DISCHARGE OF A CONTRACT by Performance & Mutual Agreement

 

DISCHARGE OF A CONTRACT BY PERFORMANCE & MUTUAL AGREEMENT

Discharge of a contract means termination of the contractual relations between the parties to the contract. The contract may be discharged in the following six modes: - 

1. Discharge by Performance

 2. Discharge by Mutual Agreement

 3. Discharge by Operation of Law

 4. Discharge by Impossibility of Performance

 5. Discharge by Lapse of Time

6. Discharge by Breach of Contract  

 

 

Various modes of Discharging of a Contract

Discharge of a contract means termination of the contractual relations between the parties to a contract. A contract is said to be discharged when the rights and obligations of the parties under the contract come to an end. Modes of discharge of contract 

1. Discharge by Performance 
A contract can be discharged by performance in any of the following ways: 

(a) By Actual Performance - A contract is said to be discharged by actual per-formance when the parties to the contract perform their promises in accordance with the terms of the contract. 

(b) By Attempted Performance or Tender - A contract is said to be discharged by attempted performance when the promisor has made an offer of performance to the promisee but it has not been accepted by the promisee. 

2. Discharge by Mutual Agreement 
Since a contract is created by mutual agreement, it can also be discharged by mutual agreement. A contract can be discharged by mutual agreement in any of the following ways: 

a) Novation [Section 62]- Novation means the substitution of a new contract for the original contract. Such a new contract may be either between the same parties or between different parties. The consideration for the new contract is the discharge of the original contract. 

Illustrations:

(a) A is indebted to B and B to C. By mutual agreement B’s debt to C and B’s loan to A are cancelled and C accepts A as his debtor. There is novation involving change of parties.

(b) Rescission [Section 62] - Rescission means cancellation of the contract by any party or all the parties to a contract. 

Illustration:

A promises to deliver certain goods to B on a certain date. Before the date of performance, A and B mutually agree that the contract will not be performed. The contract stands discharged by rescission.

(c) Alteration [Section 62] - Alteration means a change in the terms of a contract with mutual consent of the parties. Alteration discharges the original contract and creates a new contract. However, parties to the new contract must not change. 

(d) Remission [Section 63] - Remission means acceptance by the promisee of a’ lesser fulfillment of the promise made. According to Section 63, “Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.” 
Illustrations:

(a) If the promisee agrees to accept Rs 2,000 in full satisfaction of a claim of Rs 5,000, the promise is enforceable and the promisee cannot in future bring a suit for the recovery of Rs 5,000.

(e) Waiver - Waiver means intentional relinquishment of a right under the con-tract. Thus, it amounts to releasing a person of certain legal obligation under a contract. 
Thus, where A promises to tailor a shirt for B if he will sing a song at his birthday party and accordingly B sang the song but afterwards B forbids A to tailor the shirt, to which A consents, the contract is terminated by waiver.