A Contract Is Discharged When A Change In The Law Renders The Performance Illegal?

A Contract Is Discharged When A Change In The Law Renders The Performance Illegal
VI. Subsequent or supervening impossibility – A. Pre-contractual Impossibility A contract which at the time was entered into was impossible to perform, is void ab initio and creates no rights and obligations. Sec.56(1) states that “An agreement to do an act impossible in itself is void.” Such fact of impossibility may be— ( i ) Known to the parties: In such a case the agreement is void ab initio and creates no rights and obligations.

For example a promise to ride a horse to the Sun or A agrees with B to discover treasure by magic. The agreement is void. ( ii ) Unknown to the parties: When both the parties are ignorant of the impossibility at the time of making the contract, the contract, is void on the ground of mutual mistake. For example: A agrees to sell his horse to B but unknown to both the parties the horse had already died at the time of making the contract.

The contract is void. ( iii ) Known only to the promisor : On the contrary, if the promisor alone knew about the impossibility of performance at the time of making the contract, he shall have to compensate the promisee for any loss which such promisee sustains through the non-performance of the promise.B.

Post-contractual Impossibility A contract, which at the time was entered into, was capable of being performed may subsequently become impossible to perform or unlawful.
In such cases the contract becomes void.
This is known as the doctrine of Supervening Impossibility.
It is also known as the Doctrine of Frustration.

Frustration occurs where it is established that due to subsequent change in circumstances, the contract has become impossible to perform or it has been deprived of its commercial purpose. “A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful”.

Para 2.C. Grounds of Frustration Supervening impossibility may occur in many ways, some of which are explained below: ( i ) Destruction of the subject matter of contract On the destruction of the subject matter, a contract is discharged and no party is liable to perform.
Ii ) Change of Law The performance of a contract may become unlawful by a subsequent change of law.

In such cases, the original contract becomes void. ( iii ) Failure of pre-conditions When a contract is entered into on the basis of the continued existence of a certain state of things, the contract is discharged if the state of things change.

- - - Illustration: A & B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void.
    - Illustration: H hired a room from K for two days with the object (as both parties know) of using the room to view the coronation procession of Edward VII although the contract continued no reference to the procession. Owing to the king’s illness the procession was abandoned. Held, that the contract was discharged and H was excused from paying rent of the room as the existence of the procession was the basis of the agreement.

( iv ) Death or incapacity for personal services Where the personal qualification of a party is the basis of the contract the contract is discharged in cases of death or personal incapacity. G contracts to act of a theatre for six months in consideration of a sum paid in advance by H.

On several occasions G is too ill to act. The contract to act on these occasions becomes void. ( v ) Outbreak of war A contract entered into during war with an alien enemy is void ab-initio, A contract entered into before the war commenced between citizens of countries subsequently at war, remains suspended during the pendency of the war.

After the termination of the war, the contract revives and may be enforced.

What is the discharge of a contract?

1) Introduction A contract is said to be discharged when the obligations created by it come to an end. In other words discharge of contract means ‘ termination of the contractual relationship between the parties’. There are various modes of Discharge of Contract, a contract may be discharged either in a positive way (Positive – by performance) or in negative.

Negative – by breach or failure to perform contractual obligation by either of the parties).2) Discharge of contract – There are various modes of discharge of a contract which are as follows : 1. By performance 2. By agreement or consent 3. By impossibility 4. By lapse of time 5. By operation of law 6. By breach of contract 1.

By performance – A contract is said to be discharged if the parties to a 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.

Performance of a contract is the most usual mode of its discharge.
It may be Actual Performance or attempted Performance (tender) (a) Actual performance: When both the parties perform their promises, the contract is discharged.
Performance should be complete, precise and according to the terms of the agreement.

Most of the contracts are discharged by the performance in this manner. (b) Tender or Offer of Performance: Tender or offer of performance means “offer made by the promisor to promisee expressing his willingness to perform his part of the obligation under the contract.

It is also known as attempted performance. Example- ‘A’ offers to sell his house to ‘B’ for $100000 and ‘B’ accepts the same letter ‘B’ paid the amount in full and ‘A’ handed over the house to ‘B’. Here the parties have fulfilled their obligations.The contract is said to be discharged by performance. 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 of contract. See also. Doctrine of Privity of contract 2. Discharge by agreement or consent: A contract rests on the agreement of the parties. As it is an agreement which binds them, so by their agreement or consent they may be discharged.

A contract may be terminated by subsequent agreement.
The new agreement may be by way of : a) Novation- Section 62 of the Indian Contract Act deals with the doctrine of novation.
When a new contract is substituted for an existing one, either between the same parties or between the new parties.
If the parties to a contract agreed to substitute a new contract for it or to rescind or alter it, the original contract need not be performed.

b) Alteration-,i.e., when one or more of the terms of the contract is/are altered by the mutual consent of the parties to the contract. c) Rescission – i.e., when all or some of the terms of the contract are canceled. d) Remission- Section 63 of the Indian Contract Act 1872 speaks about the discharge of a contract by remission.i.e., acceptance of a lesser fulfillment of the promise made.

E) Waiver – which means intentional relinquishment or giving up of a right by a party entitled thereto under a contract. f) Merger- i.e., when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under a new contract. See also. By Whom Must Contract be Performed? 3.

Discharge by Impossibility of Performance: If the performance of a contract is impossible, it is void. In other words, the impossibility of performance renders the contract void. Section 56 of the Indian Contract Act 1872 lays down the provisions relating to the impossibility of performance, which runs as follows – ” An agreement to do an act impossible in itself is void.” Impossibility which arises subsequent to the formation of a contract ( which could be performed at the time when the contract was entered into ) is called subsequent or supervening impossibility include- a) destruction of the subject-matter of contract; b) non-existence or non-occurrence of a particular state of things; e) death or incapacity for personal service; d) change of law or stepping in of a person with statutory authority; e) outbreak of war.

The contract is discharged in these case.
The following cases are not covered by supervening impossibility ; a) difficulty of performance; b) commercial impossibility; c) failure of a third person on whose work the promisor relied; d) strikes, lockouts and civil disturbances; e) failure of one of the objects.

The contract is not discharged in these cases.4. Discharge by lapse of time: The limitation act 1963, imposed an obligation on the parties in respect of certain contacts to perform within a specified. If a contract is not performed within the period of limitation and if no action is taken by the promise in a law court, the contract is discharged.5) Discharge by operation of law: A contract may be discharged by operation of law.

It includes discharge by a) Death b) Merger c) Insolvency/ Bankruptcy d) Unauthorized Alteration of the terms of a written agreement, and e) Rights and liabilities becoming vested in the same person. f) Judgement of Court 6) Discharge by breach of Contract: Breach of contract means failure to perform the contractual obligation by either of the parties without any lawful excuse.

It is a ground for discharge of the contract. Breach of contract may be – 1) Actual breach, or 2) Anticipatory breach.1) Actual breach of contract may occur a) at the time when the performance is due, or b) during the performance of the contract.2) Anticipatory breach of contract occurs when a party repudiates his liability or obligation under the contract before the time for performance arrives.

Can a contract be discharged under the frustration of purpose doctrine?

A contract may be discharged under the frustration of purpose doctrine if the event which frustrated the purpose was foreseeable. False Generally, contracts are discharged by the performance of the terms of the contract. True By operation of law, a party can be discharged in bankruptcy from debts. True

How is a contract discharged by lapse of time?

Negative – by breach or failure to perform contractual obligation by either of the parties).2) Discharge of contract – There are various modes of discharge of a contract which are as follows : 1.
By performance 2.
By agreement or consent 3.
By impossibility 4.
By lapse of time 5.
By operation of law 6.
By breach of contract 1.

Performance of a contract is the most usual mode of its discharge. It may be Actual Performance or attempted Performance (tender) (a) Actual performance: When both the parties perform their promises, the contract is discharged. Performance should be complete, precise and according to the terms of the agreement.

It is also known as attempted performance.
Example- ‘A’ offers to sell his house to ‘B’ for $100000 and ‘B’ accepts the same letter ‘B’ paid the amount in full and ‘A’ handed over the house to ‘B’.
Here the parties have fulfilled their obligations.The contract is said to be discharged by performance.
If only one party performs the promise, he alone is discharged.

A contract may be terminated by subsequent agreement. The new agreement may be by way of : a) Novation- Section 62 of the Indian Contract Act deals with the doctrine of novation. when a new contract is substituted for an existing one, either between the same parties or between the new parties. If the parties to a contract agreed to substitute a new contract for it or to rescind or alter it, the original contract need not be performed.

E) Waiver – which means intentional relinquishment or giving up of a right by a party entitled thereto under a contract.
F) Merger- i.e., when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under a new contract.
See also.
By Whom Must Contract be Performed? 3.

The contract is discharged in these case.
The following cases are not covered by supervening impossibility ; a) difficulty of performance; b) commercial impossibility; c) failure of a third person on whose work the promisor relied; d) strikes, lockouts and civil disturbances; e) failure of one of the objects.

It includes discharge by a) Death b) Merger c) Insolvency/ Bankruptcy d) Unauthorized Alteration of the terms of a written agreement, and e) Rights and liabilities becoming vested in the same person.
F) Judgement of Court 6) Discharge by breach of Contract: Breach of contract means failure to perform the contractual obligation by either of the parties without any lawful excuse.

How are losses divided when frustration discharges a contract?

Effects of the doctrine – Law Reform (Frustrated Contracts) Act 1943 provides that losses may be divided between the parties as the court sees fit where frustration discharges a contract. Section 1(2) provides three rules: Money paid prior to the frustrating event is recoverable, and Money payable prior to the frustrating event is not longer payable If the party who would have been due money incurred losses prior to performing the contract, the court may award that party such expenses up to the limit of the money paid/payable before the frustrating event.

A pop concert was due at a stadium, but it was later declared unsafe and could not legally be used. No alternative venue was available and the concert could not take place. Both parties had incurred costs – the pop concert promoters had paid the defendants $412,500 for the venue and naturally wanted to recover these monies relying on s1(2) of the 1943 Act.

The stadium owners counterclaimed for breach of contract by the promoters in failing to secure the permit for the concert. The fact the stadium was declared unsafe was the frustrating event, not the lack of the permit and the counterclaim was dismissed.

What does discharge mean in contract law?

In contract law, the fulfillment of one’s duties arising under a contract with another; the normal way of discharging one’s contractual obligations. A party may be discharged from a valid contract by: 1. A condition occurring – or not occurring.2.Full performance or material breach by the other party.3.Agreement of the parties.

What are the modes of discharge of contract?

Negative – by breach or failure to perform contractual obligation by either of the parties).2) Discharge of contract – There are various modes of discharge of a contract which are as follows : 1.
By performance 2.
By agreement or consent 3.
By impossibility 4.
By lapse of time 5.
By operation of law 6.
By breach of contract 1.

It is also known as attempted performance. Example- ‘A’ offers to sell his house to ‘B’ for $100000 and ‘B’ accepts the same letter ‘B’ paid the amount in full and ‘A’ handed over the house to ‘B’. Here the parties have fulfilled their obligations.The contract is said to be discharged by performance. If only one party performs the promise, he alone is discharged.

A contract may be terminated by subsequent agreement. The new agreement may be by way of : a) Novation- Section 62 of the Indian Contract Act deals with the doctrine of novation. when a new contract is substituted for an existing one, either between the same parties or between the new parties. If the parties to a contract agreed to substitute a new contract for it or to rescind or alter it, the original contract need not be performed.

E) Waiver – which means intentional relinquishment or giving up of a right by a party entitled thereto under a contract.
F) Merger- i.e., when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under a new contract.
See also.
By Whom Must Contract be Performed? 3.

The contract is discharged in these case.
The following cases are not covered by supervening impossibility ; a) difficulty of performance; b) commercial impossibility; c) failure of a third person on whose work the promisor relied; d) strikes, lockouts and civil disturbances; e) failure of one of the objects.

What is discharge by impossibility of performance?

Negative – by breach or failure to perform contractual obligation by either of the parties).2) Discharge of contract – There are various modes of discharge of a contract which are as follows : 1.
By performance 2.
By agreement or consent 3.
By impossibility 4.
By lapse of time 5.
By operation of law 6.
By breach of contract 1.

Performance of a contract is the most usual mode of its discharge.
It may be Actual Performance or attempted Performance (tender) (a) Actual performance: When both the parties perform their promises, the contract is discharged.
Performance should be complete, precise and according to the terms of the agreement.

A contract may be terminated by subsequent agreement. The new agreement may be by way of : a) Novation- Section 62 of the Indian Contract Act deals with the doctrine of novation. when a new contract is substituted for an existing one, either between the same parties or between the new parties. If the parties to a contract agreed to substitute a new contract for it or to rescind or alter it, the original contract need not be performed.

The contract is discharged in these case.
The following cases are not covered by supervening impossibility ; a) difficulty of performance; b) commercial impossibility; c) failure of a third person on whose work the promisor relied; d) strikes, lockouts and civil disturbances; e) failure of one of the objects.

It includes discharge by a) Death b) Merger c) Insolvency/ Bankruptcy d) Unauthorized Alteration of the terms of a written agreement, and e) Rights and liabilities becoming vested in the same person.
F) Judgement of Court 6) Discharge by breach of Contract: Breach of contract means failure to perform the contractual obligation by either of the parties without any lawful excuse.

How does subjective impossibility of performance affect a contract?

Subjective impossibility of performance can discharge a contract. When a change in the law renders the performance of a contract illegal, the nonperforming party is normally held in breach of contract. Kali contracts to sell Leony her car for $3,000. This contract will be fully discharged when Kali and Leony