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DISCHARGE OF A CONTRACT

 DISCHARGE BY PERFORMANCE
 DISCHARGE BY AGREEMENT OR CONSENT
 DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
 DISCHARGE BY LAPSE OF TIME
 DISCHARGE BY OPERATION OF LAW
 DISHARGE BY BREACH OF CONTRACT
Discharge of Contract
 A contract is said to be discharged when it ceases to operate.
 The rights and obligations created by it comes to an end.
 A contract may be discharged -
 By Performance
 Actual performance – doing what the parties intended to do
when they entered in to the contract.
 Attempted performance or tender – It is the legitimate
attempt on the part of the promisor to perform his obligations

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Performance of Contract
 Performance of a contract is a mode of discharge of the
contract.
 Performance of contract takes place when the parties to the
contract fulfill their respective obligations under the
contract.
 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.[Sec 37]

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Types of Performance
Complete
Performance

Substantial
Performance

Inferior Performance
Complete Performance
• Most contracts are discharged by strict
performance.
• A fully performed contract is an executed
contract.
• Tender of performance discharges contractual
obligations.
Substantial Performance
• This occurs when there is a minor breach of
contract.
– Performance deviates slightly from complete
performance.
– Non breaching party may recover damages.
Inferior Performance
• This is a material breach of contractual
obligations.
• Non breaching party may rescind contract and
seek restitution.
• Non breaching party is excused from any
further performance.
Performance and Demand of Performance
 By promisor himself. (S. 40)
 Promisor’s Agent. (S. 40)
 Legal representatives.
 Third person. (S 41)
 Joint promisors.
 Promisee
 Legal Representative
 Third Party
 Joint promisee
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DISCHARGE BY
AGREEMENT OR CONSENT
 NOVATION (Sec 62): New contract substituted for old contract with the same or
different parties
 RESCISSION (Sec 62) : When some or all terms of a contract are cancelled

 ALTERATION (Sec 62):When one or more terms of a contract is/are altered by


the mutual consent of the parties to the contract
 REMISSION (Sec 63) :Acceptance of a lesser fulfilment of the promise made.

 WAIVER :Mutual abandonment of the right by the parties to contract

 MERGER :When an inferior right accruing to a party to contract merges into a


superior right accruing to the same party
Rescission of the contract
 Rescission means a right not to perform an obligation.
 In case of breach of contract the promisee need not perform
his obligation,
 he is not only discharged from his liabilities but also he is
entitled to claim compensation for damages
 which he might have sustained due to non performance of
the contract. [Section 39]

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By operation of Law
 By death.

 By merger.

 By insolvency.

 By unauthorized alteration of terms of a written contract.

 By rights and liabilities becoming vested in the same person.

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By Impossibility of Performance
 Impossibility existing at the time of agreement –

 Known to the parties – the agreement is void ab initio.

 Unknown to the parties – the agreement is void on the


ground of mutual mistake.
 Impossibility arising subsequent to the formation of the
contract.

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By Supervening Impossibility

 Destruction of subject matter of contract

 Non-existence or non-occurrence of a particular state or


things
 Death or incapacity for personal services

 Change of law or stepping in of a person with statutory


authority
 Out break of war

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By breach of contract
 Actual Breach
 a) On the due date of performance.
 b) During the course of performance of contract.
 i) Express Repudiation.
 ii) Implied Repudiation.
 Anticipatory Breach
 a) By express renunciation.
 b) Making the performance of promise become
impossible by doing some act.
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Remedies for Breach of Contract
 When the contract is broken, the injured party has one or
more of the following remedies:
 Rescission of the contract.

 Suit for damages.

 Suit upon quantum meruit.

 Suit for specific performance.

 Suit for injunction.

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Suit for damages

 Damages are monetary compensation allowed to the injured


party for the loss suffered.
 The object of awarding damages is not to punish the party at
fault
 but to make good the financial loss suffered by the injured
party due to breach of contract.

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Types of Monetary Damages
Compensatory Consequential
Damages Damages

Nominal Liquidated
Damages Damages
Compensatory Damages
• Award of money intended to compensate a non-
breaching party for the loss of the bargain.
• They place the non-breaching party in the same
position as if the contract had been fully
performed by restoring the “benefit of the bargain.”
• The amount of that will be awarded for breach
of contract depends on:
– The type of contract involved, and
– Which party breached the contract.
• Special types of contracts:
– Sale of Goods
– Construction Contracts
– Employment contracts
Mitigation of Damages

• A non-breaching party is under a legal


duty to avoid or reduce damages caused by
a breach of contract.
• The extent of mitigation depends on the
type contract involved.
Consequential Damages

• Foreseeable damages that arise from


circumstances outside the contract.
• To be liable for these damages,
– The breaching party must know or have reason to
know that the breach will cause special damages to
the other party.
Liquidated Damages
• Damages to which parties to a contract agree
in advance if the contract is breached.
• To be lawful,
– The actual damages must be difficult or
impracticable to determine, and
– The liquidated amount must be reasonable in the
circumstances.
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.
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.”
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.
Specific Performance
 The remedy of Specific Performance is in the nature of
equitable remedies based on the principles of equities.
 Among the remedies are specific performance, injunction,
rectification and cancellation of instruments and rescission of
contract.
 In the discretion of the court, specific performance may be
enforced:
 where there is no standard for ascertaining the actual
damage caused by the non-performance; or
 where compensation in money for the non-performance
would not afford adequate relief.
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Suit for Injunction
 It is a judicial process whereby a party to the contract is
ordered to refrain from doing a particular act or thing, or
 to do a particular act or thing.
 It a discretionary remedy and it acts only in personam.
 Injunction means a prohibitory order of the court to a
person to
 not to do a particular act he has promised not to do under a
contract, or
 to do an act which he has promised, under a contract, to do.

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