Discharge of contract means termination of the contractual relationship between parties. When rights and obligations under a contract are extinguished, the contract is discharged. A contract may be discharged either by acts of parties to contract or by operation of law.
2. Various ways in which a contract can be Discharged
Following are the ways in which a contract can be discharged.
i. Performance of Contract
A way, through which a contract can be discharged, is performance of contract, a contract can be discharged when following conditions are met:
a. Fulfillment of Promise
For actual performance of a contract, it is necessary that promise, which is made through contract, should be fulfilled.
For actual performance of a contract, it is essential that conditions, which are incorporated into the contract, and obligations, which are born out of the contract, should be fulfilled.
c. Fulfillment within decided time-period
If time-period has been fixed in a contract for fulfillment of promise, conditions and obligation, it is necessary that promise, conditions and obligations should be fulfilled within decided time-period for actual performance of the contract.
ii. Agreement or Consent of contractual Parties
A contract can be discharged by agreement or consent of parties to contract. Through agreement or consent of the parties, a contract can be discharged when following conditions are met:
a. Consent of both the parties to contract
Both the parties to contract should express their consent to make an agreement so as to put an end to the contract.
b. Release from obligations
Both the parties to contract should release each other from their contractual obligations.
c. Free Consent
Agreement regarding discharge of a contract should be made through free consent of parties.
iii. Breach of Contract
Another way, through which a contract can be discharged, is breach of contract. In case of breach of contract, aggrieved party gets right to announce immediate end of contract without waiting for date fixed for performance of contract. Through breach of contract, a contract can be discharged when either of following conditions is met:
a. Non-observation of contractual obligations
Either of parties to contract should show by express words or by implications from his conduct at some time before performance of contract that he does not intend to observe his contractual obligations.
b. Break of contractual conditions
Either of parties to contract should break contractual condition or the contract itself in some serious manner.
Frustration is also a way through which a contract can be discharged. Through frustration, a contract can be discharged when following conditions are met:
a. Change in circumstances
After making of a contract, circumstances should be changed.
b. No Fault of either of parties to contract
Change in circumstances should not be caused due fault of either of parties to contract.
Due to change of circumstance, performance of contract should become impossible.
v. Death of Promisor
Contracts can be discharged through death of promisors. However, all kinds of contract are not discharged with death of promisors are contract can be performed through legal representatives of deceased promisors in some cases.
vi. Lapse of Time
A contract can be discharged by lapse of time particularly in the following two cases:
a. Time-period decided in Contract
If time-period is decided in a contract for performance of the contract, but the contract is not performed within such decided time-period, then contract is considered discharged.
b. Time-period settled under limitation act
If time-period has been provided in Limitation Act for performance of a contract, but the contract is not performed within such provided time-period, contract is considered discharged.
To conclude, it can be stated that legal remedy can be availed when contract is discharged due to some act of either of parties, and aggrieved party can initiate legal action to avail such remedy against other party. However, some exceptions have been provided to the principle in Contract Act.