DISCHARGE OF CONTRACTS BY AGREEMENT & BY FRUSTRATION

WHAT IS DISCHARGE OF CONTRACT?

DISCHARGE: TO RELIEVE FROM CHARGE OR LOAD Discharge of contract means termination of a contractual relationship between the parties.

 DISCHARGE BY FRUSTRATION
Sec.56 of Indian contract act says Agreement to do an impossible act an agreement to do an act impossible in itself is void ILLUSTRATION A agrees with B to discover treasure by magic. The agreement is void.

INSTANCES OF FRUSTATION WHEN IT BECOMES IMPOSSIBLE:

a) DESTRUCTION OF SUBJECT MATTER OF CONTRACT

This says that where the performance of the contract is made impossible by the destruction of a specific thing essential to the performance

CASE STUDY : TAYLOR vs CALDWELL (Destruction of the music hall)

NON OCCURANCE OF A PARTICULAR EVENTS

the principles of frustration has also been held to apply to cases concerning the cancellation of an expected event.

CASE STUDY : KRELL vs. HENRY

NON AVAILABILITY OF THE PARTIES OWING TO DEATH OR ILLNESS :

If one of the parties to the contract is unavailable owing to the death or illness then this against can frustrate the contract. Death of one of the parties will frustrate the contract, especially so if performance of the contract can only be undertaken by the individual. CASE STUDY : CONDOR vs. THE BARRON KNIGHTS

ILLEGALITY

Illegality is another cause by which contract can be frustrated. After the contract has been formed an event may occur that makes it illegal to continue performing obligation under the contract.

CASE STUDY: Man Singh vs. Khazan Singh

CHANGE IN THE LAW The performance of a contract maybe made legally impossible either by a change in the law or by a change in the operation of the law by reason of new facts supervising. ILLUSTRATION The outbreak of war: when there is outbreak of war all the law changes within the country. Even the citizens are deprived of their fundamental rights. So in that case the contract can be frustrated on this basis.

BUILDING CONTRACTS
Doctrine of frustration is provided by a group of cases concerning building or construction contracts. Events may occur which hold up completion of the works. Such delays in evitable increase the contractors costs. If the contract is a fixed-priced contract, the contractor may lose the profit which is expected to gain or even be forced into loss CASE STUDY: DAVIS CONTRACTORS vs. FAREHAM U.D.C [1956]AC696

BECOMES UNLAWFUL

A contract may be discharged, if legislation is passed making further performance illegal; and if it is the common intention of the parties to perform it in a manner so illegal, it would be frustrated, even if the contract does not provide for such manner of performance.

 INSTANCES OF THE FRUSTRATION :

1. SEBSEQUENT LEGAL CHANGE 2.Frustration and compensation

EFFECTS OF IMPOSSIBILTY
a)DISCHARGE OF ALL THE PARTIES b) AUTOMATIC DISCHARGE c) EFFECT ON ARBITRATION CLAUSE d) TIME OF DISCHARGE e) IMPOSSIBILITY AFTER DECREE OF SPECIFIC PERFORMANCE

 DISCHARGE BY AGREEMENT
INTRODUCTION : This section(sec.62) provides for discharge of contractual obligation where the contract is substitute with new contract

,or altered or rescinded by all the parties to it .

SEC.62

Effect of novation, rescission and alteration of the contract

If the parties to a contract agrees to substitute a new contract for it,or to rescind or alterate it ,the original contract for it need not be performed.

NOVATION
When the parties to a contract agree to substitute the existing contract with a new contract, it is called novation.

It is of two kind, namely :

A novation involving change of parties ; and

A novation involving substituting of a new contract in place of the old.

1.Change of parties
A novation of this kind usually takes place when a new partner retires from a firm and the new firm as constituted after admission or retirement accepts the liabilities of the old firm and this is approved by the person dealing with the firm.

2. Substitution of new agreement

When the parties to a contact agree to substitute a new contract for it , the original contract is discharge and need not be performed.

REMISSION
Section 63 of Indian contract act allows a party to contract to dispence with the performance of the contract by the other party, or to accept any other satisfaction instead of performance The section permits a party who is entitle to the performace of a contract,to Dispense with or remit either wholly or in part, the performace of the contract,or Extend the time of performance, or Accept any other satisfaction instead of performance

ALTERATION OF CONTRACT

Sec 62 allows the parties to alter the terms of the contract and in such a case the original contract will be discharged and the new contract will take over such alteration of terms and consequent substituting can only be by mutual consent of the parties. Where however an alteration in the contract is carried out without the consent of the other party the contract becomes unenforceable against such party.

RESCISSION
If a person withdraws a contract, the other party is no longer bound to any other promises made related to that contract.
If the party had received any benefit due to the existence of the contract shall have to restore it.

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