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Six Ways to Discharge Contracts

A contract can be discharged in one of the following ways:


By performance: A contract is discharged when the contract parties fulfil their obligations within the time and in the manner prescribed. If only one party performed the obligations, he alone is discharged and gets a right of action against the other party in breach. 


By agreement or consent: If the contract is not performed for some reason, then the contract parties can discharge the contract by mutual consent. Alternatively, they can accept a lesser fulfilment of the obligations (i.e. remission).


By frustration: If the contract requires performance of an impossibility that exists at the time the contract is formed, then the contract is void ab initio. If a subsequent event make the contract impossible to perform, then the contract is frustrated and brought to an end. 


By lapse of time: A contract should be performed within a specified period (i.e. a period of limitation). If it is not performed and no action is taken, the innocent party will be deprived of his remedy for breach of contract. The Limitation Act 1963 lays down a period of three years for the enforcement of most types of rights.


By operation of law: A contract may be discharged independently of the wishes of the parties. For example, it may happen when a contract party has died or become incapacitated or insolvent.


By breach of contract: A breach occurs when one party refuses to continue performing or commits an act which prevents further performance without lawful excuse. Actual breach occurs when a party fails to fulfill his obligations at the time when the performance is due. Anticipatory breach occurs when a party declares his intention of not performing the contract before the performance is due.

You can learn more about this topic with our Contract Law notes.

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