A contract is said to be discharged when an agreement that was binding on the parties ceased to bind them and contract is said to be discharged. It can be discharged by performance of the contract, by breach of contract, impossibility of performance, by agreement, by lapse of time, by operation of law. In discharge by performance when both parties perform their promises and there is nothing remain to perform contract is discharged. Discharge by agreement is when a new contract substitutes for the old one, when some of terms of contract are cancelled then there is discharge of contract, when some terms are altered by mutual consent of parties, and mutually parties abandon the contract, and when contracts merge to a superior one it is discharged. These are different circumstances wherein a contract is discharged.
When known or unknown impossibilities to the parties happen like death, outbreak of war, change of law then contract is discharged. When time lapses relating to Limitation Act, 1963 where contract should be performed within some specified time limitation period, and if that does not happen then it lapses. Discharge happens when there is actual breach or anticipatory breach during the performance of contract.
In the case Adam & Coal Resources Pvt. Ltd Vs Interbulk Trading Sa on (25 August, 2014) court took the reference of the decision held in National Insurance Co. Ltd. vs. M/s. Boghara PolyfabPvt. Ltd (September 18, 2008) that contract comes to an end when there is a discharge of contract by performance. In such cases where contract has been discharged nothing remains neither any right to seek performance nor any obligation to perform. A contract can be discharged by the same process as it was created like by mutual agreement. Section 65 of the Indian Contract Act 1872 refers to Discharge of Contract by Frustration. Effects of frustration is with reference to restitution of advantages received by a party not entitled to such benefit. Frustration takes place when an event occurs that the parties could not contemplate when they made the contract and such event which none of the party was responsible.
by Sushma Javare.