Data Structure
Networking
RDBMS
Operating System
Java
MS Excel
iOS
HTML
CSS
Android
Python
C Programming
C++
C#
MongoDB
MySQL
Javascript
PHP
Physics
Chemistry
Biology
Mathematics
English
Economics
Psychology
Social Studies
Fashion Studies
Legal Studies
- Selected Reading
- UPSC IAS Exams Notes
- Developer's Best Practices
- Questions and Answers
- Effective Resume Writing
- HR Interview Questions
- Computer Glossary
- Who is Who
Discharge of the Contract
Discharge of contract is the primary purpose of the law of contract, as it indicates that the contractual relationship between the parties has come to an end due to its completion. The term discharge basically implies that the parties are discharged or absolved from their liability to perform any act that was due in the contract; hence, they are no longer bound to do something as prescribed, and no liability for any action would be undertaken against them for the same.
Though ideally, the performance of obligations under the contract entails its completion, in certain circumstances, some other factors also terminate the contractual relationship between the parties.
Modes of Discharge of the Contract
The Indian Contract Act, 1872, provides different modes and methods for discharging the obligations of a contract under different situations, along with the liabilities imposed for default. These are the prescribed modes of terminating the contractual relationship under the statute −
Performance of Contract − Once the parties to the contract have performed their respective obligations within the prescribed time and manner, the contract comes to an end itself, and the parties are absolved of their liabilities. This is the most natural and sacrosanct method of contract completion as enshrined under Section 37 of the Act.
Mutual Agreement − If the parties to the contract mutually decide between themselves that the obligations need to be discharged under the contract, then as well, the contractual relationship comes to an end because if it can be entered into by mutual consent, then it can be destroyed by the same method.
Novation − When the parties to an agreement substitute a new contract for the old contract, then the old contract is discharged as provided under Section 62 of the Act.
Remission − When parties to a contract accept either a lesser amount or less performance of the obligation, the contract also terminates under Section 63 of the Act.
Recission − If the parties to a contract decide to dissolve the old contract by consent, then it implies discharge of obligations under Section 62 of the Act.
Waiver − If a party to a contract waives its right, then the other party is absolved from the obligation to perform the concerned act, hence the contract comes to an end.
Impossibility of Performance − Section 65 of the Act provides that a contract comes to an end if the performance of the obligations therein becomes either unlawful or impossible to perform after the making of the contract; hence, the contractual relationship between the parties is terminated.
Breach of Contract − If a party to a contract fails, neglects, or refuses to perform its obligation under the contract, then it amounts to a breach of contract, eventually absolving the other party to the contract from the performance and causing the discharge of the contract.
Lapse of Time − If the performance of a contract exceeds the time prescribed under the Limitation Act, then the parties to the contract are discharged from the obligations therein.
Operation of Law − There are certain situations under which a contract is discharged as the law releases the parties from performing their duties as it is neither reasonable nor practical to do so, for instance −
Death − If the rights and liabilities of a party to a contract cannot be performed by the representatives of the deceased party, then the contract is discharged
Insolvency − When a party to a contract is declared insolvent, he is discharged from all liabilities under the contract incurred prior to such a declaration.
These are some of the specified methods of discharging the contract by mutual agreement −
Conclusion
Discharge of contract is both a natural as well as a legal phenomenon, as it is based on the intention of parties and the demands of circumstances. Although, generally, the parties are inclined to perform the contract as it serves the purpose of making it unless some supervening or changed circumstances restrain them from executing it, the law acknowledges it and does not impose any penalty for the same.
However, if the performance of the contract becomes impossible due to the default of the parties, then there are due provisions for imposing damages that justify the loss suffered by others.
Frequently Asked Questions
Whether breach of contract by a party attracts penalty for the same?
The Indian Contract Act categorically provides that if a party fails or refuses to perform his part of the contract due to an unjustifiable or unreasonable cause, then the other party can claim damages for the loss suffered.
What is the difference between alteration and novation of contract?
Novation of contract implies discharge of old contract and formation of a new contract along with the freedom to add new parties; however, alteration of contract only provides for change in the terms or conditions of contract and does not include termination of contract.
48 Views
