Sunday, 9 September 2012

CONTRACT ACT - PART VI (DISCHARGE OF A CONTRACT)


Agreements enforceable by law are contracts.
The Contract Law is mostly Commonsense
Points for discussion as based on The Indian Contract Act 1872

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
  • Discharge by breach of contract


DISCHARGE BY PERFORMANCE

Actual Performance
When both parties perform their promises & there is nothing remaining to perform.

Attempted Performance
When the promisor offers to perform his obligation, but promisee refuses to accept the performance. It is also known as tender.

DISCHARGE BY AGREEMENT OR CONSENT

  • NOVATION: New contract substituted for old contract with the same or different parties.
  • RESCISSION: When some or all terms of a contract are cancelled.
  • ALTERATION: When one or more terms of a contract is/are altered by the mutual consent of the parties to the contract.
  • REMISSION: Acceptance of a lesser fulfillment 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.


DISCHARGE BY IMPOSSIBILITY OF PERFORMANCE
  • Known to the Parties
  • Unknown to the Parties
          Subsequent impossibility
          Supervening Impossibility (doctrine of frustration in English Law)
                 Destruction of subject matter
                 Non-existence of state of things (Failure of Ultimate Purpose – frustration of the contract)
                 Krell v Henry (1903) (Case of hiring a flat to witness coronation procession of King Edward VII)
  • Death or incapacity of personal services
  • Change of law
  • Outbreak of war


When Impossibility of performance is not an excuse:
  • Difficulty of performance – due to some uncontemplated events or delays
  • Commercial impossibility – e.g. expectations of higher profits not realised, sudden depreciation of currency etc
  • Impossibility due to failure of a third person on whose work the promisor relied
  • Strikes, lock-outs & civil disturbances; unless the parties have specifically agreed in this regard at the formation of the contract.
  • Failure of one of the objects, where there are several objects, does the discharge the contract


DISCHARGE BY LAPSE OF TIME
The Limitation Act 1963, clearly states that a contract should be performed within a specified time called period of limitation. If it is not performed and if the promisee takes no action within the limitation time, then he is deprived of his remedy at law.

DISCHARGE BY OPERATION OF LAW
  • Death
  • Merger
  • Insolvency
  • Unauthorised alteration of the terms of a written agreement
  • Rights & liabilities becoming vested in the same person
  • (e.g. bill of exchange gets into the hands of the acceptor)


DISCHARGE BY BREACH OF CONTRACT

ACTUAL BREACH
  • At the time when the performance is due
  • During the performance of the contract


ANTICIPATORY BREACH
Declaration of not performing the contract before the performance is due

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