ways:
By Performance of the contract ;
By breach of the contract ;
By impossibility of performance ;
By Agreement.
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1. DISCHARGE BY PERFORMANCE
Under a contract each party is bound to
perform his part of the obligation. After the
parties have made due performance of the
contract, their liability under the contract
comes to an end. In such a case the
contract is said to be discharged by
performance.
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2. DISCHARGE BY BREACH OF CONTRACT

When a party having a duty to perform a contract fails to do
that, or does an act whereby the performance of the contract
by him becomes impossible, or he refuses to perform the
contract, there is said to be a breach of contract on his part. On
the breach of contract by one party, the other party is
discharged from his obligation to perform his part of the
obligation, and he also gets a right to sue the party making the
breach of contract for damages for the loss occasioned to him
due to the breach of contract. The breach of contract may be
either actual, i.e., non-performance of the contract on the due
date of performance, or anticipatory, i.e., before the due date of
performance has come. For example, A is to supply certain
goods to B on 1st January. On 1st January A does not supply
the goods. He has made actual breach of contract. On the
other hand, if A informs B on 1st December that he will not
perform the contract on 1st January next, A has made
anticipatory breach of contract
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ANTICIPATORY BREACH OF CONTRACT

It means the repudiation of a contract by one party to it
before the due date of its performance has arrived.
Section 39, which contains law relating to anticipatory
breach of contract is as follows:
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.
Anticipatory breach of contract could be made by
promisor, either by refusing to perform the contract, or
disabling himself from performing the contract in its
entirety, before the due date of performance has arrived.
When the refusal to perform the contract in its entirety is
not there, it is not to be considered to be a case of
anticipatory breach within the meaning of section 39.
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EFFECT OF ANTICIPATORY BREACH OF CONTRACT

When the promisor has made anticipatory breach of
contract, the promisee may put an end to the contract,
unless he has signified by words or conduct his
acquiescence in its continuance.
It means that on the breach of contract by one party, the
other party has two alternatives open to him, viz.,
(i) He may rescind the contract immediately, i.e., he may
treat the contract as an end, and may bring an action for
the breach of contract without waiting for the appointed
date of the performance of the contract,
(ii)He may not put an end to the contract but treat it as still
subsisting and alive and wait for the performance of the
contract on the appointed date.

In Hochester Vs. De La Tour (1853) the Defendant

engaged the plaintiff on 12th April, 1852, as a courier to
accompany him on the tour of Europe. The tour was
agreed to begin on 1st June, 1852 and the plaintiff was to
be paid 10 per month for his services. On 11th May,
1952 the defendant wrote to the plaintiff informing him that
he has changed his mind and declined to take the services
of the plaintiff. On 22nd May, 1852, the plaintiff brought an
action against the defendant for the breach of contract.
The defendant contended that there could be no breach of
contract before 1st June. It was held that a party to an
executory contract may make a breach of contract before
the actual date of performance, and the plaintiff, in such a
case, is entitled to put an end to the contract and he can
bring an action even before the actual date of performance
has arrived. The plaintiffs action therefore succeeded.

(ii) ELECTION TO KEEP THE

CONTRACT ALIVE
Anticipatory breach of contract by one party does not automatically
put an end to the contract. It has already been noted above that on
the anticipatory breach by one party the other party can exercise the
option either to treat the contract at an end, or, to treat it as still
subsisting until the due date of performance comes. As pointed out by
the Supreme Court in the case of State of Kerala Vs. Cochin
Chemical Refineries, AIR. 1968, Breach of contract by one party
does not automatically terminate the obligation under the contract :
the injured party has the option either to treat the contract as still in
existence, or to regard himself a discharged. If he accepts the
discharge of the contract by the other party, the contract is at an end.
If he does not accept the discharge, he may insist on the
performance.
When the contract is kept alive by the promisee, the promisor may
perform the same, in spite of the fact that he had earlier repudiated it.
If the promisor still fails to perform the contract on the due date, the
promisee will be entitled to claim compensation on the basis of the
breach of the contract on the agreed date of performance.
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Illustration
A, a singer, enters into a contract with B, the
manager of a theatre, to sing at his theatre two
nights in every week during the next two months,
and B engages to pay her at the rate of 100
rupees for each night. On the sixth night A
wilfully absents herself. With the assent of B, A
sings on the seventh night. B has signified his
acquiescence in the continuance of the contract,
and cannot now put an end to it, but is entitled to
compensation for the damage sustained by him
through As failure to sing on the sixth night
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The case of Avery Vs. Bowden (1855) illustrates the point where
the promisee elects to keep the contract alive, and the promisor in
spite of his earlier repudiation of the contract is discharged from
liability because of supervening circumstances before the date of
the performance arrives. In this case, A chartered Bs ship at
Odessa, a Russian port, and undertook to load the ship with cargo
within 45 days. Before this period had elapsed, A failed to supply
the cargo and declined to supply the same. The master of the ship
continued to insist that the cargo be supplied but A continued to
refuse to load. Before the period of 45 days was over, Crimean War
broke out between England and Russia, whereby it became illegal
to load cargo at a hostile port. The question in this case was,
whether by declaration of the war A had been discharged from
liability to load the cargo. In this case, on As refusal to load the
cargo B could have rescinded the contract and brought an action
against A, but B instead, by insisting that the cargo be supplied,
kept the contract alive. The contact continued to be alive and
subsisting for the benefit of both A and B. By the declaration of war,
the performance of the contract having become unlawful, it was held
that A had been discharged from his duty to supply the cargo, and,
therefore, A could not be made liable for non-performance of the
contract.
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3. DISCHARGE

BY IMPOSSIBILITY OF
PERFORMANCE

Section 56, which deals with this question,

mentions two kinds of impossibility.
Firstly, impossibility existing at the time of the
making of the contract.
Secondly, a contract which is possible of
performance and lawful when made, but the
same becomes impossible or unlawful thereafter
due to some supervening event.

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1. INITIAL IMPOSSIBILITY
An agreement to do an act impossible in itself is
void. The object of making any contract is that
the parties to it would perform their respective
promises. If a contract is impossible of being
performed., the parties to it will never be able to
fulfil their object, and hence such an agreement
is void. For example, A agrees with B to
discover treasure by magic. The performance of
the agreement being impossible, the agreement
is void. Similarly, an agreement to bring a dead
man to life is also void.
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2. SUBSEQUENT IMPOSSIBILITY
The performance of the contract may be
possible when the contract is entered into but
because of some event, which the promisor
could not prevent, the performance may become
impossible or unlawful. Section 56 makes the
following provision regarding the validity of such
contracts :
A contract to do an act which after the contract
is made, becomes impossible, or by reason of
some event which the promisor could not
prevent, unlawful, becomes void when the act,
becomes impossible or unlawful.
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Section 56 explains this point with the help of following

illustrations:
A and B contract to marry each other. Before the time fixed for
marriage, A goes mad. The contract becomes void.
A Contracts to take in cargo for B at a foreign port. As
Government afterwards declares war against the country in
which the port is situated. The contract becomes void when war
is declared.
A contracts to act at a theatre for six months in consideration of
a sum paid in advance by B. On several occasions A is too ill
to act. The contract to act on those occasions becomes void.

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(4) DISCHARGE BY AGREEMENT AND

NOVATION
Section 62 and 63 deals with contracts in which the
obligation of the parties to it may end by consent of the
parties.
Novation
Novation means substitution of an existing contract with
a new one. When, by an agreement between the parties
to a contract, a new contract replaces an existing one,
the already existing contract is thereby discharged, and
in its pace the obligation of the parties in respect of the
new contract comes into existence. Section 62 contains
the following provision in this regard:
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62. EFFECT OF NOVATION, RESCISSION

AND ALTERATION OF CONTRACT

If the parties to a contract agree to

substitute a new contract for it or rescind or
alter it, then original contract need not be
performed,
Novation is of two kinds :
(i) Novation by change in the terms of the
contract, and
(ii) Novation by change in the parties to the
contract
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(i) CHANGE IN THE TERMS OF

THE CONTRACT
Then parties to a contract are free to alter the contract
which they had originally entered into. If they do so, their
liability as regards the original agreement is extinguished,
and in its place they become bound by the new altered
agreement. For example, A owes B 10,000 rupees. A
enters into an agreement with B , and gives B a
mortgage of his (As) estate for 5,000 rupees in place of
the debt of 10,000 rupees. This is a new contract and
extinguishes the old. In this illustration the parties to the
contract remain the same but there is a substitution of a
new contract with altered terms in place of the old one. It
may be noted that novation is valid when both the parties
agree to it. As the parties have a freedom to enter into a
contract with any terms of their choice, they are also free
to alter the terms of it by their mutual consent.
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(ii) CHANGE IN THE PARTIES

TO THE CONTRACT
It is possible that by novation an obligation may be created for one party in
place of another. If under an existing contract A is bound to perform the
contract in favour of B , the responsibility of A could be taken over by C.
Now instead of A being liable towards B, by novation C becomes liable
towards B .
It may be noted here that in such cases there should be consent of all the
three persons, viz.,
i.
the person who wants to be discharged from the liability,
ii.
the person who undertakes to be liable in place of the person
discharged, and
iii. the person in whose favour the performance of the contract is be liable to
be made. Thus, if A and B agree that in place of A, now C will be
liable, but C does not consent to it, there would be no novation. For
example, A owes B 1,000 rupees under a contract. B owes C 1,000
rupees. B orders A to credit C with 1,000 rupees in his books, but C
does not assent to the agreement. B still owes C 1,000 rupees and no
new contract has been entered into.
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REMEDIES FOR BREACH OF

CONTRACT

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REMEDIES FOR BREACH OF

CONTRACT
When one of the parties to the contract makes
a breach of the contract the following remedies
are available to the other party.
1. Damages : Remedy by way of damages is the
most common remedy available to the injured
party. This entitles the injured party to recover
compensation for the loss suffered by it due to
the breach o9f contract, from the party who
caused the breach. Section 73 to section 75
incorporate provisions in this regard.
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REMEDIES FOR BREACH OF

CONTRACT
2. Quantum meruit : When the injured

party has
performed a part of his obligation under the contract
before the breach of contract has occurred, he is
entitled to recover the value of what he has done, under
this remedy.

3. Specific Performance and Injunction :

Sometimes a party to the contract instead of recovering

damages for the breach may have recourse to the
alternative remedy of specific performance of the
contract, or an injunction restraining the other party from
making a breach of the contract. Provisions regarding
these
remedies have been contained in the Specific
Relief Act, 1963.
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DAMAGES
Section 73 makes the following provisions regarding the
might of the injured party to recover compensation for the
loss or damage which is caused to him by the breach of
contract.
Section 73. Compensation for loss or damage caused
by breach of contract. When a contract has been
broken, the party who suffers by such breach is entitled to
receive, from the party who has broken the contract,
compensation for any loss or damage caused to him
thereby, which naturally arose in the usual course of
things from such breach, or which the parties knew, when
they made contract, to be likely to result from the breach
of it.
Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason of the
breach.
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DAMAGES
Compensation for failure to discharge obligation
resembling those created by contract. When an
obligation resembling those created by contract has
been incurred and has not been discharged, any person
injured by failure to discharge it is entitled to receive the
same compensation from the party in default, as if such
person has contracted to discharge it and had broken his
contract.
Explanation :- In estimating the loss or damage arising
from a breach of contract, the means which existed of
remedying the inconvenience caused by nonperformance of the contract must be taken into account.
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DAMAGES
The section has been explained with the help of the following
illustrations :
a) A contracts to sell and deliver 50 maunds of saltpetre to B , at
certain price to be paid on delivery. A breaks his promise, b is
entitled to receive from A, by way of compensation, the sum, if
any, by which the contract price falls short of the price for which B
might have obtained 50 maunds of saltpetre of like quality at the
time when the saltpetre ought to have been delivered.
b) A contracts to let his ship to B for a year from the first of January,
for a certain price. Freights rise, and on the first of January, the hire
obtainable for the ship is higher than the contract price. A breaks
his promise. He must pay to B, by way of compensation, a sum
equal to the difference between the contract price and the price for
which B could hire a similar ship for a year on and from first
January.
c) A contracts to repair Bs house in a certain manner, receives
payments in advance. A repairs the house but not according to
contract. B is entitled to recover from A the cost of making the
repairs conform to the contract.
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IMPORTANT TYPES OF DAMAGES

1. General Damages and Special Damages
2. Nominal Damages
3. Exemplary Damages
4. Liquidated Damages
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General Damages and Special Damages

General Damages are those which arise naturally and in the normal
course of events, whereas special damages are those which do not
arise naturally out of the defendants breach and are recoverable
only when they were in the reasonable contemplation of the parties
at the time they made the contract.
General damages are those which will be presumed to be natural or
probable consequences of the wrong companied of, with the result
that the plaintiff is required only to assert that such damages has
been suffered, whereas special damages refers to those losses
which must be specifically pleaded and proved.
General Damages are those losses which are non pecuniary, which
are not capable of precise quantification in monetary terms, whereas
special damages are those losses which can be calculated in
financial terms. Special damages represent the precise amount of
pecuniary loss which the claimant proves to have suffered from the
set of facts.
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Nominal Damages
Where the injured or aggrieved party
suffers no loss or very negligible loss the
Court may still award him or her nominal
damages in order to recognise his or her
right. Thus, such damages merely
acknowledge that the aggrieved or
injured party has proved his case and
won it.
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Exemplary Damages
Liquidated Damages
Exemplary Damages
They are intended to make an example of the
defendant, they are punitive and not intended to
compensate the plaintiff for any loss, but rather to
punish the defendant.

Liquidated Damages
Damages are said to be liquidated when they have
been agreed and fixed by the parties. It is the sum
which the parties have agreed by contract as payable
on default on one of them. If the compensation to be
paid on the breach of contract is the genuine
pre-estimate of the prospective damages, it is known
as liquidated damages.
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QUANTUM MERUIT
Ordinarily if a person having agreed to do some work or
render some
service has done only a part of what he was required to
do, he cannot claim anything for what he has done. When
a person agrees to complete some work for a lump sum
non-completion of the work does not entitle him to any
remuneration even for the part of the work done. But the
law recognises an important exception to this rule by way
of an action for Quantum Meruit Under this section if A
and B have entered into a contract, and A, who has
already performed a part of the contract, is then prevented
by B from performing the rest of his obligation under the
contract, A can recover from B reasonable remuneration
for what ever he has already done.
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QUANTUM MERUIT
It may be noted that this action is not an action for
compensation for breach of contract by the other side. It
is an action which is alternative to an action for the
breach of contract. This action in essence is one of
restitution, putting the party injured by the breach of
contract in a position in which he would have been had
the not been entered into. It merely entitles the injured
party to be compensated for whatever work he may have
already done, or whatever expense he may have
incurred. In the words of Alderson, B,
Where one party has absolutely refused to perform, or
has rendered himself incapable of performing, his part of
the contract, he puts it in the power of the other party
either to sue for the breach of it or to rescind the contract
and sue on a quantum meruit for the work actually
done.
29

QUANTUM MERUIT
The essentials of an action of quantum meruit are as
follows :
1. One of the parties makes a breach of contract, or

prevents the performance a part of it by the other side.

2. The party injured by the breach of the contract, who has

already performed a part of it, elects to be discharged

from further performance of the contract and brings an
action for whatever he has already done.

For instance, if A agrees to deliver B 500 bags of

wheat and when A has already delivered 100 bags B
refuses to accept any further supply, A can recover from
B the value of wheat which he has already delivered.
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QUANTUM MERUIT
In De Bernardy
Vs. Harding, (1853) the
defendant, who was to erect and le seats to view
the funeral of the Duke of Wellington, appointed
the plaintiff as his agent to advertise and sell
tickets for the seats. The plaintiff was to be paid
commission on the tickets sold by him. The
plaintiff incurred some expense in advertising for
the tickets but before any tickets were actually
sold by him his authority to sell tickets was
wrongfully revoked by the defendant. It was held
that the plaintiff was entitled to recover the
expenses already incurred by him under an
action for quantum meruit.
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Suit for Specific Performance

Award of damages are not considered to be an adequate
remedy in certain cases and therefore the court of law can
direct the party in breach to perform his promise according to
the terms and conditions of the contract. The party can claim
specific performance only when he keeps alive the contract
and is ready to perform his part of the contract. Specific
Performance is not granted where damages are an adequate
remedy for breach of contract.
In the following cases, specific performance may be granted
1. When the compensation in the from of money for the non
performance of the contract cannot be considered to be an
adequate relief.
2. Cases wherein accurate standard for ascertaining the actual
damage caused by the non-performance of the contract is not
available.
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Suit for Injunction

An injunction is an order of the court asking a
person to be or abstain from doing a particular
act, which is in fact the subject matter of the
contract.
X is a renowned teacher who agreed to teach
exclusively to Y for a period of two years and no
one else. During that period of two years, if X
contracts to teach to any other person, X can be
restrained by injunction from doing so.

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