CONFLICT OF LAWS ASSIGNMENT

On

CONFLICT OF LAWS IN RELATION TO DISCHARGE OF CONTRACT

Submitted by

Name- Aisha Ali

Student ID- 20183406

B.A. LL.B. (X Semester) (Regular)

FACULTY OF LAW, JAMIA MILLIA ISLAMIA

Submitted to:

DR. ALISHA KHATUN

FACULTY OF LAW, JAMIA MILLIA ISLAMIA

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 ACKNOWLEDGEMENT

I would like to take this opportunity to express my profound gratitude and deep regard to teacher
Dr. Alisha Khatun, Faculty of Law, Jamia Millia Islamia for her guidance, valuable feedback and
constant encouragement throughout the duration of the report. Her valuable suggestions were of
immense help throughout my research work. Her perspective, criticism kept me working to make
this assignment in a much better way. Working under her was an extremely knowledgeable
experience for me.
AISHA ALI

20183406

B.A. LL.B. (X Semester)

(Regular)

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 TABLE OF CONTENTS

S.NO. CONTENTS PAGE

NO.
1. ABSTRACT 4
2. INTRODUCTION 4
3. DISCHARGE OF CONTRACT: INDIAN POSITION 5

● DISCHARGE BY PERFORMANCE.

● DISCHARGE OF CONTRACT BY
SUBSTITUTED AGREEMENT.

● DISCHARGE BY LAPSE OF TIME.

● DISCHARGE BY OPERATION OF LAW.

● DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE.

● DISCHARGE BY ACCORD AND

SATISFACTION.

● DISCHARGE BY BREACH

4. DISCHARGE OF CONTRACT UNDER PRIVATE

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INTERNATIONAL LAW : VARIOUS THEORIES
 ROME STATUTE
 THE ENGLISH CONCEPT OF PRIVATE
INTERNATIONAL LAW
 LIMITATIONS
 PERFORMANCE OR DISCHARGE OF
OBLIGATIONS
5. CONCLUSION 15
6. BIBLIOGRAPHY 16

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ABSTRACT

Private International Law deals with the rules and regulations that govern the relationships
between individuals and legal entities in different countries. In the context of contracts, it is
essential to consider how private international law impacts the discharge of a contract. The
discharge of a contract is the process by which the obligations and duties that arise from a
contract come to an end. This can be due to various reasons such as the performance of the
contract, agreement by parties, frustration, breach, or termination. This assignment aims to
explore the discharge of contracts under private international law in detail.

KEYWORDS: Contract, Discharge, Obligations.

INTRODUCTION

A contract is a backbone of trade at a domestic or an international level. In India, the Indian

Contract Act, 1872 (ICA) forms the governing and foundational law in terms of regulation of all
forms of contract, however, one must also appreciate that the business contract between
individuals, institutions, companies, etc. have also grown beyond the boundaries of the ICA.
When contracts transcend national boundaries, the legal regime of a single country becomes
inadequate to regulate and control the implications of the international contracts.

Thus, when parties to a contract are from different countries, at least two systems of law impinge
upon the transaction and the rules and guidelines of private international law come into play.
Hence, there are multiple international conventions such as the United Nations Convention on
Contracts for the International Sale of Goods (CISG), or the clauses of International Arbitration

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that play their role in the formation as well as governance of contracts in India. In this
assignment, the challenges of choice of laws in the context of international commercial contract
and then briefly the practices prevailing in India regarding the principles governing the choices
of law are been addressed.

DISCHARGE OF CONTRACT – INDIAN POSITION

Discharge of contract under Indian law refers to the process by which the duties and
obligations arising from a contract come to an end. The Indian Contract Act, 1872 governs
the law of contracts in India and provides for various modes of discharge of a contract. In
this assignment, we will discuss the different ways in which a contract can be discharged
under Indian law.
A Contract is considered to be discharged, that is, closed and done restricting, in the
accompanying conditions: 1

● Discharge by performance.

● Discharge of Contract by Substituted Agreement.

● Discharge by lapse of time.

● Discharge by operation of law.

● Discharge by Impossibility of Performance.

● Discharge by Accord and Satisfaction.

● Discharge by breach

Performance of Contract:

The most common way to discharge a contract under Indian law is through performance.
Performance refers to the fulfillment of the obligations and duties that arise from the
contract. When both parties have performed their obligations under the contract, the contract
is considered to be discharged.

Agreement by Mutual agreement:

1
Raviteja P.A.N.V, “Discharge by Performance & Contingent contracts”, Academike (2014).

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Another way to discharge a contract under Indian law is through mutual agreement by both
parties. This can happen in situations where both parties agree to terminate the contract
before its completion. The parties may come to an agreement on the terms and conditions of
the termination of the contract.

Discharge of Contract by Substituted Agreement

A contract radiates from an agreement between the parties. It hence follows that, the contract
should likewise be discharged by agreement. Hence, what is required, unavoidably, is
commonality. Discharge by subbed agreement emerges when a contract is deserted, or the
terms inside it are modified, and both the parties are in congruity over it.

 Novation

It occurs when a contract is substituted for the old contract between the same or new
parties. In order to enforce novation, the following conditions must be followed. It is
laid down in Section 62 of the Indian Contract Act, 1872.

 There must be a valid reason for substituting the contract.

 Consent of all the parties is required.

 The old contract must be substituted before the expiry or breach of the contract.

In the case of Manohur Koyal v. Thakur Das2, the defendant failed to pay the agreed
upon sum to the plaintiff on the due date stated in the contract. However, the defendant
promised to pay Rs. 400 to the plaintiff and to execute a fresh kistibundi bond. The
plaintiff agreed to this but the defendant failed to pay that amount consequently, the
plaintiff sued the defendant. The Calcutta High Court stated that since the new bond was
created after the breach of the original contract, therefore the contract cannot be
discharged by novation but by breach of contract.

 Remission

Remission occurs when parties to a contract accept a lesser amount or lesser degree of
performance than what was initially agreed upon in the contract. Section 63 of the Act
states that a party may;

2
(1888) ILR 15 Cal 319.

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  Remit the performance stated wholly or in part.

 Extend the time for performance.

 Accept any other kind of performance apart from the one mentioned in the contract.

 Alteration

It means changing one or more contract terms, thereby discharging the old contract and
forming a new one. Alterations to a contract must take place with the consent of all the
parties to the contract. In the case, United India Insurance Co. Ltd v. M.K.J.
Corporation(1996), the Supreme Court held that utmost good faith must be observed by
the contracting parties and the duty of good faith is of a continuing nature even after the
completion of the agreement no material alterations can be made to the contract without
the mutual consent of the parties.

 Rescission

Rescission takes place when the parties in the contract agree to dissolve the contract. In
this case, the old contract stands discharged and no new contract is formed.

 Waiver

The term waiver means the abandonment of a right. A party to a contract may have their
rights specifically stated under the contract which also helps to release the other party
from the contract and the contract is discharged.

 Merger

When an existing inferior right of a party, in respect of a subject matter, merges into a
newly acquired superior right of the same person, in respect of the same subject matter,
then the previous contract conferring the inferior right stands discharged by the way of
merger.

Discharge by lapse of time:

A contract stands discharged if not authorized inside a predefined period called the 'time of
limitation'. The Limitation Act, 1963 recommends the time of limitation for different
contracts. For example, time of limitation for practicing option to recuperate an immovable
property is twelve years, and option to recuperate a debt is three years. Contractual rights

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become time barred after the expiry of this limitation period. Accordingly, if a debt isn't
recuperated inside three years of its instalment turning out to be expected, the debt stops to
be payable and is discharged by lapse of time. 3

Discharge by Operation of Law- A contract terminates by operation of law in the

following cases:

a. Insolvency: The insolvency Act for discharge of contract under particular circumstances.
Where the court declares a person as insolvent, the rights and duties of such person are
transferred to the officer of court, known as Official Receiver, after the order of the court
such person is discharge from his liabilities incurred before his insolvency.

b. Merger: Merger takes place when an inferior right available to a party mergers into a
superior right available to the same party under, some other contract. As a result of merger
the former contract stands discharged automatically.

Discharge in case of Frustration:

Frustration occurs when an event occurs that makes it impossible to perform the obligations
and duties that arise from the contract. This can be due to various reasons such as war,
natural disasters, or a change in the law that makes it impossible to perform the contract. In
such cases, the contract is considered to be frustrated, and the obligations and duties that
arise from the contract come to an end.

Discharge by Termination:

Termination occurs when one of the parties decides to end the contract before its
completion. This can happen due to various reasons such as a breach of contract, frustration,
or mutual agreement.

Indian law provides for various modes of termination of a contract, such as by agreement,
lapse of time, operation of law, and breach. Under Section 2(j) of the Indian Contract Act,
1872, the term 'termination' refers to the discharge of the parties from their respective
obligations and duties arising under the contract.

Discharge by Breach of Contract- A contract must be performed according to its terms.

But where the Promisor fails to perform the contract according to the terms of the contract,

3
Ayub v. Saloman, 252 S.W. 291 (Tex. Civ. App. 1923); Watson v. Murray, 23 N.J. Eq. 257 (Ch. 1872);

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there is breach of contract by him. Breach of contract may be of two kinds:

a. Actual Breach: It occurs when a party fails to perform a contract, when performance is
due. But, if a party who has failed to perform the contract at the appointed time,
subsequently expresses his willingness to perform, he can do so after paying compensation,
if time is not essence of contract

b. Anticipatory Breach: It occurs when a party to an executor contract declares his

intention of not performing the contract before the performance is due. He may do so-

I. By expressly renouncing his obligation under the contract

II. By doing some act so that the performance of his promise becomes impossible.

Remedies for Breach of Contract:

Indian law provides for various remedies in case of a breach of contract, such as damages,
specific performance, and injunction. Damages refer to the monetary compensation that the
non-breaching party may be entitled to in case of a breach of contract. Specific performance
refers to the court order that directs the breaching party to perform their obligations under
the contract. Injunction refers to the court order that prohibits the breaching party from doing
something that is in violation of the contract.

In conclusion, the Indian Contract Act, 1872 provides for various modes of discharge of a
contract, such as performance, mutual agreement, frustration, breach, and termination. The
choice of mode of discharge will depend on the specific circumstances of the contract. It is
essential for parties to a contract to be aware of the different modes of discharge and the
remedies available in case of a breach of contract.

DISCHARGE OF CONTRACT UNDER PRIVATE INTERNATIONAL LAW

The contact in conflict of laws involves many transactions in trade and commerce. The
contracts are more complex when there is an involvement of foreign element; it is difficult to
determine the rights and liabilities of the parties. 4 For instance the contract may be signed in

4
E. A. Fredericks and J. L. Neels, ‘The Proper Law of a Documentary Letter of Credit South African Mercantile
Law Journal (2003).

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one country, the subject matter of the contract in another country, the place of the
performance in another country and the domicile of the contracting parties may be in another
country, so in that case there is a involvement of four different laws of four different
countries involved in the contract, so there is a conflict of laws exist there to determine
which of the following law can be applied to determine the rights and liabilities of the parties
in the contract. The nature of problem in contractual obligation is ascertaining the proper law
due to diverse connecting factors.

ROME CONVENTION:-
The Rome convention or convention on contractual obligation, 1980 is the principle
convention governing the contractual obligations. The Scope of the convention is given in
Article 1(1) provides that 'the rules of this Convention shall apply to contractual obligations
in any situation involving a choice between the laws of different Countries.
The Main purpose of Rome convention is to adopt uniform rules of conflict of laws within
the European community in which it was proposed by the Benelux nations (Belgium,
Netherlands, Luxemburg) countries in 1967 and it was finally drafted in the year 1980 and
came into force on April 1990. It is even accepted in India due to its international
recognition so that it would increase legal certainty and make it easier to anticipate more
easily. 5
APPLICATION OF THE CONVENTION:-
It applies to all contractual matters but does not have retrospective effect. It also does not
limit other international convention applicability to which the state is a party. For the
application two essentials are the one is contractual obligation and secondly choice of law
must be in question.
CONNECTING FACTORS:-
Two connecting factors have been appropriate to govern the law of a contract, viz;
(i) Lex loci contractus (law of the place where the contract was made);
(ii) Lex loci solutionis (law of the place where performance of the contract was due.)

5
Cheatham, Goodrich, Griswold And Reese, Conflict Of Laws 494-95 (3d ed. 1951); Note, 40 CORNELL L.Q.
772 (1955).

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However, each of these connecting factors has its limitations.
THE ENGLISH CONCEPT OF PRIVATE INTERNATIONAL LAW
The English Private International Law Has Evolved The Principle Of Proper Law Of
Contract To Decide Questions Regarding Contractual Obligations Involving Foreign
Element. They Defined It As The Law Which The English Court Is To Apply In
Determining Obligations Under A Contract.
HOW TO ASCERTAIN THE PROPER LAW?
There are two theories in Determining Proper law for Contract
1. THEORY OF INTENTION OR SUBJECTIVE THEORY
It is the proper law in which the parties intended to apply and parties themselves have
chosen their rights and liabilities to determine under a particular law and when not
expressly mentioned, the relevant circumstances must be taken into consideration to
determine the intention
2. THEORY OF LOCALISATION OF THE CONTRACT OR OBJECTIVE
THEORY
The contract in which the most part of the transaction takes place which is the natural seat
of the contract, then the law of that particular country will be applicable. Weslakesays,
“proper law should be the law of the country with in which the contract has the most real
connection and not the place of the contract will be taken into account”.
-An illustration in which X is domiciled in France, Y domiciled in Italy, place of contract
will be Italy, place of performance will be Italy and the money must be paid in a French
bank and in this contract, Italy is the country in which the contract is most densely grouped
or the country which is closely connected, so the Italian law is the proper law of the
contract according to localization theory supported by Westlake. 6
DOCTRINE OF PROPER LAW:-
The law chosen by the parties is often referred to as the proper law of the contract’ and this
choice can be express or implied. If there is no choice then governed by the most closely
connected test. Thus the law by which the contract is intended to be governed is called

6
Forsyth, p. 321; W. de Vos, ‘Freedom of Choice of Law for Contracts in Private International Law’ (1961) Acta
Juridica 1.

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 proper law contract.7
Article 3 (1) of the convention says: “A contract shall be governed by the law chosen by the
parties. The choice must be express or demonstrated with reasonable certainty by the terms
of the contract or the circumstances of the case. By their choice the parties can select the
law applicable to the whole or a part only of a contract.”

Choice is of two types express and implied choice. In express choice the parties themselves
choose the proper law like lex domicille, lex loci contractus etc.. Whereas in implied choice
it is determined from the terms of the contract, nature, circumstances then the proper law is
determined. The term ‘proper law’ was clearly defined in Indian General Investment
Trust vs. Raja of Kholikote8 as “the proper law of contract means the law which the court
is to apply in determining the obligation under the contract”.
The matter of ascertaining proper law depends on the intentions of the parties to be
ascertained in each case on consideration of:
a) the terms of the contract,
b) the situation of the parties and generally on
c) all surrounding facts from which the Intention of the parties is to be gathered.

EXPRESS CHOICE- In Vita Food Products Inc. vs. Unus Shipping Co. Ltd. (1939) 9In
this case, even though the contract is mostly connected with just one country, the court chose
to go with the law in which the parties have chosen expressly and mentioned despite it has
no connection with the contract. Lord Wright an English jurist said that: ‘where there is an
express statement by the parties to select the law of contract, it is difficult to see other
criteria to determine proper law provided that the intention expressed is bona fide and legal,
and provided there is no reason for avoiding the choice on grounds of public policy’ the
intention of the parties as to the choice of law prevails’.
IMPLIED CHOICE- When the intention regarding governing law is not expressly stated,
intention to be inferred from the terms and nature of the contract, circumstances and the
inferred intention determines the proper law of contract. The court should find out the

7
Rabel, Conflict Of Laws 452 (1947); Stumberg, Conflict Of Laws 224 (2d Ed. 1951).
8
AIR 1952 Cal 508.
9
UKPC 7,, A.C. 277 (P.C.), (1939) 63 Ll L Rep 21.

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implied intention to govern the contract, in the absence of such implied intention the court
has to find out the intention. The major task of the court is that they have to find the
intention under which the reasonable man and a prudent man under the same circumstances
would have did, the judges should have placed himself in the place of the reasonable man
and find out the intention of the parties.
In Amin Rasheed vs. Kuwait insurance company10, a Liberian company resident in Dubai,
insured a ship with the Kuwait Insurance Company. When a claim made by Liberian
company under this policy was rejected by Kuwait Company. Plaintiff sought an order to
serve a writ on Defendant which could be granted, providing the contract ‘by its terms, or by
implication, governed by English law.’ There was no express choice of English law, nor was
it clear as to what was the implied law: both Kuwaiti law and English law had claims to
being the proper law of the contract. However, based on the surrounding circumstances as
well as the terms of the contract the rights and obligations should be determined in
accordance with the English law of marine insurance’. A significant factor was that at the
time of making the contract, Kuwait had no law of marine insurance.
LIMITATIONS:-
The limitation over determining the proper law is explained with Mandatory rules and most
closely connected test.
MANDATORY RULES:-
Article 3(3) of the convention speaks about mandatory rules. The purpose of this provision is
to prevent evasion of mandatory rules of law. This can be of any rules based on public
policy or invalidate provision.
MOST CLOSELY CONNECTED TEST:-
In the absence of an expressed or an implied choice of law, the contract shall be governed by
the law of the country with which it is most closely connected as per Art.4 (1) of the
convention. The factors which help the court determine the proper law of the contract are
those with which the transaction had its ‘closest and most real connection’. 11
The following factors are considered by the Court when deciding this issue:
1. The form of the contract.

10
[1983] UKHL J0707-2
11
Rabel Ernst, “The Conflict of Laws: A Comparative Study.”, Vol. 3. Ann Arbor: The University of Michigan
Press, 1950.

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 2. The place where the contract was concluded.
3. The place where the contract is to be performed.
4. The parties place of residence and business.

PERFORMANCE OR DISCHARGE OF OBLIGATIONS:

The proper law is to determine whether the parties obligations have been discharged.
CAPACITY:-
The three possibilities are:
Capacity can be governed by;
(i) the lex domicilii of each contracting party (unreasonable); or
(ii) the proper law of the contract or
(iii) the lex loci contractus (which may be entirely fortuitous).
Ralli Bros. Case.12
Here, Spanish shippers contracted with R, English charterers, in London, to carry goods
from Calcutta to Barcelona. The shippers were to be paid £50/ton freight in Barcelona on
delivery there. [i.e. Barcelona was the place where the contract was to be performed].
However, after the voyage had begun, but before the goods arrived in Barcelona, a Spanish
law enacted that freight must not exceed £10/ton freight. Accordingly, the charterers, R,
agreed to pay £10 but no more. The shippers brought an action in England for the balance.
It was held English law, which was the proper law of the contract, regarded the Spanish
legislation as a frustrating event. The action for recovery of the balance was unsuccessful.
RENVOI:-
As per Article 15 of the convention it excludes the application of renvoi over contractual
obligation.
CASE WHERE THE PROPER LAW IS NOT THE ONLY LAW APPLICABLE
The increasing tendency today in English law is to follow the view that all aspects of
contract should be governed by proper law in the objective sense i.e., the law of the country
with which the contract is most substantially connected. The subjective theory of proper law
(proper law is the law chosen by the parties, irrespective of existence of connection with the
contract) is not gaining ground. The view expressed by Cheshire that “the courts should, and

12
[1920] 1 K.B. 614.

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do have a residual power to strike down, for good reason, choice of law clauses totally
unconnected with contract,” has a good deal of supporters. Be that as it may, it should be
borne in mind that there are a few areas in the law of contracts where some other law than
the proper law becomes relevant.
The more important these are stated below among:
(a) FORMAL VALIDITY In earlier times jurists advocated the exclusive application of
Lex loci contractus (the law of the place where the contract is made) to determine the
formal validity of contracts.
(b) ILLEGALITY: It is not possible to decide the question of illegality of a contract by
referring exclusively to proper law; it may be necessary to take into account other legal
systems also. For example, an English court will not enforce a foreign contract regarded
as immoral, although it may be perfectly valid according to the proper law. The lex fori,
lex loci contractus and lex loci solutionis (the law of the place of performance) are
relevant and should be taken into consideration. 13

13
Elliott E. Cheatham, “Sources of Rules for Conflict of Laws,” University Of Pennsylvania Law Review (2005).

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CONCLUSION

As with the fundamental contract, the performance of a contract may involve associations
with numerous frameworks of law. In fact, distinguishing what comprises performance
under a contract can at times be a test. It shows up from the concluded cases to have been
acknowledged that performance is represented by the appropriate law of the contract and
lex loci solutionis. It stays unsure which wins on account of irregularity, for example,
where performance is legitimate under the appropriate law of the contract, yet is illegal
under lex loci solutionis. What is sure is that the courts won't enforce a contract which is
illegal under lex loci solutionis or in the country where enforcement is looked for. Then
again, the simple fact that performance is illegal under the laws of whatever other country
which has some association with the contract, like the spot of residence, business, ethnicity
or domicile of one party, won't forestall enforcement of the contract. Comity and public
policy contemplations which advise the non-enforcement regarding contracts for which
performance is illegal under lex loci solutionis, the appropriate law of the contract or where
enforcement is looked for, have not been extended to nations for certain different
associations with the contract. This is a proper position since it forestalls a circumstance
emerging where one party can depend on their own independent associations with an
arrangement of law to crush performance under the contract.

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BIBLIOGRAPHY & REFERENCES

 ACTS & STATUTES

1. INDIAN CONTRACT ACT, 1872.
2. THE ROME CONVENTION ON CONTRACTUAL OBLIGATION, 1980.

 BOOKS

1. J. H. C. Morris: Conflict of Laws, Sweet & Maxwell, London.

2. John P. Tiernan: Conflict of Laws, Callaghan & Co, Chicago.
3. Robert A. Leflar: The Law of Conflict of Law, The Bobbs-Merrill Company, Inc.,
Indianapolis.
4. Geoffrey Chevalier Cheshire: Private International Law, Clarendon Press, Oxford.
5. Paras Diwan: Indian and English Private International Law, Deep & Deep, New
Delhi.

 ARTICLES, JOURNALS & SCHOLARLY WORKS

1. Arthur Nussbaum, “Conflict Theories of Contracts: Cases Versus Restatement” ¸

The Yale Law Journal Vol 51, (1942)
2. Elliott E. Cheatham, “Sources of Rules for Conflict of Laws,” University Of
Pennsylvania Law Review (2005).

3. Rabel Ernst, “The Conflict of Laws: A Comparative Study.”, Vol. 3. Ann Arbor:
The University of Michigan Press, 1950.

4. Raviteja P.A.N.V, “Discharge by Performance & Contingent contracts”, Academike

(2014).

 WEBSITES
1. https://jmielibrary.informaticsglobal.com/
2. https://www.jstor.org/
3. https://shodhganga.inflibnet.ac.in/
5. https://www.casemine.com/
9. https://www.latestlaws.com/
10. http://www.livelaw.com

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