dischargeofcontract.ppt

8/11/2019 DISCHARGEOFCONTRACT.ppt

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AMITY GLOBAL

BUSINESS SCHOOL Chandigarh

Dischargeof contract Means- termination of the contractualrelationships between the parties.

A contract Is said to be discharged whenceases to operate.

The various modes of Discharge of

contract


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DISCHARGE OF CONTRACT

By agreement (sec-62,63)

By breach of contract (section-39) By impossibility of performance

initial impossibility

subsequent impossibility

By operation of law

By lapse of time


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DISCHARGE BY AGREEMENT

Alteration

Novation Rescission

Remission

Waiver merger


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Novation (sec 62)

Novation takes place when (1)a new contract issubstituted for an existing one between thesame parties

(2)a contract between 2 parties is rescinded inconsideration of a new contract being enteredinto on the same terms between one of theparties and a third party .

E.g.. where a creditor at the request of a debtoragrees to take another person as his debtor inplace of the original debtor


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Resciss ionmay occur when all or some of the terms of thecontract are cancelled. it may occur-

(1)by mutual consent of the parties(2)where one party fails in the performance of his

obligationEx.-A promises to supply certain goods to B six

months after date. by that time goods go out offashion .A and B may rescind the contract

-A induces B to enter into a contract by fraud .inthis case the contract is void able at the option ofB. he may rescind the contract


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ALTERATION Takes place when one or more of the terms ofthe contract is/are altered by the mutual consentof the parties to the contract. in such a case the

old contract is discharged. E.g.. A enters into a contract with B for the

supply of 100 bales of cotton at his godownNO.1by the first of the next month. A and B may

alter the terms of the contract by mutual consent


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Remission

It means acceptance of a lesser fulfillmentof the promise made. e.g. acceptance of alesser sum than what was contracted for,

in discharge of the whole of the debt. It isnot necessary that there must be someconsideration for the remission of the part

of the debt


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Waiver Waiver takes place when the parties to acontract agree that they shall no longer bebound by the contract .

Mergertakes place when an inferior rightaccruing to a party under contract mergesinto a superior right accruing to the same

party under the same or some othercontract


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DISCHARGE BY OPERATIONOF LAW

INSOLVENCY-when a person is adjudged insolvent ,he isdischarged from all liabilities incurred prior to his adjudication

MERGER

ALTERATION-where one party makes any alteration into thecontract without the consent of other party the ,other party can avoidthe contract

DEATH-in contracts involving personal skill or ability ,the contract isterminated on death of the promisor. in other contracts ,the rightsand abilities o a deceased person pass on to the legalrepresentatives of the deceased person


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DISCHARGE BY IMPOSSIB IL ITY

OF PERFORMANCE If an agreement contains an undertaking

to perform an impossibility ,it is void abinitio. this rule is based on the followingmaxims:

1)law does not recognizes what is

impossible2)What is impossible does not create an

obligation


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U/S 56 impossibility of performancemay fall into either of the following

categories

1.Impossibility existing at the time ofagreement known aspre-contractualimpossibility. the fact of impossibility maybe

(i) Known to the parties

(ii) Unknown to the parties


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Pos t contractual /superveningimposs ib i l i ty

Impossibility which arises subsequent to

the formation of a contract. The contract becomes void when the act

becomes impossible or unlawful


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Discharge by superveningimpossib i l i ty

Destruction of the subject matter

Death or personal incapacity

Change of law Nonexistence or non-occurring of a

particular state of things

Declaration of war


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E.GS SUBJECT MATTER-A contracted to sell a specified

quantity of potatoes to be grown on his farms. the croplargely failed. held, the contract was discharged (Howellv. Coupland)

Death or personal incapacity-A contracts to act at atheatre for six months in consideration of a sum paid inadvance by B .on several occasions A is too ill to act. thecontract to act on those occasions is void.

Change o f law-D enters into a contract with P on 1st

march for the supply of certain imported goods in themonth of September of the same year .in June by an actof parliament, the import of such goods is banned .thecontract is discharged


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Declarat ion of war-A contracts to take cargofor B at a foreign port .As govt. afterwards

declare war against the country in which the port

is situated .the contract becomes void when waris declared

Non exis tence or non-occurr ing of a

part icular state of th ings-A and B contract to

marry each other .before the time fixed for themarriage A goes mad ,the contract becomesvoid.


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Impossibility of performance-not anexcuseIn the following cases, a contract is not discharged

on the ground of supervening impossibility:

1.difficulity of performance

2.commercial impossibility-a contract is notdischarged merely because expectation of

higher profits is not realized, or the necessaryraw material is available at a higher pricebecause of the outbreak of war ,or suddendepreciation of currency


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By lapse of time The limitation act ,1963 lays down that a

contract should be performed within aspecified period ,called period of limitation.


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Discharge by breach of contract

Breach of contract means a breaking ofobligation which a contract imposes. it occurs

when a party to the contract without lawfulexcuse does not fulfill his contractual obligationor by his own act makes it impossible that heshould perform his obligation under it.

It confers a right of action for damages on theinjured party


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Breach of contract may be1.Actual breach of contract

2.Anticipatory or constructive breach ofcontract

1.Actual breach of contract

-at the time when performance is due

-during the performance of the contract (halfconsignment delivered and half not given)


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Anticipatory breach of contract It occurs when a party to an executory contract

declares his intention of not performing thecontract before the performance is due. he maydo so

-by expressly renouncing his obligation under thecontracte.g. A undertakes to supply certain goods to B on

1stJanuary .before this date ,he informs B that

he is not going to supply the goods .-by doing some act so that performance of hispromise becomes impossible.


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The rights of the promisee in case ofanticipatory breach are as following;

-he can treat the contract as discharged

-he can immediately take a legal actionANTICIPATORY BREACH DOES NOT NECESSARILY

DISCHARGE THE CONTRACT ,UNLESS THE

PROMISEE SO CHOOSES


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REMEDIES FOR BREACH OFCONTRACT Rescission

Specific performance Injunction

Quantum Meruit

Damages ;- general or ordinarydamages,special damages,vindictive orexemplary damages,nominal damages


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Party rightfully rescinding contract entitled tocompensation(section-75)

A, a singer ,contracts with B, the manager of a

theatre ,to sing at his theatre for 2 nights inevery week during the next 2 months ,and Bengages to pay her rs.100 for each nightsperformance. on the sixth night, A willfullyabsents herself and B in consequences rescindsthe contract. B is entitled o claim compensationfor the damage which he has sustained throughthe non-fulfillment of the contract.


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Specific performanceIn certain cases the court may direct the party inbreach to carry out his performance according tothe terms of the contract .this is a discretion by

the court for specific performance of the contractat the suit of the party not in breach.

Some of the cases specific performance beenforced are as follows:

-when the act agreed to be done is such thatcompensation in money for its non-performanceis not an adequate relief.


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Injunction Where a party is in breach of a negative term of

a contract (i.e. where he is doing somethingwhich he promised not to do), the court may byissuing an order ,restrain him from doing whathe promised not to do ,such an order of the courtis known as injunction

Ex. N, a film actress ,agreed to act exclusivelyfor W for a year and for no one else. during theyear she contracted to act for Z .held she couldbe restrained by injunction from doing so.[Warner bros. v.nelson (1937)]


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Quantum Meruit This phrase literally means as much as earned'. this

right arises where a contract partly performed by oneparty, has become discharged by the breach of thecontract by the other party.

In other words unless a party has performed his promisein its entirely ,it cannot claim performance from theother.

But in certain cases ,when a person has done somework under the contract and the other party repudiated

the contract ,or some events happen which makes thefurther performance of the contract impossible,then theparty who has performed the contract can claimremuneration for the work he has already done.


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Damages-Damages are a monetory compensation

allowed to the injured party by the court forthe loss or injury suffered by him by

breach of a contractThe object of awarding damges for the

breach of a contract is to put the injuredparty in the same position ,so far asmoney can do it,as if he had not beeninjured


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Rules relating to damages-Damages arising naturally-ordinary damages

-special damages-e.g.. specimen of goods to be sent atexhibition and a note written on the consignment mustbe at new castle Monday certain

-vindictive or exemplary damages-given for a wrong doingeg.cheque bounce, breach of a promise to marry

-Nominal damages-small damages

-damages for loss of reputation

-cost of decree-the suit for damages is in discreation of thecourt

-damages agreed upon in advance in case of breach


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3.A enters into a contract with B for singingat his theatre for three nights for a fee ofrs.100 for every night. she sings for two

nights and is taken ill.(a) Can B ask for damages for loss of profit

from A?

(b) Would your answer be different if A singsfor the theatre another night?

dischargeofcontract.ppt

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