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 Discharged of a Contract 


(i) Discharged by performance

(ii) Discharged by mutual agreement

(iii) Discharged by lapse of time

(iv) Discharged by operation of law

(v) Discharged by impossibility of performance

(vi) Discharged by breach of contract

Discharged By Performance

Discharged by performance takes place when the parties to the contract fulfill their obligations arising under the contract. In such a case, the parties are discharged and contract comes to an end. The performance of contract may be:


Actual performance: where both the parties perform their promises.

Attempted performance: where a party offers to perform his obligation under the contract but the other party refuses to accept his performance.

Discharged By Agreement Or Consent

The contractual obligations may be discharged by agreement among the parties to the contract. The parties to the contract may agree to rescind the contract, alter the contract or substitute it with a new contract. In such a case, the original contract gets discharged. A contract may terminate by mutual consent in any one of the following ways:



Novation takes place when:

  • A new contract is substituted for an existing one between the same parties.
  • A new contract is substituted for an existing one where the contract on the same terms is entered into between one of the parties and the third party.

On novation, the original contract is discharged and need not be performed. However, the novation should take place before the expiry of the time for the performance of the original contract.


The parties to a contract may mutually decide to alter certain terms of the contract. When the parties to a contract, agree to alter the contract, the original contract is rescinded and need not be perform. For alteration, the benefiting party has to pay some consideration to the other party.


Difference between Novation and alteration:-

1. In novation, there may be change in the terms of the contract or in the parties to the contract. However, in alteration there is change only in the terms of the contract and not in the parties to the contract.

2. In novation there is a substitution of an existing contract with a new one. But in alteration there is no such substitution but only a change in some terms and conditions of the original contract.



Recession means termination of a contract. Where parties mutually decide to cancel the terms of the contract, the contract need not be performance. In rescission, the old contract is cancelled and no new contract comes into existence.


Remission is said to be done where a party to the contract agrees to:

  • Dispense with (waive the performance)
  • Accept a lesser amount or lesser degree of performance for full discharged of contract
  • Extends the time of performance

For remission, no consideration is required to be paid by benefiting party. Once the party agrees for remission, it cannot be revoked. However, the remission may be conditional.


Waiver means abandonment or intentional relinquishment of a right under a contract. A promise may dispense with the performance of a promise. When a party waives his rights under a contract the other party is released from his obligation. Consideration is not necessary for waiver.

Discharge By Lapse Of Time

The right and obligations under a contract can be enforced only within a specified period called the ‘period of limitation’. The limitation Act has prescribed the period of limitation for various contracts. After the expiry of the limitation period, the contractual rights cannot be enforced and the contract comes to an end due to lapse of limitation period.

Discharged By Operation Of Law

A contract may be discharged by operation of law in the following cases:-

Death of the promisor: Contracts, the performance of which involves personal skill or ability of the promisor, comes to an end with the death of the promisor.

Insolvency: when a person is declared insolvent by insolvency court, he is discharged from all his liabilities incurred prior to his adjudication.

Merger: When an inferior right accruing to a party in a contract merges into a superior right accruing to the same party, then the contract conferring inferior rights is discharged.

By unauthorized alteration of terms of a written document: Where any of the parties to a contract makes any material alteration to the terms of the contract without seeking the consent of the other party, the contract can be avoided by the other party at his will.

Discharge By Impossibility Of Performance

An agreement to do an impossible act is void ab initio. When an act subsequently becomes impossible or unlawful, it becomes void. Impossibility may be of two types:


Impossibility existing at the time of making the contract: When the parties agree upon doing something which is impossible, the agreement is void whether the fact of impossibility was known or not known to the parties at the time of making the contract. Where at the time of contracting, the promisor alone knows about the impossibility or he should have known it with reasonable diligence then the promise can claim compensation for damages on account of non performance.

Supervening impossibility: Impossibility which arises subsequent to making of the contract is called supervening impossibility. If the contract was capable of performance at the time of making it, but subsequently because of some event which the promisor could not prevent, the performance becomes impossible or unlawful, the contract becomes void and the parties are discharged from their obligations.

A contract is discharged by supervening impossibility in the following cases:
  • Destruction of subject-matter
  • Death of personal incapacity
  • Change of law
  • Declaration of war
  • Non-existence or non-occurrence of a particular state of things

Exceptions: some of the cases which do not come within the principle of supervening impossibility are as follows:

  • Difficulty of performance
  • Commercial impossibility
  • Default of the third party
  • Strikes, lockouts and civil disturbances
  • Partial impossibility

Effects of supervening impossibility: Contract becomes void where the contract becomes subsequently impossible or unlawful.


Compensation for non performance where the promisor knew about the impossibility at the time of making the contract.

Benefits to be restored by the parties receiving it under a contract void due to supervening impossibility.

Discharge By Breach Of Contract

A contract is discharged by breach of contract. Breach of contract may arise in two ways:


Anticipatory breach: Anticipatory breach occurs where the party declares his intention of not performing the contract before the performance is due. This intention may be declared expressly or impliedly.

Actual breach: Actual breach of contract may take place:

1. On the due of performance

2. During the course of performance

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