Unit III — Discharge & Performance of Contracts

“He who prevents a thing being done shall not avail himself of the non-performance he has occasioned.” — maxim behind reciprocal promises

Modes of Discharge

flowchart TD
    A["Discharge of a contract"]:::root
    A --> B["By performance<br/>(actual or attempted)"]:::leaf
    A --> C["By agreement / consent<br/>(novation, rescission,<br/>alteration, remission — S.62-63)"]:::leaf
    A --> D["By impossibility /<br/>frustration (S.56)"]:::leaf
    A --> E["By lapse of time /<br/>operation of law"]:::leaf
    A --> F["By breach<br/>(actual or anticipatory — S.39)"]:::leaf

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    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

A contract ends the “good way” (everyone performs, or both agree to end it) or the “bad way” (it becomes impossible, time runs out, the law steps in, or one party breaks it).

Time, Place & Reciprocal Promises

Time as the essence (S.55): where time is the essence and a party fails to perform by the fixed time, the contract becomes voidable at the other’s option; where it is not the essence, the contract stands but compensation may be claimed for delay. In commercial/mercantile contracts time is usually the essence; in contracts for sale of immovable property it usually is not. Reciprocal promises (S.2(f)) must be performed in the agreed or natural order; a party who prevents the other’s performance, or who must perform first but does not, loses the right to demand performance and must pay compensation. Appropriation of payments (Ss.59–61): the debtor’s express direction governs; failing that, the creditor may apply the payment; failing both, it goes to debts in order of time.

Joint Promisors — Sections 42–44

S.42 — joint promisors must jointly fulfil the promise.
S.43 — the promisee may compel any one or more to perform the whole; liability is joint and several. A promisor who pays more than his share recovers equal contribution from the others, and an insolvent’s share is borne by the rest.
S.44 — release of one joint promisor does not discharge the others.

Frustration & Breach

Frustration / impossibility (S.56): an agreement to do an impossible act is void; a contract to do an act that later becomes impossible or unlawful by a supervening event beyond the parties’ control becomes void — Satyabrata Ghose v. Mugneeram Bangur (1954) is the leading Indian authority; Taylor v. Caldwell (1863, the burnt music hall) and Krell v. Henry (coronation case) illustrate destruction of subject-matter and failure of purpose. Breach (S.39): actual breach (failure to perform when due) or anticipatory breach (repudiation before the due date — Hochster v. De La Tour, 1853), the latter giving the aggrieved party an immediate right to sue or to keep the contract alive.

✏️ Sample Solved Problem (IRAC Method)

Problem: A hires rooms from B to view the Dasara procession on a fixed day; before the day, the procession is cancelled (an earthquake / official cancellation). B claims the agreed rent. Decide.

I — Issue

Whether the cancellation of the event that was the foundation of the contract frustrates it and discharges A from paying the rent.

R — Rule

Section 56 — a contract to do an act which, after it is made, becomes impossible or whose basis is destroyed by a supervening event, becomes void.
Krell v. Henry (1903) — the coronation case: rooms hired to view a procession that was cancelled; the purpose (the procession) was the foundation of the contract, so its cancellation frustrated the contract and the hirer was excused; Satyabrata Ghose confirms the Indian position under S.56.

A — Analysis

The decoy is that the rooms remained available — B could argue he performed his side by keeping them ready, so rent is due. But the contract’s real subject-matter was not the bare rooms; it was the viewing of the procession, which both parties understood to be its foundation. When the procession was cancelled by an event beyond the parties’ control, that foundation collapsed and performance lost its purpose — the classic Krell v. Henry frustration, distinct from a mere rise in cost or difficulty.

C — Conclusion

The contract is frustrated and void under Section 56; A is discharged from paying the rent (and any advance is recoverable). The cancellation of the procession destroyed the very basis of the bargain (Krell v. Henry).

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