Introduction. The discharge of a contract refers to the termination of contractual obligations. Once discharged, the parties are no longer bound to perform their promises. The Indian Contract Act, 1872 recognises several modes through which a contract may be discharged. These modes ensure clarity, finality, and legal closure in contractual relations.
1. Discharge by Performance
Performance is the most common mode of discharge. When both parties fulfil their respective obligations as agreed, the contract ends automatically.
- Actual Performance: Both parties perform fully.
- Tender of Performance: A valid offer to perform (even if refused) discharges the offering party.
2. Discharge by Mutual Agreement (Section 62)
Parties may alter or terminate a contract through mutual consent. Section 62 recognises the following forms:
- Novation: Substitution of a new contract in place of the old one.
- Rescission: Cancellation of the agreement by mutual consent.
- Alteration: Changing terms of the original contract.
- Remission: Acceptance of lesser performance.
- Waiver: Voluntary abandonment of rights.
3. Discharge by Lapse of Time
Under the Limitation Act, a contract must be enforced within a specified time. After expiry, parties cannot enforce it legally, thus the contract stands discharged.
Example: A debt becomes unenforceable after 3 years.
4. Discharge by Operation of Law
Certain events discharge the contract automatically by law:
- Death of a party: When obligations are personal in nature.
- Insolvency: Debtor’s obligations are discharged after adjudication.
- Unauthorized alteration: Material alteration voids the contract.
- Merger: Inferior rights merge into superior rights.
5. Discharge by Impossibility of Performance (Section 56)
A contract becomes void when performance becomes impossible or unlawful after formation. This is also known as supervening impossibility or frustration.
- Destruction of subject matter
- Change of law
- Death or incapacity of promisor
- Outbreak of war
6. Discharge by Breach of Contract
When a party fails to perform obligations, the contract is discharged by breach. Breach may be:
- Actual Breach: Failure to perform on due date.
- Anticipatory Breach: Party refuses performance before due date.
The aggrieved party may sue for damages.
7. Discharge by Material Alteration
A contract is discharged if one party makes a material alteration without consent. Such alteration changes the legal effect of the contract.
8. Discharge by Recission of Voidable Contract
When the aggrieved party rescinds a voidable contract, it stands discharged and unenforceable.
Extended Explanation
Discharge ensures finality in contractual relationships and prevents indefinite obligations. It provides closure in cases of performance, breach, impossibility, or mutual consent. The modes of discharge reflect flexibility within contract law by allowing parties to end agreements while maintaining legal certainty. These principles uphold fairness and efficiency in commercial activities.
Conclusion: Contracts may be discharged through performance, mutual agreement, impossibility, lapse of time, breach, operation of law, or rescission. Each mode offers a lawful way to release parties from contractual obligations, marking a formal end to their legal relationship.