Legal Notes

Q.1: What are various ways in which a contract can be discharged?
Explain
with cases.
ANS 1:
Discharge of a contract means termination of the contractual relations
between the parties to a contract. A contract is said to be discharged when the
rights and obligations of the parties under the contract come to an end. Modes
of discharge of contract
Discharge by Performance
A contract can be discharged by performance in any of the following ways:
(a) By Actual Performance A contract is said to be discharged by actual
performance when the parties to the contract perform their promises in
accordance with the terms of the contract.
(b) By Attempted Performance or Tender A contract is said to be discharged by
attempted performance when the promisor has made an offer of performance
to the promisee but it has not been accepted by the promisee.
Discharge by Mutual Agreement
Since a contract is created by mutual agreement, it can also be discharged by
mutual agreement. A contract can be discharged by mutual agreement in any
of the following ways:
a) Novation [Section 62] Novation means the substitution of a new contract for
the original contract. Such a new contract may be either between the same
parties or between different parties. The consideration for the new contract is
the discharge of the original contract.
(b) Rescission [Section 62] Rescission means cancellation of the contract by any
party or all the parties to a contract.
(c) Alteration [Section 62] Alteration means a change in the terms of a contract
with mutual consent of the parties. Alteration discharges the original contract
and creates a new contract. However, parties to the new contract must not
change.
(d) Remission *Section 63+ Remission means acceptance by the promisee of a
lesser fulfillment of the promise made. According to Section 63, Every
promisee may dispense with or remit, wholly or in part, the performance of
the promise made to him, or may extend the time for such performance, or
may accept instead of it any satisfaction which he thinks fit.
(e) Waiver Waiver means intentional relinquishment of a right under the contract. Thus, it amounts to releasing a person of certain legal obligation under a
contract.
Discharge by Operation of Law
A contract may be discharged by operation of law in the following cases:
(a) By Death of the Promisor A contract involving the personal skill or ability of
the promisor is discharged on the death of the promisor.
(b) By Insolvency When a person is declared insolvent, he is discharged from
his liability up to the date of his insolvency.
(c) By Unauthorised Material Alteration If any party makes any material
alteration in the terms of the contract without the approval of the other party,
the contract comes to an end.
(d) By the Identity of Promisor and Promisee When the promisor becomes the
promisee, the other parties are discharged.
Discharge by Impossibility of Performance
The effects of impossibility of the performance of a contract may be discussed
under the following two heads:
(a) Effects of Initial Impossibility
(b) Effects of Supervening Impossibility
(c) Declaration of War The pending contracts at the time of declaration of war
are either suspended or declared as void.
(d) Change of Law The contract is discharged if the performance of the
contract becomes impossible or unlawful due to change in law after the
formation of the contract.
Discharge by Lapse of Time
A contract is discharged if it is not performed or enforced within a specified
period, called period of limitation. The Limitation Act, 1963 has prescribed the
different periods for different contracts, e.g. period of limitation for exercising
right to recover a debt is 3 years, and to recover an immovable property is 12
years. The contractual parties cannot exercise their rights after the expiry of
period of limitation.
Discharge by Breach of Contract
A contract is said to be discharged by breach of contract if any party to the
contract refuses or fails to perform his part of the contract or by his act makes
it impossible to perform his obligation under the contract. A breach of contract
may occur in the following two ways:
(a) Anticipatory Breach of Contract Anticipatory breach of contract occurs
when party declares his intention of not performing the contract before the
performance is due.
(b) Actual Breach of Contract Actual breach of contract occurs in the follow-ing
two ways:
(i) On Due Date of Performance: If any party to a contract refuses or fails to
perform his part of the contract at the time fixed for performance, it is called
an actual breach of contract on due date of performance.
Q2. Explain Goods under Sales of Goods Acts. Explain the rights of an unpaid
seller.
ANS: As per Sale of Goods Act, 1930, goods means every kind of movable
property other than actionable claims and money; and includes stock and
shares, growing crops, grass, and things attached to or forming part of the land
which are agreed to be severed before sale or under the contract of sale.
Unpaid seller means a person who has sold the good for a price but price has
not been paid to him unpaid seller has rights against the goods and buyer.
RIGHTS OF AN UNPAID SELLER
The unpaid seller has following rights.
1) Rights against the goods.
i.Rights of lien
The right of lien means lawfully right to retain the goods possession until the
full price is received. Anunpaid seller can exercise his right of lien in following
cases. Sec 47-49
I.Where the goods have been sold on the cash basis.
II. Where the goods have been sold on credit basis and the term of credit has
expired.
III.Where the buyer has become insolvent even if the period of credit has not
been expired
Example: A seller S sells a TV set to B and delivers it to B and since the TV
set was not functioning properly,B delivered it back to S for the repairs. It
was held that S can not exercise his right of lien over TVset.
ii.Right of stoppage of goods in transit

It means stoppage of goods while they are in transit to take possession until
the price is paid (sec. 50-52)
Unpaid seller can stop the goods in transit in the following cases.
I.While the buyer becomes insolvent

II. While the goods are out of actual possession of seller, but have not reached
buyers possessioni.e. goods are in transit with career.
III.The unpaid seller can stop the goods in transit only for payment of the price
of the goods andnot for any other charges
Example: A sells TV set to B. A delivers the TV to the carrier to carry it to
B. Later on gets news that Bhas become insolvent; A can stop delivery.
iii. Right of resale

If a buyer fails to pay or offer the price within a reasonable time, the unpaid
seller has the right to resellthe goods in the following circumstances.
a)Where the goods are of perishable nature.
b)Where the unpaid seller has exercised his right of lien or stoppage in transit
and gives a noticeto buyer of his intension of resell the goods.
c)Where the unpaid seller has expressly reserved his right of resale.
Example: a)X sells vegetable to Y on credit, Y does not pay, X can resell
to any other person.
b)M sells 100 blankets to N and gives him one week for payment. N does
not pay. M canresell those to any other person.
2)Rights against buyer personally

i. Suit for price
Where ownership of the goods has passed to the buyer and the buyer refuses
to pay the price accordingto the terms of the contract, the seller can sue the
buyer for price, irrespective of delivery of the goods
ii. Suit for damages for non-acceptance
Where the buyer refuses to accept and pay for the goods, the seller may sue
him for damages for non-acceptance. The seller can recover damages only and
not the full price
iii. Suit for special damages and interest
The seller can sue the buyer for special damages where the parties are aware
of such damages at thetime of contract. The unpaid seller can recover interest
at a reasonable rate on the total unpaid price of goods, from the time it was
due until it is paid.

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Q.1: What are various ways in which a contract can be discharged?

ii.Right of stoppage of goods in transit

I.While the buyer becomes insolvent

iii. Right of resale

2)Rights against buyer personally

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