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Termination (Discharge) of Contract

Termination (Discharge) of Contract . Termination of a contract means that the parties are no more liable under the contract. The rights and obligations created by the contract come to an end. Modes of Termination of a Contract:

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Termination (Discharge) of Contract

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  1. Termination (Discharge) of Contract • Termination of a contract means that the parties are no more liable under the contract. The rights and obligations created by the contract come to an end. • Modes of Termination of a Contract: • By Performance: When parties to the contract actually fulfil their respective obligations arising under the contract or make valid offer to fulfil such obligations. • By Lapse of Time: (i)If contractual obligations are not fulfilled within the fixed or reasonable time period; and (ii) when law of limitation applies (Section 89 of the Contract Act).

  2. Modes of Termination of a Contract 3. By Operation of Law: • Death. • Insolvency. • Merger of Rights. 4. By Agreement or Consent. Section 81 of the Contract Act. • Novation: Substitution of existing contract for new contract. • Rescission:Cancellation of the contract. • Alteration: Change in one or more terms of the contract.

  3. Termination continue.. • Remission: Acceptance of lesser fulfilment of the terms of the contract. • Waiver: Abandonment of the rights by the party who is entitled to claim performance. • Acceptance of any other satisfaction. 5. By Breach of Contract. When a party to the contract fails to perform its obligations under the contract, a breach of the contract occurs. A breach of a contract discharges the other party (aggrieved party) from performing its obligations.

  4. Impossibility of performance and the Doctrine of Frustration 6. By Promisee Failing to Offer Facilities for Performance: Section 80 of the Contract Act. 7. By Impossibility of Performance. Section 79 of the Contract Act. General Rule: If a contract becomes impossible to perform due to the occurrence of a substantial change in circumstances after the conclusion of the contract, both the parties to the contract are discharged from their respective obligations. • This is called supervening impossibility or doctrine of frustration.

  5. Cases of Supervening Impossibility Conditions: (i)Performance must become impossible, (ii) Impossibility should have been caused by the circumstances which were beyond the control of the parties, and (iii) impossibility must not be self-induced. • Destruction or Non-availability of the Object Necessary for the Performance of the Contract. Section 79 (2) (c). • Change of Law or Government Policy (in consequence of which the contract becomes illegal or inconsistent with the government policy). Section 79 (2) (a). • War and Natural Disasters. Section 79 (2) (b). War, flood, landslide, fire, earthquake, volcano etc. • Death or Incapacity of the Promisor. Section 79 (2) (d).

  6. Cases that do not Constitute Supervening Impossibility • Difficulty in performance. • Strikes or lockouts. • Increased tax, fees or other payable charges. • Default or failure of a third person on whose word the promisor relied. • Decrease in profit or incurring loss. • Impossibility of performance with regard to one of the objects when the contract is entered into for several objects. • Consequences of the Supervening Impossibility • Refund of already made payment. • Compensation for any advantage received.

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