A contract is a legally binding agreement or contract is an agreement

creating and defining obligations between parties

According to section 2(h) of Indian Contract Act,1872 An agreement which is

enforceable by law is contract.

In order to create a valid contract, According to Sec.-10 of contract Act,1872

there must be: An Agreement ( offer + acceptance) Sec.-2(e)
Competent parties (major,sound mind,not otherwise disqualified)
Free consent (sec.-14)
Lawful Consideration
Lawful object
Contract should not be declared void by contract act.(ex:- sec.26,27,28,29,30,56)
Other requirements should be fulfilled (written,registration,witness)

Discharge: To discharge a contract is to end the obligation by agreement or by

carrying it out
Discharge of contract
Discharge of a contract refers to a process, by which the rights and obligations
arising out of a contract come to an end or the parties are released from their
obligations in the contract
Thus, discharge of a contract means termination of a contract.
Why we need to discharge of contracts?
It is the act of making a contract or agreement null. A discharged contract refers to
contract that is fully performed. We need to discharge the contract because of:7. Confusion, where the duty to pay and the right to receive unite in the same
person.
Non performance of contract or when the performance falls due
8. Extinction, or the loss of the subject matter of the contract.
10. The inability of one of the parties to fulfill his/her part.
11. The death of the contractor, as where s/he undertook to teach an apprentice.

12. Bankruptcy.
13. lapse of time.
14. neglecting to give notice to the, person charged.
17. the discharge of a defendant, who has been arrested under a capiases amd
satisfaciendum.
18. certificate and discharge under the bankruptcy laws.
Ways of discharge of contracts
A contract can be discharged in any of the 6 following ways:
1. By performance (sec.-37 to 55)
2. By mutual consent or agreement.(sec.- 62,63,64)
3. By impossibility of performance. (sec.-56)
4. By lapse of time
5. By operation of law
6. By breach of contract. (sec.-39)
DISCHARGE BY PERFORMANCE
Performance means the doing of that which is required by a contract. Discharge by
performance takes place when the parties to the contract fulfill their obligations
arising under the contract within the time and in the manner prescribed. In such a
case the parties are discharged and the contract comes to an end. But if only one
party performs the promise,he alone is discharged. Such a party gets a right of
action against the other party who is guilty of breach.

Usually, the parties have to perform all of their obligations in the exact
way stated in the contract

However, there are 4 exceptions to this

Where the contract is divisible
Where the contract can be completed by substantial performance
Where performance has been prevented by the other party

 Where partial performance has been accepted by the other party

The contract is divisiable
A court may decide that parts of the contract are separate from other parts

E.g. : John makes a contract with Jane to carry out improvements to

her home. He installs new heaters and a new bath.

If the heaters are defective but the bath is ok, then Jane can refuse to
pay for the heaters but she must pay for the bath.
Substantial Performance

A contract may be discharged by substantial performance of what was

agreed

In other words, the most important part is completed and only a small
part is has not been done (or a small part needs to be fixed)

Hoenig v. Isaacs [1952] 2 All ER 175

Contract to redecorate a flat for 750
The work was done, except for minor defects (which would cost 55 to
put right)
The decorator could sue for 750
though he was liable to pay back 55 in compensation
Performance Prevented

If one party prevents the other from performing their obligations under
the contract then the contract is discharged

If some work has been done before this, then the party may claim
payment for the work which has been done

E.g.: John has a contract with Jane to paint her house.

He starts the work, but after two days, Jane asks him not to come
back because her pet cat is scared of him

John can claim payment from Jane for the two days work which he has
done

Partial Performance Accepted

The contract can be discharged if one party accepts partial

performance by the other party

Eg: Jim places an order with Fred for 12 bottle of wine. However, Fred can
only supply 10 bottles.

Jim could refuse to accept the 10 bottles

However, he could accept 10 bottles and reduce the price he pays

That would be accepting partial performance by Fred.

DISCHARGE BY CONSENT OR AGREEMENT
As it is the agreement of the parties which binds them, so by their further
agreement or consent the contract may be terminated.
Types of discharge by agreement or consent:1. Novation
2. Rescission
3. Alteration
4. Remission
5. Waiver
6. Merger
novation:
when a new contract is substituted for an existing contract, either between
the same parties or different parties, the consideration for such contract
being the discharge of the old contract.
Where the contract is between same parties, then the nature of the
obligations must be altered substantially or else it shall amount to
alteration & not novation.
novation cannot be compulsory, it has to be with the mutual consent of
all the parties.

 The new contract must be valid & enforceable, if it suffers from any
legal flaw, then the original contract shall revive.
alteration
Alteration of a contract refers to change in one or more of the material
terms of a written contract.
Where such alteration takes place with mutual consent, then the
original contract is discharged & the new altered contract comes into
existence.
The alteration should be material & alter the legal effect of the
contract, mere correction of clerical errors does not amount to
alteration.
Where such alteration is made by one party, without the consent of the
other party, then such alteration will render the entire contract void &
none of the parties can maintain an action upon it.
Unlike novation, here there is no change of parties, the parties to the
contract remain the same, only the material terms of the contract are
altered.
Rescission
Rescission of a contract means cancellation of an existing contract
without substituting a new contract in its place.
A contract is said to be discharged by rescission, when the parties
come to an agreement, before the date of performance, that the
contract is no longer binding on them.
The consideration for such an agreement is abandonment of their
respective rights under the contract, thus releasing each other of their
contractual obligations.
An agmt. for rescission of contract is to be distinguished from agmts in
restraint of legal proceedings which are void under the Act. An
agreement for rescission is an agmt. out of mutual consent to excuse
performance of contractual obligations. Thus, an agmt to excuse
performance is valid, where as an agmt not to sue for breach is void.

Remission:
It is the acceptance of a lesser sum or lesser fulfillment of the promise
made.
A promisee may remit either entire or a part of the promise made to
him and a promise to do so is binding even though there is no
consideration for it.
An agmt to extend the time for the performance of the promise does
not require consideration either.