Discuss the meaning of discharge of contract, it modes, with examples, how a contract is discharged by that mode.
Discharge of contract means termination of contract i.e. end of rights and obligations created by contract.
Modes of discharge of contract:-
i. By performance of contract: When the parties to the contract has fulfilled the terms and obligations under the contract within the specified time and in specified manner, then the contract gets discharged.
For example: A promises to sell 100 cotton bales for fixed price to which B agrees. A delivers the cotton bales to B within reasonable period of time and B pays the amount of price on time of delivery in the manner agreed as mode of payment. Thus, the contract si completed.
ii. By agreement or consent: There are different modes for discharge of contract by way of agreement or consent of the parties to contract-
As per provisions of Section 62 of ICA, novation means when the parties to contract have agreed to substitute the existing contract with new terms, then in that case the earlier contract gets terminated. Similarly, when parties alter some provisions of the contract or cancel all or any terms of existing contract, it discharges the existing contract.
Section 63 provides that performance of promise can be remitted wholly or partly or time limited fixed for such performance can be extended or can accept any lesser satisfaction.
For example: A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform his promise.
Suppose, A owes Rs. 5000 to B. Instead of Rs. 5000, b pays him Rs. 2500 which A accepts in satisfaction of the whole debt. Thus, the whole debt gets discharged.
iii. By impossibility of performance- When it becomes impossible for the parties to perform the promise due to supervening impossibility. Supervening impossibilities can be-
a) Destruction of subject matter of the contract
b) Non- presence of particular state of things
c) Death or disability for personal services
d) Change in any law
e) Outbreak of law
iv. By lapse of time- Non performance of a contract within the limitation time period or period fixed for performance of contract automatically discharges the contract.
v. By operation of law- The contract can be discharged by operation of law by death of parties to contract, insolvency of party, decision of the court etc.
vi. By breach of contract- When any party to contract does not fulfill the terms of contract or refuses to perform the contract i.e. anticipatory breach of contract, thus the breach of contract discharges the contract.
For example: ‘A’ and ‘B’ enters into a contract that B will sing in A’s theatre for two nights in a week for Rs. 200 for each night. But on 5th night he willfully remains absent. Now, A can end the contract as B has not performed the promise and breached it.