Ways in which a contract is discharged

A contract is discharged when the obligations it created come to an end, so that neither party can any longer be made to perform. The ways can be grouped by what ends the obligations: the parties' own conduct, an outside event, or a failure by one side.

Ended by the parties themselves

1. By performance. The usual way: each party does what he promised (actual performance). If the promisor offers to perform properly and the promisee will not accept (tender, or attempted performance), the promisor is not responsible for the non-performance and may sue for breach. A tender of goods that is refused thus frees the seller; a refused tender of money, by contrast, does not discharge the debt, which the debtor still owes.

2. By mutual agreement (s. 62). The parties may replace the contract with a new one (novation), cancel it (rescission) or change its terms (alteration). A retailer owing a wholesaler ₹40,000 is released when all three agree that the retailer's brother will owe the sum instead.

3. By remission (s. 63). The promisee may accept less than what is due, or something else, in full satisfaction: a carpenter owed ₹15,000 who agrees to take a used scooter in full settlement cannot later claim the money. Related to this is merger, where a lower right is absorbed into a higher right held by the same person.

Ended by events outside the parties' control

4. By impossibility (s. 56). Performance becomes impossible or unlawful after the contract is made, through destruction of the subject matter, a change in the law, death or incapacity in a personal contract, or war. A hall booked for a concert burns down a week before the date: the booking contract is void.

5. By lapse of time. A promisee who does not sue within the period of limitation loses his remedy; a landlord whose tenant left in 2020 owing a month's rent, and who never sued for it, can no longer make the tenant pay through a court.

6. By operation of law, as on the insolvency of a party, or the death of a promisor whose personal skill was the point of the contract.

Ended by one party's failure

7. By breach, actual or anticipatory. The innocent party is freed from his own obligations and may claim damages. A builder who walks off the site halfway commits an actual breach; one who writes in March that he will not hand over the flats due in June commits an anticipatory breach.

8. By the promisee's failure to give reasonable facilities (s. 67). If the promisee does not give the promisor the reasonable help needed to perform, the promisor is excused for whatever that failure prevents: a firm hired to move a client's data to a new system is excused if the client never gives it access to the old one.