Discharge is the process whereby the primary objectives and obligations under a contract, which is validly formed, come to an end. A contract may be discharged either by an Act of the parties or by an operation of law in the different base set out below:
i) Discharge by performance:- It takes place when the parties to the contract fulfil then -obligations arising under the contract within the time and in the manner prescribed. Discharge by performance may be (1) actual performance or (2) attempted performance. Actual performance is said to have taken place, when each of the parties has done what he had agreed to do under the agreement. When the promisor offers to perform his obligation, but the promisee refuses to accept the performance, it amounts to attempted performance or tender.
ii) Discharge by mutual agreement:- Section 62 of the Indian Contract Act provides if the parties to a contract agree to substitute a new contract for it, or to refund or remit or alter it, the original contract need not be performed. The principal of Novation, Rescission, Alteration and Remission are already discussed in para 4.12.
iii) Discharge by impossibility of performance:- The impossibility may exist from the very start. In that case, it would be impossibility ab initio. Alternatively, it may supervene. Supervening impossibility may take place owing to: (a) an unforeseen change in law, (b) the destruction of the subject-matter essential to that performance; (c) the non-existence or non-occurrence of particular state of things, which was naturally contemplated for performing the contract, as a result of some personal incapacity like dangerous malady; (e) the declaration of a war (Section 56)
iv) Discharge by lapse of time:- A contract should be performed within a specified period as prescribed by the Limitation Act, 1963. If it is not performed and if not action is taken by the promising within the specified period of limitation, he is deprived of remedy at law. For example, if a creditor does not file a suit against the buyer for recovery of the price within three years, the debt becomes time-barred and hence irrecoverable.
v) Discharge by operation of law:- A contract may be discharged by operation of law which includes by death of the promisor, by insolvency etc.
vi) Discharge by breach of contract:- Breach of contract may be actual breach of contract or anticipatory breach of contract. If one party defaults in performing his part of the contract on the due date, he is said to have committed breach thereof. When on the other hand, a person repudiates a contract before the stipulated time for its performance has arrived, he is deemed to have committed anticipatory breach. If one of the parties to a contract breaks the promise the party injured thereby, has not only a right of action for damages but he is also discharged from performing his part of the contract (Section 64)
vii) A promise may dispense with or remit the performance of the promise made to him or 'I may accept any satisfaction he thinks fit. In the first case, the contract will be discharged by remission and in the second by accord and satisfaction (Section 63).
viii) When a promise neglects or refuses to afford the promisor reasonable facilities for the performance of the promise, the promisor is excused by such neglect or refusal (Section 67).
Courtesy:- Legal Point Foundation