Discharge of Contract: Explained with Various Modes

In the world of business and commerce, contracts are a crucial part of every transaction. A contract is a legally binding agreement between two or more parties that outlines the rights and obligations of each party involved. At the end of the contract period, the parties involved must fulfill their respective obligations, bringing an end to the agreement. This termination of the contract is referred to as ‘discharge of contract’. In this article, we will explain what discharge of contract means and the various modes of discharge.

What is discharge of contract?

As mentioned earlier, discharge of contract is the termination of a legally binding agreement between two or more parties. It happens when the parties involved fulfill their respective obligations stated in the original contract. In simpler terms, it means that the contract has come to an end, and the parties are free from any further obligations under the agreement.

Modes of discharge of contract

There are several ways in which a contract can be discharged, and these modes are outlined below:

1. Performance – The most common method of discharging a contract is through performance. This means that the parties involved do what they agreed to do under the contract. Once all the terms of the contract have been fulfilled, the contract is deemed discharged.

2. Breach of Contract – If one party fails to fulfill their obligations under the contract, it is considered a breach of contract. The other party has the right to terminate the agreement and seek damages for any loss suffered as a result of the breach.

3. Agreement – Contracts can also be discharged by mutual agreement between the parties involved. If both parties agree to end the contract, it can be terminated even if all the terms of the agreement have not been fulfilled.

4. Frustration – In some cases, events outside the control of the parties involved can make it impossible to fulfill the terms of the agreement. This is known as frustration and can discharge the contract. For example, if a building is destroyed by fire, it is impossible to fulfill the terms of the contract, and therefore, it can be discharged.

5. Impossibility – In certain situations, it may become impossible to fulfill the terms of the contract due to unforeseen circumstances. If this is the case, the contract can be discharged.

6. Operation of law – Contracts can also be discharged by operation of law. This happens when a change in the law makes it impossible to fulfill the terms of the contract. In this case, the contract is considered discharged by operation of law.

Conclusion

Contracts are a crucial part of business transactions, and understanding the various modes of discharge is essential for all parties involved. Discharge of contract means the termination of the legally binding agreement, and it can happen through performance, breach of contract, mutual agreement, frustration, impossibility, or operation of law. Knowing the different modes of discharge can help you avoid legal disputes and ensure that you fulfill your obligations under a contract.