Paper-I: LAW OF CONTRACT-I Unit-III

Paper-I: LAW OF CONTRACT-I Unit-III

✅ Q.1. What is discharge of a contract? Explain in detail the different modes of discharge of a contract under the Indian Contract Act.

🔷 Introduction: Meaning of Discharge of a Contract

A contract is said to be discharged when the contractual obligations of the parties come to an end. In other words, discharge of a contract means termination of the contractual relationship between the parties.

Under the Indian Contract Act, 1872, a contract may be discharged in various ways, either by performance, mutual agreement, impossibility, or breach.

🔷 Different Modes of Discharge of a Contract

There are six main modes by which a contract may be discharged:

By Performance (Section 37–38)
By Agreement or Mutual Consent (Section 62–63)
By Impossibility of Performance (Section 56)
By Lapse of Time (Limitation Act)
By Operation of Law
By Breach of Contract

Let’s understand each mode in detail:

1️⃣ Discharge by Performance

When both parties fulfill their respective obligations, the contract is said to be discharged by actual performance.

✅ Types of Performance:

Actual Performance: Both parties perform as agreed.
Example: A agrees to deliver goods to B on payment of ₹10,000. A delivers and B pays.
Attempted Performance (Tender): A valid offer to perform is made, but the other party refuses to accept.
Example: A offers to deliver goods to B on due date, but B refuses to take them.

✅ Special Cases of Performance:

Performance by Joint Promisors (Section 43)
Appropriation of Payments (Section 59–61)

2️⃣ Discharge by Agreement or Mutual Consent

Parties may mutually agree to alter or terminate the contract. This is based on Section 62 and 63 of the Indian Contract Act.

✅ Types of Discharge by Agreement:

Novation (Section 62): Substitution of a new contract in place of the old one.
Example: A owes B ₹1,000. With mutual consent, A, B, and C agree that C will now pay B. The original contract is discharged.
Rescission (Section 62): Cancellation of the contract by mutual agreement.
Example: A and B agree to cancel their contract to sell goods.
Alteration (Section 62): Change in one or more terms of the contract.
Example: A agrees to sell goods on 10th, later both agree to change it to 15th.
Remission (Section 63): Acceptance of lesser performance than what was due.
Example: B accepts ₹7,000 in full settlement of a ₹10,000 debt.
Waiver: Intentional abandonment of a right by one party.
Example: A waives his right to claim damages from B.
Accord and Satisfaction: A promise is made to accept some performance different from what was originally agreed, and that is fulfilled.

3️⃣ Discharge by Impossibility of Performance (Section 56)

This is based on the Doctrine of Frustration. If it becomes impossible for the parties to perform the contract due to events beyond their control, the contract stands discharged.

✅ Types of Impossibility:

Initial Impossibility: Contract is void from the beginning.
Example: A agrees to sell a horse that was already dead.
Subsequent Impossibility (Frustration): Contract becomes impossible after formation.
Example: A contracts to rent a hall for a wedding. Before the date, the hall burns down.

✅ Leading Case:

Satyabrata Ghose v. Mugneeram Bangur & Co. (1954): Supreme Court accepted doctrine of frustration in India under Section 56.

4️⃣ Discharge by Lapse of Time

Under the Limitation Act, 1963, if a party does not enforce their rights within the prescribed limitation period, the contract becomes unenforceable and hence discharged.

✅ Example:

If a person has a right to sue within 3 years, and fails to do so, they cannot enforce the contract thereafter.

5️⃣ Discharge by Operation of Law

In certain cases, the contract is discharged automatically due to the operation of law, such as:

Death of the Promisor: In personal contracts.
Insolvency: Rights and liabilities are transferred to the official receiver.
Merger of Rights: When inferior and superior rights merge into one.

✅ Example:

A holds property under lease, later he purchases the property. The lease is merged into ownership and discharged.

6️⃣ Discharge by Breach of Contract

When a party fails to perform their part of the contract, it results in breach, and the other party may treat the contract as discharged.

✅ Types of Breach:

Actual Breach: Occurs at the time of performance.
Example: A does not deliver goods on due date.
Anticipatory Breach: One party declares their intention before due date not to perform.
Example: A promises to deliver goods on 10th Aug but informs on 1st Aug that he won’t deliver.

✅ Remedy: The aggrieved party may claim damages and treat the contract as discharged.

🔷 Conclusion

The discharge of a contract brings the legal relationship between the parties to an end. The Indian Contract Act provides for multiple methods to discharge a contract, whether by performance, agreement, impossibility, or breach. Knowing these principles helps in understanding rights, obligations, and remedies in case of non-performance or other events affecting contracts.

✅ Q.2. Explain the concept of discharge of contract by performance. Distinguish between actual performance and attempted performance (tender).

🔷 Introduction: Discharge of Contract by Performance

A contract is said to be discharged by performance when the parties to the contract fulfill their respective obligations as promised. It is the most natural and common method of discharging a contract.

According to Section 37 of the Indian Contract Act, 1872, the parties to a contract must either perform or offer to perform their respective promises unless such performance is dispensed with or excused under the provisions of the Act.

🔷 Meaning of Performance

Performance implies the carrying out of the contractual obligations by the parties. When all the terms of a contract are fulfilled in the manner and within the time stipulated, the contract comes to an end.

There are two types of performance:

Actual Performance
Attempted Performance (also called Tender of Performance)

🔷 1️⃣ Actual Performance

✅ Definition:

Actual performance takes place when both the parties fulfill their respective promises as per the terms of the contract.

When a party has done what it had agreed to do under the contract, its obligation is said to be performed, and the contract is discharged.

✅ Features:

Fulfilment of obligations as per terms of the contract.
Discharge of the contract for the performing party.
Entitlement to receive consideration or performance from the other side.

✅ Example:

A contracts with B to supply 100 bags of rice for ₹50,000. A delivers the bags, and B makes the payment. This is actual performance, and the contract stands discharged.

🔷 2️⃣ Attempted Performance or Tender of Performance

✅ Definition (Section 38):

Attempted performance means a valid offer to perform the obligation under the contract made by the promisor, but the promisee refuses to accept the performance.

This is also called “Tender” of performance.

A tender is a legal offer to perform a promise which is refused or prevented by the other party.

✅ Legal Effect:

If the tender of performance is valid and refused by the promisee, the promisor is discharged from his obligation, and he is not liable for non-performance.

✅ Essentials of a Valid Tender:

Must be unconditional.
Must be made at proper time and place.
Must be made to the proper person.
The promisor must be ready and willing to perform.
If goods are involved, they must be shown to the promisee.

✅ Example:

A contracts to deliver 500 kg of wheat to B on 5th July. A arrives with the wheat at B’s warehouse, but B refuses to accept. This is a valid tender, and A is discharged.

🔄 Distinction Between Actual Performance and Attempted Performance (Tender)

Point of Difference	Actual Performance	Attempted Performance (Tender)
Meaning	Fulfillment of contractual obligation by both parties.	Valid offer to perform, which is refused by the promisee.
Effect on Contract	Contract is discharged by completion.	Contract is discharged for promisor if tender is valid.
Fulfilment	Performance is actually completed.	Performance is only offered, not accepted.
Acceptance	The promisee accepts the performance.	The promisee refuses to accept the performance.
Remedy	No cause of action arises; contract ends.	Promisor can sue for non-acceptance or damages.
Example	A delivers goods, and B pays for them.	A offers goods, but B refuses to take them.

🔷 Special Rules Regarding Performance

Performance by Third Party: Performance by an authorized third party can be accepted unless personal skill is involved.
Joint Promisors and Promisees: Special provisions are made under Sections 42 to 45 regarding joint liabilities and rights.
Time and Place of Performance: If not specified, the promise must be performed within reasonable time and at reasonable place.

🔷 Case Law:

✅ Dayabhai v. State of Gujarat (1964 AIR 1563)

It was held that when performance is duly tendered and refused, the promisor cannot be held liable for breach.

✅ Cutter v. Powell (1795)

A sailor died before the end of his voyage. Since actual performance was not complete, his wife could not claim payment. It shows importance of actual performance in full.

🔷 Conclusion

Discharge of contract by performance is the ideal way to end a contractual relationship. While actual performance ensures complete fulfillment, attempted performance protects the rights of a willing party when the other party is unwilling. The Indian Contract Act fairly recognizes both forms and provides legal sanctity to them.

📌 Thus, both actual and attempted performance are significant under contract law and ensure fairness in commercial dealings.

✅ Q.3. What do you understand by the ‘appropriation of payments’? Discuss the rules governing appropriation under Sections 59 to 61 of the Indian Contract Act.

🔷 Introduction: What is Appropriation of Payments?

In many cases, a debtor may owe several distinct debts to the same creditor. When the debtor makes a lump sum payment, the question arises: To which debt should the payment be applied (appropriated)?

This situation is governed by the rules of appropriation of payments under Sections 59 to 61 of the Indian Contract Act, 1872.

🔑 Appropriation of payment means the application of a payment made by a debtor to discharge one or more debts owed to a creditor.

🔷 Applicability of the Doctrine

The debtor must owe more than one debt to the same creditor.
A single payment is made which is not sufficient to discharge all debts.
Then, it becomes necessary to decide which debt has been discharged.

🔷 Statutory Provisions: Sections 59 to 61

Let’s understand each section in detail:

✅ Section 59 – Appropriation by Debtor

“Where a debtor, owing several distinct debts to one person, makes a payment to him, with express intimation or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment shall be applied accordingly.”

🔹 Key Points:

The debtor has the first right to appropriate the payment.
The debtor must expressly specify or indicate the intention.
The creditor is bound to appropriate the payment as per the debtor’s direction.

🔹 Example:

A owes B ₹5,000 from loan #1 and ₹3,000 from loan #2. A sends ₹3,000 with a note stating it is for loan #2. B must apply it accordingly.

🔹 Case Law:

Seth Ramkrishan v. Mahabir Prasad AIR 1955 All 543
— The court held that creditor is bound to accept the debtor’s instructions regarding appropriation if clearly expressed.

✅ Section 60 – Appropriation by Creditor

“Where the debtor has omitted to intimate, and there are no other circumstances indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt.”

🔹 Key Points:

Applies only when the debtor is silent.
The creditor then gets the right to appropriate the payment.
The creditor can apply it to any lawful debt, including a time-barred debt (not illegal but unenforceable in court).

🔹 Example:

A owes B ₹10,000 (recoverable) and ₹5,000 (time-barred). A pays ₹5,000 without specifying purpose. B can apply it to the time-barred debt.

🔹 Case Law:

Meka Venkatadri v. Raja Parthasarthy (1904)
— The creditor validly appropriated a payment to a time-barred debt as the debtor gave no instructions.

✅ Section 61 – Appropriation by Law

“Where neither party makes any appropriation, the payment shall be applied in discharge of the debts in order of time, whether they are barred by limitation or not.”

🔹 Key Points:

If neither party (debtor or creditor) makes an appropriation:
- Payment is applied in chronological order (oldest debt first).
- If debts are of same date, payment is applied proportionately.

🔹 Example:

A owes B three debts incurred in Jan, March, and July 2020. A pays ₹2,000 without specifying. B also doesn’t indicate appropriation. The payment will be applied first to the January debt, then March, and so on.

🔹 Case Law:

Kundan Lal v. Jagannath AIR 1962 All 547
— Held that when no appropriation is made, payment must be applied in chronological order of the debts.

🔷 Special Points to Note

Appropriation must be made at the time of payment.
Once appropriation is made and accepted, it cannot be altered later.
If a debt is illegal (e.g., gambling debt), no appropriation can be made towards it.

🔄 Summary Table: Rights of Appropriation

Circumstance	Who has right to appropriate?	Remarks
Debtor specifies debt	Debtor (Sec. 59)	Creditor is bound to follow
Debtor is silent	Creditor (Sec. 60)	May even appropriate to time-barred debts
Both are silent	Law (Sec. 61)	Applied in order of time

🔷 Importance of the Rule of Appropriation

Ensures certainty and fairness in handling payments.
Protects creditors’ rights in case of multiple debts.
Gives flexibility to parties while maintaining legal structure.

🔷 Conclusion

The concept of appropriation of payments is crucial in contractual and financial dealings involving multiple debts. Sections 59 to 61 of the Indian Contract Act provide a structured and equitable framework to handle such payments based on the intention of the parties. The law balances the rights of both debtors and creditors, while allowing flexibility and protecting justice.

✅ Q.4. Explain the legal provisions regarding performance of contract by joint promisors. What are the rights and liabilities of joint promisors and promisees?

🔷 Introduction: Joint Promisors and Promisees under Indian Contract Law

Under the Indian Contract Act, 1872, a contract may be made between two or more promisors or promisees. These are known as joint promisors (on the promisor side) and joint promisees (on the promisee side).

When several persons jointly promise to do something, or when a promise is made to several persons jointly, certain special provisions apply regarding their rights and liabilities.

👉 These provisions are mainly covered under Sections 42 to 45 of the Indian Contract Act, 1872.

🔷 I. Legal Provisions Regarding Joint Promisors

✅ Section 42: Devolution of Joint Liabilities

“When two or more persons have made a joint promise, then, unless a contrary intention appears from the contract, all such persons must jointly fulfill the promise.”

🔹 Key Points:

All joint promisors must perform the promise together.
If one dies, the liability devolves on the survivors, and ultimately on legal representatives of all.

🔹 Example:

A, B, and C jointly promise to pay ₹30,000 to D. A dies. Then B and C must perform, and later A’s legal representatives become liable with B and C.

✅ Section 43: Joint and Several Liability of Promisors

“When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole promise.”

🔹 Key Features:

Joint and several liability – any one promisor can be compelled to pay the entire amount.
The promisor who pays can seek contribution from others.
If one cannot pay, the loss is shared by the others.

🔹 Illustration:

A, B, and C jointly promise to pay ₹60,000 to D. D can sue only A for the full amount. If A pays, he can recover ₹20,000 each from B and C.

🔹 Case Law:

Gajendra Singh v. Union of India AIR 1973 All 357 –
It was held that any one of the joint promisors can be sued for full performance, and then he can claim contribution from co-promisors.

✅ Section 44: Effect of Release of One Joint Promisor

“Where one of the joint promisors is released by the promisee, the other joint promisors remain liable to perform the promise.”

🔹 Key Points:

Release of one promisor does not discharge others.
Released promisor is also not liable to the promisee, but co-promisors can recover contribution from him.

🔹 Example:

A, B, and C jointly owe ₹90,000. D releases A. B and C are still liable for the full ₹90,000, and they may claim A’s share from him internally.

🔷 II. Legal Provisions Regarding Joint Promisees

✅ Section 45: Devolution of Joint Rights

“When a promise is made to several persons jointly, unless a contrary intention appears, the right to claim performance rests with all of them jointly.”

🔹 Rights of Joint Promisees:

All joint promisees must act together to enforce the contract.
On the death of one, the right passes to the survivors, and finally to the legal representatives of all.

🔹 Example:

A promises to pay ₹10,000 to B and C jointly. B dies. C and B’s legal representative must sue together for enforcement.

🔹 Case Law:

Narayan Das v. Ganga Ram (1884) ILR 6 All 246 –
It was held that when a promise is made to two jointly, both must sue together unless one has died and the right devolves.

🔷 III. Summary Table: Rights and Liabilities of Joint Promisors and Promisees

Aspect	Joint Promisors	Joint Promisees
Performance	Must be performed jointly (Sec. 42)	Right to demand performance jointly (Sec. 45)
Liability	Joint and several liability (Sec. 43)	Right survives to survivors and legal heirs
Recovery of Contribution	Paying promisor can recover from co-promisors	Not applicable
Release by Promisee	Other promisors remain liable (Sec. 44)	Not applicable
Suing Rights	Can be sued individually or jointly	Must sue jointly

🔷 IV. Important Doctrines & Notes

🔹 Doctrine of Contribution:

A promisor who has paid more than his share can claim proportionate reimbursement from co-promisors.

🔹 Doctrine of Survivorship:

On the death of a joint promisor or promisee, the rights and liabilities pass to the survivors and then to legal heirs.

🔷 Conclusion

The Indian Contract Act, 1872, through Sections 42 to 45, lays down a clear framework for dealing with joint promises. It ensures that:

Promisees get full performance even if one promisor defaults.
Promisors have internal remedies for contribution.
Joint rights and liabilities are preserved and passed in an orderly legal manner.

These rules protect the interest of both parties and provide flexibility and justice in multi-party contractual relationships.

✅ Q.5. Define Novation. How does it discharge a contract? Differentiate between Novation, Alteration, and Rescission.

🔷 Introduction: Discharge by Mutual Agreement

One of the recognized modes of discharging a contract under the Indian Contract Act, 1872 is by mutual agreement. This includes:

Novation
Alteration
Rescission
Remission, etc.

These methods are governed by Section 62 of the Act, which allows the parties to replace, change, or cancel a contract by mutual consent.

🔷 Definition of Novation (Section 62 of Indian Contract Act, 1872)

📜 “If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.”

This is known as Novation.

🔑 Novation means substitution of a new contract in place of the existing one, either between the same parties or between different parties, thereby discharging the original contract.

✅ Types of Novation

There are two main types:

Novation involving change of parties
➤ One of the original parties is replaced by a new party with mutual consent.
Example: A owes B ₹50,000. With the consent of A, B accepts C as his debtor instead of A. The old contract is discharged.
Novation involving change in terms
➤ The contracting parties remain the same, but the terms and conditions are materially altered.
Example: A owes B ₹10,000 to be paid in a month. Later, both agree that A will instead deliver goods worth ₹10,000. The original contract is discharged.

✅ Essentials of a Valid Novation

Mutual Consent of all concerned parties.
Substitution of a valid new contract.
The original contract must still be subsisting at the time of novation.
New contract must be enforceable by law.

✅ Legal Effect of Novation

The original contract is discharged.
A new contract is created, and rights/liabilities are now governed by it.
No party can enforce the original agreement once novation is complete.

✅ Illustration (Section 62 Example):

A owes money to B under a contract. It is agreed between A, B, and C that B shall henceforth accept C as his debtor instead of A. The old debt of A to B is discharged, and a new debt from C to B is created. This is novation, and the original contract need not be performed.

🔷 Difference between Novation, Alteration, and Rescission

Let us now understand how novation, alteration, and rescission differ in their meaning and legal effect:

Basis	Novation	Alteration	Rescission
Definition	Substitution of a new contract for the old one	Change in one or more terms of the same contract	Cancellation of the contract by mutual agreement
Section	Section 62	Section 62	Section 62
Effect on Old Contract	Old contract is completely discharged	Old contract is modified, not replaced	Old contract is cancelled and not replaced
Number of Contracts	Involves two contracts (old + new)	Involves only one contract with changed terms	Involves termination of the contract
Change in Parties	May or may not involve change in parties	Parties remain the same	No change in parties
Requirement	Requires mutual consent and existence of valid new contract	Requires consent of both parties to change terms	Requires mutual consent to cancel
Example	A owes B ₹10,000. B agrees to accept goods instead of cash.	A and B agree to change delivery date from 10th to 20th.	A and B agree to cancel their contract mutually.

🔷 Important Case Law

✅ Lata Construction v. Dr. Rameshchandra Ramniklal Shah (2000)

Supreme Court held that novation requires complete substitution of the contract.
If the new contract is vague or not enforceable, the old contract is not discharged.

✅ Scarf v. Jardine (1882)

It was held that novation extinguishes the original contract, and the parties cannot go back to it if the new contract is valid.

🔷 Conclusion

Novation is a powerful mode of discharging a contract under Section 62 of the Indian Contract Act. It allows parties to modify their legal relationship by creating a new agreement, either with the same or different parties. However, it must be done by consent and result in a valid new contract. When compared with alteration (which modifies terms) and rescission (which cancels the contract), novation replaces the contract entirely, making it a unique form of contractual discharge.

✅ Q.6. What is remission under the Indian Contract Act? How is it different from waiver and alteration? Explain with examples.

🔷 Introduction: Concept of Remission in Contract Law

In general, when a party has a right to receive full performance from the other party under a contract, he is expected to enforce it completely. However, Section 63 of the Indian Contract Act, 1872 provides a relaxation to this principle.

A party may choose to accept lesser performance or forgive the whole or part of the obligation, and the law will recognize such concession. This is known as remission.

🔷 Definition of Remission (Section 63 of the Indian Contract Act, 1872)

📜 “Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.”

🔑 Remission means accepting less than what is due under the contract or excusing non-performance, either fully or partly, without fresh consideration.

✅ Legal Essentials of Remission

The promisee must agree to accept less or excuse performance.
It can be partial or total.
No new consideration is required for remission.
It must be made voluntarily and by the party to whom performance is due.

✅ Examples of Remission

A owes B ₹1,000. B agrees to accept ₹700 in full satisfaction. A pays ₹700. The debt is discharged.
A promises to deliver 10 bags of rice to B. B tells A to deliver only 7 bags and forget about the rest. A complies. The contract is discharged.
B owes A ₹20,000 due on 1st July. A agrees to extend the due date to 1st August. This is also covered under Section 63.

🔷 Remission vs. Waiver vs. Alteration

Let’s now examine how remission is different from waiver and alteration:

✅ 1. Waiver

Waiver means the intentional abandonment of a right under a contract. It can be partial or total and may not involve acceptance of any performance.

No performance or substitute is taken.
It is a unilateral act of the promisee.

📌 Example: A has a right to receive ₹5,000 from B. A tells B, “You need not pay me anything.” This is waiver.

✅ 2. Alteration

Alteration means change in one or more terms of the contract by mutual agreement without changing the entire contract.

Both parties remain the same.
The old contract is not discharged but modified.
Requires mutual consent.

📌 Example: A and B agree that instead of delivery on 10th June, the new delivery date will be 20th June. This is alteration.

🔄 Comparison Table: Remission vs. Waiver vs. Alteration

Basis	Remission	Waiver	Alteration
Definition	Acceptance of lesser or no performance	Giving up a right	Changing the terms of contract
Legal Provision	Section 63	Implied in Section 63	Section 62
Consideration Required	❌ Not required	❌ Not required	✅ Required if new obligations created
Performance Involved	Yes, but reduced	No performance accepted	Modified performance
Consent of Other Party	❌ Not mandatory	❌ Not mandatory	✅ Mandatory (mutual)
Effect on Contract	Original contract stands, but partially performed	Original contract remains unenforced	Terms of original contract modified

✅ Important Case Law:

🔹 Ganga Saran v. Firm Ram Charan Ram Gopal (AIR 1952 SC 9)

Supreme Court upheld the validity of remission without consideration, stating that if a party voluntarily accepts lesser performance, he cannot later claim the balance.

🔹 State of Rajasthan v. Basant Nahata (2005)

The court reiterated that Section 63 allows unilateral remission and doesn’t require consideration.

🔷 Conclusion

Remission under Section 63 of the Indian Contract Act allows a promisee to accept less than full performance or to excuse the performance of a contract. It provides flexibility and recognizes the freedom of the promisee. It differs from waiver (which is the abandonment of a right altogether) and alteration (which involves a mutual change in contract terms). The Indian law permits such arrangements even without fresh consideration, making it unique compared to English law.

✅ 7. Explain the concept of ‘Accord and Satisfaction’. How does it lead to discharge of contract? Support your answer with relevant case laws.

🔹 Introduction: Discharge of Contract by Accord and Satisfaction

The terms “Accord and Satisfaction” refer to a method of discharging a contractual obligation where the parties agree to substitute the original obligation with a new one (accord), and that new obligation is then performed (satisfaction). When both steps are completed, the original contract is considered discharged.

🔹 Meaning of Accord and Satisfaction

Accord means an agreement between the parties to accept a lesser performance or different obligation than what was originally agreed upon in the contract.
Satisfaction means the actual performance of the obligation as per the new accord.

Thus, accord is the agreement, and satisfaction is its execution.

⚖️ In simple terms: A agrees to accept Rs. 8,000 from B in full settlement of B’s original debt of Rs. 10,000. If B pays Rs. 8,000 and A accepts it as full satisfaction, then the original contract is discharged.

🔹 Essentials of Accord and Satisfaction

There must be an existing contractual obligation.
There is a new agreement (accord) between the parties.
The new agreement must be supported by consideration.
The performance of new obligation (satisfaction) must take place.
The creditor must accept the new performance in full satisfaction of the original obligation.

🔹 Discharge of Contract through Accord and Satisfaction

When the accord is performed and the satisfaction is accepted, the original contract is discharged. This discharge is by mutual consent, and it operates under the principle of substituted performance.

🔹 Legal Position under Indian Contract Law

Though the Indian Contract Act, 1872 does not specifically use the phrase “accord and satisfaction,” the principles are recognized under Section 62 and Section 63:

Section 62: Effect of novation, rescission and alteration of contract.

It permits discharge of a contract through mutual agreement (novation), which can include accord and satisfaction.
Section 63: Promisee may dispense with or remit performance of promise.

This allows a party to accept lesser performance than what was originally agreed, enabling accord and satisfaction.

🔹 Examples

Example 1 (Complete Accord and Satisfaction):
A owes B Rs. 50,000. B agrees to accept Rs. 40,000 in full settlement. A pays Rs. 40,000, and B accepts it as full satisfaction. The contract is discharged.
Example 2 (No Satisfaction):
A agrees to accept Rs. 40,000 from B (accord), but B does not pay it (no satisfaction). The original contract is not discharged.

🔹 Difference between Accord and Satisfaction vs Novation/Alteration

Basis	Accord and Satisfaction	Novation	Alteration
Nature	New obligation in place of old	Substitution of a new contract	Change in terms of the same contract
Discharge	Only after satisfaction (performance)	Discharges original contract	Original contract modified, not discharged
Need for consent	Yes, both parties	Yes, all parties	Yes, both parties
Example	Acceptance of lesser amount	Replacing A with C in a contract	Changing due date of payment

🔹 Case Laws on Accord and Satisfaction

1. Union of India v. Kishorilal Gupta & Bros. (AIR 1959 SC 1362)

Facts: A dispute arose regarding payment. The parties agreed to a new arrangement, and it was acted upon.
Held: The original contract stood discharged by accord and satisfaction.

2. Kapur Chand Godha v. Mir Nawab Himayatali Khan (AIR 1963 SC 250)

Held: If a party accepts lesser performance knowingly and voluntarily, the original obligation is discharged.

3. The State of Punjab v. Darshan Singh (AIR 2004 SC 361)

Held: Once a party accepts payment in full and final settlement, it cannot later claim the balance amount unless fraud or coercion is proved.

🔹 Conditions Where Accord and Satisfaction is Not Valid

If consent is obtained through coercion, fraud, or misrepresentation, the accord and satisfaction is not valid.
If the satisfaction is not completed, the original contract remains enforceable.

🔹 Conclusion

‘Accord and Satisfaction’ is a practical method of resolving disputes and modifying obligations under a contract. When properly executed, it legally discharges the original contract and replaces it with a new, fulfilled obligation. The concept ensures flexibility and finality in contractual relationships.

✅ Final Note: Accord without satisfaction is not enough to discharge the contract. Both must be complete.

✅ Q.8. What is meant by ‘Discharge of Contract by Impossibility of Performance’? Explain the Doctrine of Frustration with Leading Case Laws.

🔷 Introduction:

A contract is said to be discharged when the rights and obligations arising out of the contract come to an end. One of the important ways a contract can be discharged is through “impossibility of performance”, which means that the contract becomes impossible to perform after it has been made due to certain unforeseen or unavoidable events. This principle is governed under Section 56 of the Indian Contract Act, 1872, which lays down the Doctrine of Frustration.

🔷 Section 56: Impossibility of Performance

Section 56 of the Indian Contract Act, 1872 provides:

“An agreement to do an act impossible in itself is void.”

“A contract to do an act which becomes impossible or unlawful after the contract is made, becomes void when the act becomes impossible or unlawful.”

🔷 Meaning of Impossibility of Performance:

Impossibility of performance means that the contract cannot be performed because of some supervening event or circumstance which is beyond the control of the parties, and which was not foreseen at the time the contract was entered into.

🔷 Types of Impossibility:

Initial Impossibility (Pre-Contract):
- If the act is impossible at the time of making the contract, the contract is void ab initio (from the beginning).
- Example: Contracting to discover treasure by magic.
Subsequent or Supervening Impossibility (Post-Contract):
- If the act becomes impossible or unlawful after the contract is made, the contract becomes void.

🔷 Doctrine of Frustration:

Doctrine of Frustration means automatic discharge of contract when an event occurs after the formation of the contract which renders the performance physically or legally impossible without any fault of the parties.

The frustration of a contract puts an end to the obligation of both the parties.

🔷 Conditions for Applicability of Doctrine of Frustration:

There must be a valid contract.
Performance must have become impossible or unlawful.
The impossibility must not be due to the fault of any party.
The event must be unforeseen and beyond control.

🔷 Situations Leading to Frustration:

Destruction of Subject Matter
– Taylor v. Caldwell (1863)
– A music hall rented for a concert was destroyed by fire. Held: contract was discharged.
Death or Incapacity of a Party
– If the contract is of personal nature, death or incapacity of one party frustrates the contract.
– Robinson v. Davison (1871) – Pianist fell ill; contract held frustrated.
Change in Law / Illegality
– A contract may become illegal due to change in law or government order.
Outbreak of War or Political Events
– A contract with an alien enemy or with a country at war may be frustrated.
– Fibrosa Spolka v. Fairbairn Lawson (1943) – War made contract illegal.
Non-occurrence of an Event that is the Foundation of the Contract
– Krell v. Henry (1903) – A flat was rented to watch the King’s coronation parade. Parade was canceled. Held: contract frustrated.
Administrative or Government Interference
– Government banning export/import of specific goods may frustrate the contract.

🔷 Indian Case Laws on Doctrine of Frustration:

Satyabrata Ghose v. Mugneeram Bangur & Co. (AIR 1954 SC 44)
- Supreme Court held that impossibility doesn’t mean literal impossibility, but includes impracticability and uselessness due to changed circumstances.
Alopi Prasad v. Union of India (AIR 1960 SC 588)
- Government contract – mere hardship or economic unprofitability is not frustration.
Energy Watchdog v. CERC (2017) 14 SCC 80
- SC ruled that increase in fuel prices or commercial hardship is not frustration of contract.
Naihati Jute Mills Ltd. v. Hyaliram Jagannath (AIR 1968 SC 522)
- Just because the contract becomes difficult or expensive, it doesn’t mean it is frustrated.

🔷 Legal Effects of Frustration:

Contract becomes void under Section 56.
Parties are discharged from further performance.
Compensation is not payable for non-performance.
Restitution under Section 65 – any advantage received must be returned.

🔷 Exceptions to Doctrine of Frustration:

Self-induced Impossibility – If one party causes the impossibility, the doctrine doesn’t apply.
Mere difficulty or increased cost is not frustration.
Alternative modes of performance still available.
Force Majeure Clauses – If the contract includes such clauses, parties are governed accordingly.

🔷 Distinction between Force Majeure and Doctrine of Frustration:

Force Majeure	Doctrine of Frustration
Based on contractual clause	Based on Section 56 of the Indian Contract Act
Covers specific events listed in the contract	Covers general impossibility
Operates within the contract	Operates outside the contract
No need to prove fundamental change	Requires fundamental change in circumstances

🔷 Conclusion:

The doctrine of frustration ensures fairness and justice by discharging contracts that become impossible or unlawful to perform. However, it is applied narrowly and cautiously by courts to prevent misuse. Commercial inconvenience, hardship, or financial loss are not sufficient to claim frustration. Section 56 must be read strictly, and courts look at the root of the contract and the fundamental basis to determine frustration.

✅ Q.9. What do you understand by breach of contract? Distinguish between anticipatory breach and actual breach. What remedies are available to the aggrieved party?

📌 Introduction
A breach of contract occurs when one party to a contract fails to fulfill their obligations as agreed upon in the contract, without any lawful excuse. The breach may be total or partial, and may occur either before the time for performance (anticipatory) or at the time of performance (actual). When a breach occurs, the aggrieved party is entitled to claim legal remedies under the Indian Contract Act, 1872.

🔷 Meaning of Breach of Contract

Under Section 73 of the Indian Contract Act, 1872, when a contract is broken, the party who suffers from the breach is entitled to receive compensation for the loss or damage caused to him.

Definition:
A breach of contract is the failure or refusal by a party to a contract to perform his obligations under the contract.

🔷 Types of Breach of Contract

There are two primary types:

(A) Actual Breach of Contract

An actual breach takes place:

On the due date of performance, if one party fails to perform;
During performance, when a party refuses or fails to continue performance.

Example: A contracts to deliver 100 bags of wheat to B on 1st July. He does not deliver on the due date. This is actual breach.

(B) Anticipatory Breach of Contract

An anticipatory breach occurs when, before the due date, one party clearly refuses or disables himself from performing his obligations.

Legal Position:
The promisee can either:

Treat the contract as immediately broken and sue for damages; or
Wait till the due date to see if the promisor performs.

Example: A contracts with B to supply goods on 1st August. On 1st July, A informs B that he will not supply. This is an anticipatory breach.

🔷 Difference between Anticipatory Breach and Actual Breach

Basis	Anticipatory Breach	Actual Breach
Time of Breach	Before the date of performance	On or after the due date
Nature	Breach by renunciation or impossibility	Breach by refusal or failure to perform
Remedy	Aggrieved party may sue immediately or wait	Aggrieved party can sue after breach only
Effect on Contract	Contract may be treated as ended early	Contract ends due to non-performance

🔷 Remedies for Breach of Contract

Under the Indian Contract Act, the following remedies are available:

1. Damages (Section 73 & 74)

Ordinary Damages: Compensation for loss naturally arising.
Special Damages: When specific circumstances were known at the time of contract.
Nominal Damages: Token amount when no substantial loss is suffered.
Liquidated Damages: Fixed amount agreed in contract.

📌 Leading Case:
Hadley v. Baxendale (1854) – Laid down the foundational principles of compensation for breach.

2. Specific Performance

Under the Specific Relief Act, 1963, the court may direct the breaching party to perform their part of the contract, especially where monetary compensation is inadequate.

3. Injunction

In case of a negative contract (e.g., not to act), the court may issue an injunction to prevent the breach.

4. Quantum Meruit

If one party performs partially and the contract is later terminated, he can claim compensation proportionate to the work done.

5. Rescission of Contract

The aggrieved party may cancel the contract and be relieved from all obligations under it.

🔷 Conclusion

Breach of contract undermines the very foundation of contractual relations. Whether anticipatory or actual, the law provides ample remedies to protect the interests of the innocent party. The object is to place the aggrieved party in the position they would have been in had the contract been performed. Therefore, the Indian Contract Act ensures both deterrence and justice through effective legal provisions.