Discharge_of_contract

Chapter 2 (part 5) : Discharge of contract

Discharge of contract

• Means the termination of a contractual relationship between two parties.
• A contract is said to be discharged when its ceases to operate.

Ex : When the rights and obligations are created by it come to the end.

• The cases in which a contract is discharged may be classified as follows:

        i.            By performance or tender of contract

      ii.            By mutual consent

    iii.            By impossibility of performance

    iv.            By the operation of law

      v.            By lapse of time

    vi.            By breach of contract

  vii.            Frustration of contract

i.                    By performance or tender of contract

Actual Performance

When both parties perform their promises and there is nothing remaining    to perform.

Attempt Performance or tender

      When the promisor offer to perform his obligation, but promisee refuses to             accept the performance.

ii.                  By mutual 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.

iii.                By impossibility of performance

• Parties obligations under contracts may be discharged by objective impossibility of performance or commercial impracticability of performance.
• Where performance is only temporarily impossible, the performance is suspended until the impossibility ceases.

For example, death or illness in a personal service contract.

iv.                By the operation of law

• A contract may be discharged or the right to enforce it may be barred by operation of law.
• Debts discharged in bankruptcy.
• Time allowed for enforcement of the contract has elapsed because of the statute of limitations.
• Alteration – a material change in the term of a written contract without the consent of the other party – the alteration must be :
• Material – thus changing the obligation in an important way
• Made intentionally – not by accident or mistake
• Made by a party to the agreement or by an authorized agent
• Made without the consent of the other party

v.                  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.

vi.                By breach of contract

• If a party breaks his obligation which the contract imposes, there takes place breach of contract.

Actual breach of contract may occurs,

     (a) at the time when the performance is due

     (b) during the performance of the contract

Anticipatory breach of contract occurs, when a party repudiates his liability or obligation under the contract before the time for performance arrives.

vii.              Frustration of contract

• Frustration is where the performance of obligations under the contract becomes impossible as a result of events beyond the power and control of either party.
• Frustration is not good for us because they gradually wear us down.
• Effect is to discharge the parties from the contract.
• There is no requirements for a frustration notice.
• No legal action can be taken against either.