Discharge of contract

Discharge of contract
When the rights and duties created by law
come to an end the contract is said to be
discharged or terminated

Ways of Contract discharge

A contract can be discharged by the following
ways
1. Discharge by Performance
2. Discharge by Agreement
3. Discharge by Subsequent impossibility
4. Discharge by Laps of time
5. Discharge by Operation of law
6. Discharge by Breach of contract

Discharge by Performance
When all the parties to a contract have
performed there services required by law
the contract is discharged by performance.
If only one party performs his duties he is
alone discharged. The performance may be
Actual performance
Attempted performance (or) tender

Actual performance When all the parties to a contract have

performed their promise the contract comes to an end by actual
performance
Example Shazia agrees to sell her bag to Maria for 500 Rs. Shazia
delivers her bag and Maria makes payment. This is an actual
performance
Attempted performance (or) Tender When one of the parties,
offered to performed contract but other party does not accept it.
This is an attempt to perform
Example
Shazia agrees to sell her bag to Maria for 500 Rs. Shazia offers to
deliver her bag but Maria does not accept it. This is an attempted
performance.

Discharge by Agreement

A contract may be discharged by the

agreement between the parties in any of
the following ways
i. Novation
ii. Alteration
iii. Rescission
iv. Remission
v. Waiver

Novation Novation means the replacement of old

contract by new contract. In new contract the parties may
change or remains the same, thus an old contact is
discharged with the new contract
Example
A owed ( ) to B and B to C, As debt to b is cancelled and
C accepts A as his Debtor. It is novation
Alteration Alteration means the changing in the terms
and conditions of contract. If alteration is made with the
consent of all the parties the contract is discharged and a
new contract takes place
Example Ali agrees to sale goods to Riaz for Rs 1000.
Later, Riaz decided to purchase high quality Goods for Rs
2000. The old contract is altered.

Rescission Rescission means the cancellation of

contract by mutual agreement. The cancellation free
the parties from obligations of contract
Example Majid Agrees to sale goods to Sajid for Rs
2000. Later, Sajid requested Majid to cancel the
supply of Goods. This is rescission.
Waiver
When a party surrenders his right to contract, the
other party is free from his part of obligation. It is
called waiver.
Example
Ali owes Majid Rs. 5000. Ali agrees to accept Rs.
4000 in full satisfaction of
claim. The whole debt is discharged

Discharge by Subsequent
impossibility

If the performance of contract is possible at time of

formation of contract but afterwards it becomes
impossible or unlawful. The contract will be
discharged.
Example
a) Bilal promise to sell wheat Habib, before delivery
government banned private trading of wheat
b) Farukh and Sidra promise to marry each other,
before the time fixed for marriage Farukh dies. The
contract becomes void and discharged

Discharge by Laps of time

According to the limitation act, the contract should

be performed within a specified or reasonable
time. In case of breach of contract, legal action
should be taken within a specified period of time. If
no legal action is taken within specified period of
time the contract is discharged.
Example Bashir took loan form Nazir. Last date for
repayment of loan has expired but no legal action
has been taken by Nazir for 3 years. Bashir is
discharged from his liability.

Discharge by operation of
Law
A

contract may be terminated by the operation of law in the

following ways i. Insolvency ii. Death of any party iii. Alteration
Insolvency
A contract is discharged when court declares a person
insolvent; such person is discharged from his liabilities
incurred before insolvency.
Death of any party
If any of the party before performance dies, the contract is
discharged.
Alteration Alteration means change in rights and duties of
the parties. If the terms and conditions are changed by any
party without consent of other party the contract is discharged

Discharge by Breach of contract

Breach of contract means when one or more

of the parties fail to perform their
obligations. Breach of contract discharge
the aggrieved party from performing his
obligation.
Breach of contract may of two types;
i. Actual breach
ii. Anticipatory breach

i) Actual Breach

When a party fails to perform his obligations

when the performance is due
Example
Zeeshan agrees to sale goods to Razib on
6th November, but he does not deliver
goods at agreed time. This is actual breach.

ii) Anticipatory Breach

An anticipatory breach occurs before the time fixed for

performance. It has two types Express breach and implied
breach.
a. Express breach When one party communicates the
other party his attention not to perform the contract. This is
express breach.
Example
Mehmood agrees to sale his house to Razib. Before the date
of performance
Mehmood informs Razib that he will not sale his house.
b. Implied Breach
When a party d oes an act which makes the contract
impossible to perform. This
is called implied breach.
Example Misbah agrees to sale her bag to Anam on 7th
November but before the due date Misbah sold her Bag to
Iqra.