Discharge of Contracts under Indian Contract Act, 1872

Updated: Jul 23, 2021

Meaning

Discharge of Contracts under Indian Contract Act, 1872

Any contract is entered into between two parties for the subsequent fulfilment of the terms of the contract by the contracting parties. Any contract is only said to be discharged when the rights and obligations created by such agreement cease to exist.

However, such cessation of contracts between two parties can occur in more than a single obvious manner. Therefore, we have discussed the various modes, as to how a contract can be discharged under the Indian Contract Act, 1872.



Modes of Discharge of Contract

When an agreement that was binding on the party to it ceases or stops to bind them, the contract is said to be discharged. There are several ways of discharging a contract. They are discussed as below-

Discharge of Contracts under Indian Contract Act, 1872

1. Discharge by Performance:


Each party to contract will undoubtedly play out his piece of the commitment. After the party have made due execution of the agreement, their responsibility under the agreement concludes.

The contract is deemed to be discharged by performance. Concerning such discharged contract, there cannot be any dispute.


2. Discharge by Breach of Contract:

Discharge of Contracts under Indian Contract Act, 1872

When a party having a duty to perform a contract, fails does that or does an act whereby the performance of the agreement by him becomes unimaginable, or he won't play out the agreement, there is supposed to be a breach of contract on his part.

When one party commits a breach of contract, the other party is discharged from his obligation to perform under the contract.


Classification of Breach of Contract-


Actual i.e. the non-performance of the contract on the due date of performance.

Anticipatory i.e. before the due date of performance has come.


  • Anticipatory Breach of Contract

This is covered under Section 39 of the Indian Contract Act, 1872. It implies the repudiation of a contract by one party before the due date of his performance has arrived.

When the refusal to perform the contract in its entirety is not there, it is not be considered a case of anticipatory breach under Section 39.


Effects of anticipatory breach of contract


When the promisor has made an anticipatory breach of contract, “ the promisee may put an end to the agreement, except if he has signified by words or direct his quiet submission, in its continuation."

It means that on the anticipatory breach of contract by one party, the other party has two alternatives open to him:-

The other party may rescind the contract i.e. he has the right to treat the contract as if it has come to an end, even though the due date of performance has not yet arrived.


Anticipatory breach by one party does not automatically put an end to the contract. On anticipatory breach by one party, the other party can exercise either treat that the contract has come to an end or treat the contract as if it is still alive and continuing until the due date of performance comes.


CASE LAW: Frost v. Knight

In this case, the plaintiff was promised by the defendant, of marriage upon the death of the defendant's father. However, before the death of the father, the defendant broke off the engagement. The plaintiff sued the defendant, before the death of the defendant's father on breach of contract and was successful.


3. Discharge by Impossibility of Performance:

Discharge of Contracts under Indian Contract Act, 1872

Section 56 of the Contract Act provides for Discharge of Contract by Impossibility of Performance. If the performance of a contract is impossible, the same is considered void, in both England and India.

  • Initial Impossibility under Section 56(1)

An agreement to do an inconceivable demonstration is in itself void. Performance of the respective promises by parties is the most essential aspect of any agreement.

If a contract is impossible to be performed, the parties to it will never be able to fulfil their objective and hence such agreement is void.


Section 56 is based on the maxim-les non-cogit ad impossibilia which means that the law does not compel a man to do something that he cannot possibly perform.


  • Subsequent Impossibility under Section 56(2)

Upon entering the contract, the performance of the terms of such contract may be reasonable and can be performed. However, the occurrence of certain events or circumstances can later render it impossible for any one of the parties to fulfil their part of the contract.

Thus, in the event, when the performance of the contract becomes impossible, the contract is void.


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