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DISCHARGE OF A CONTRACT Impossibility & Lapse of time

 

DISCHARGE OF A CONTRACT BY IMPOSSIBILITY OF PERFORMANCE & LAPSE OF TIME
 

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 Impossibility of Performance

2. Discharge by Lapse of Time

3. Discharge by Performance

4. Discharge by Mutual Agreement

5. Discharge by Operation of Law

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 Impossibility of Performance 
The effects of impossibility of the performance of a contract may be discussed under the following two heads: 

(a) Effects of Initial Impossibility - [Section 56] Initial impossibility means the impossibility existing at the time of making the contract. The effects of initial impossibility are as under void-ab-initio. 

Such promisor must compensate for any loss which such promisee sustains through the non-performance of the promise. 

 

Example: - A contracts to marry B, being already married to C, and being forbidden by the law to which he is subject to practice polygamy. A must make compensation to B for the loss caused to her by the non-performance of his promise.

(b) Effects of Supervening Impossibility -Section 56, Para 2, declares: “A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful”.

Cases where the doctrine of supervening impossibility applies:

A contract will be discharged on the ground of supervening impossibility in the following cases:

1. Destruction of subject-matter: When the subject-matter of a contract, subsequent to its formation, is destroyed, without the fault of the promisor or promisee, the contract is discharged. Note that it is so only when specific property or goods are destroyed which cannot be regained.

Illustrations:

(a) A music hall was agreed to be let out for a series of concerts on certain days. The hall was destroyed by fire before the date of the first concert. The plaintiff sued the defendant for damages for the breach of contract. It was held that the contract has become void and the defendant was not liable (Taylor vs Caldwell

2. Failure of ultimate purpose: Where the ultimate purpose for which the contract was entered into fails, the contract is discharged, although there is no destruction of any property affected by the contract and the performance of the contract remains possible in literal sense. The leading case of Krell vs Henry is a good illustration on the point:

H hired a room in London from K with the object; as both parties well knew; of using the room to view the intended coronation procession of King Edward VII on a particular date.

By reason of the King’s illness the procession was postponed. H consequently could not use the room although he could go there and sit but with no purpose as there was no procession. K filed a suit for the recovery of rent.

It was held that H need not pay the rent as the contract was discharged on failure of the ultimate purpose or on postponement of the procession which was the foundation of the contract.

3. Death or Personal Incapacity of Promisor: Where the performance of a contract depends upon the personal skill or qualification or the existence of a given person, the contract is discharged on the illness or incapacity or the death of that person.

Illustrations:

(a) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void [Illustration (b) to Section 56],

4. Change of law:  A subsequent change in law may render the contract illegal and in such cases the contract is deemed discharged. The law may actually forbid the doing of some act undertaken in the contract, or it may take from the control of the promisor something in respect of which he has contracted to act or not to act in a certain way

Illustrations:

(a) A sold to B 100 bags of wheat at Rs 700 per bag. But before delivery the Government rendered the sale and purchase of wheat by private traders illegal under the Defence of India Rules. The contract was discharged by impossibility created by subsequent change in law.

5. Outbreak of war: All contracts entered into with an alien enemy during war are illegal and void ab-initio. Contracts entered into before the outbreak of war are suspended during the war and may be revived after the war is over provided they have not already become time-barred.

It may be noted that if war is declared between the countries of the contracting parties then only the contract is suspended during war.

2. Discharge by Lapse of Time 
A contract is discharged if it is not performed or enforced within a specified period, called period of limitation. The Limitation Act, 1963 has prescribed the different periods for different contracts, e.g. period of limitation for exercising right to recover a debt is 3 years, and to recover an immovable property is 12 years. The contractual parties cannot exercise their rights after the expiry of period of limitation. 
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