Discharge of contract in contract law/Law of Contract

 

Introduction:

Discharge of contract refers to the termination of a contractual obligation or duties by the parties involved. A contract is a fairly binding agreement between two or further parties that establishes the rights and  scores of the parties involved.

 The parties to a contract are required to fulfill their obligations as stipulated in the agreement. However, the contract may be discharged in several ways, including performance, agreement, impossibility, operation of law, laps of time, and breach of contract.

Modes of Discharge of Contract

Performance:

 Performance refers to the fulfillment of the contractual obligations by the parties involved. There are two types of performance complete performance and substantial performance. Complete performance occurs when all the obligations in the contract are fulfilled, while substantial performance occurs when there is a minor deviation from the terms of the contract.

Offer of Performance:

Offer of performance refers to the offer by one party to fulfill their contractual obligations to the other party. The essentials of a valid offer of performance are:

Ø

  The offer must be made at the right time and place

Ø  The offer must be made to the right person

Ø  The offer must be unconditional

Ø  The offer must be in accordance with the terms of the contract

By Agreement:

 The parties involved in a contract can agree to terminate the agreement by mutual agreement. There are several ways to terminate a contract by agreement, including:

Ways to terminate the contract: Termination of a contract can be done by mutual agreement or discharge by performance.

Novation: Novation occurs when the parties involved in the contract agree to replace the old contract with a new one.

Rescission: Rescission is the cancellation of a contract by mutual agreement between the parties involved.

Alteration: Alteration refers to the modification of the terms of the contract by mutual agreement between the parties involved.

Release or Waiver: Release or waiver refers to the abandonment of the right to enforce the contract by one party in favor of the other party.

Remission: Remission refers to the discharge of the contractual obligation by one party due to the inability of the other party to fulfill their obligations.

Merger: Merger occurs when the contractual obligation is merged with a court order, and the contract is discharged.

By Impossibility

 A contract may be discharged due to impossibility. Impossibility refers to the inability of one or both parties to fulfill their contractual obligations due to an unforeseeable event or occurrence. There are two categories of impossibility:

Initial Impossibility: Initial impossibility refers to a situation where the performance of the contractual  obligation was impossible from the beginning.

Subsequent Impossibility: Subsequent impossibility refers to a situation where the performance of the contractual obligation was possible at the time of the agreement but has become impossible due to an unforeseeable event or occurrence.

Factors causing impossibility of performance of contract

Factors causing impossibility of performance of contract include:

Ø

  Destruction of subject matter

Ø  Death or incapacity of a party

Ø  Changes in law

Ø  Outbreak of war

Ø  Natural disasters

Discharge by Lapse of Time

Discharge by lapse of time occurs when the contract is automatically terminated due to the expiration of the period specified in the agreement.

By Operation of Law

 A contract may be discharged by operation of law in two ways:

Insolvency: Insolvency occurs when one of the parties involved in the contract becomes bankrupt, and the contract is terminated by operation of law.

Unauthorized Alteration: Unauthorized alteration occurs when one of the parties alters the terms of the contract without the other party's consent, and the contract is terminated by operation of law.

By Breach of Contract: Breach of contract occurs when one of the parties fails to perform their obligations under the contract.

By impossibility:

Categories of impossibility:

Impossibility can be categorized as either initial or subsequent. Initial impossibility refers to situations where the subject matter of the contract is impossible from the very beginning.

For instance, if A agrees to sell B a phoenix bird, which is a mythical bird that does not exist in reality, the contract is void from the beginning. Subsequent impossibility, on the other hand, arises when a contract becomes impossible to perform after it has been formed due to unforeseeable events such as war, fire, natural disaster, etc.

Factors causing impossibility of performance of contract:

There are several factors that may cause impossibility of performance of a contract. Some of these factors include:

 

a)      b. Government regulations or actions such as changes in the law or imposition of tariffs.

b)      c. Death or incapacity of the parties to the contract.

c)       d. Destruction of the subject matter of the contract such as in cases of fire, theft or accident.

d)      e. War or civil unrest.

Discharge of lapse of time:

Contracts may also be discharged by the lapse of time. If a contract is for a specific period, it automatically terminates upon the expiration of that period. In such cases, no further performance is required from the parties.

By operation of law:

Contracts may also be terminated by operation of law in certain situations, such as:

 

Insolvency:

If one of the parties becomes insolvent, the  contract may be terminated.

 

Unauthorized alteration:

If one of the parties makes an unauthorized  alteration to the terms of the contract, the other party may be entitled to terminate the contract.

By breach of contract:

Finally, a contract may be discharged by a breach of contract. Breach of contract occurs when one party fails to perform its  scores under the contract.  There are four types of breach of contract:

Actual breach:

Actual breach occurs when a party fails to perform its obligations under the contract at the time when performance is due.

Anticipatory breach:

Anticipatory breach occurs when one party indicates to the other party that it will not perform its obligations under the contract. For instance, if A tells B that he will not be able to deliver the goods as agreed, this amounts to an anticipatory breach of contract.

Express breach:

Express breach occurs when one party expressly tells the other party that it will not perform its obligations under the contract.

Implied breach:

Implied breach occurs when one party fails to perform its obligations under the contract, but there is no express statement to that effect.

Conclusion:

In conclusion, there are several modes of discharge of contract. These include performance, offer of  performance, discharge by agreement, discharge by impossibility, discharge by lapse of time, discharge by operation of law, and discharge by breach of contract. Understanding these modes of discharge is essential for anyone who wants to enter into a contract or is involved in contract law.

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