Define: Discharge Of Contract

Discharge of a contract refers to the termination of contractual obligations between parties, releasing them from further performance under the terms of the agreement.

Once a contract is discharged, the parties are no longer bound by its terms, and they are released from further obligations under the agreement. It’s essential for parties to understand the circumstances under which a contract can be discharged and to comply with any legal requirements or procedures for termination to avoid potential disputes or liabilities.

Discharge of a contract refers to the termination or fulfilment of contractual obligations, thereby releasing the parties from their duties and liabilities under the contract. Contracts can be discharged in several ways, including:

Performance: When both parties fulfil their obligations according to the terms of the contract, the contract is discharged through performance.

Agreement: The parties may mutually agree to terminate the contract through a process known as mutual rescission or by entering into a new agreement to modify or terminate the original contract.

Breach: If one party fails to fulfil their contractual obligations, the other party may choose to terminate the contract due to the breach, discharging both parties from further performance.

Operation of law: Certain legal principles or events, such as frustration, impossibility, or illegality, may discharge a contract by making performance impossible or illegal.

Once a contract is discharged, the parties are no longer bound by its terms, and any remaining rights or obligations under the contract are extinguished.

A contract is deemed to be discharged, that is, completed and no longer binding, in the following circumstances:.

• Performance. That is, all parties have satisfied the requirements of the contract to the satisfaction of the other parties. The overwhelming majority of contracts are discharged this way. However, it is not always clear when a contract has been performed or what should happen in the event of partial performance of the contract.
• Agreement. If the contract is still wholly executory (in progress), then there is no problem here, as neither party is set to lose out. However, if one party has fulfiled his obligation and the other has not, then the agreement to discharge must be supported by fresh consideration. For example, suppose I hire someone to paint my house with an agreement to pay on completion. The painter does not turn up to do the job. If the painter and I agree to abandon the work, then the contract is discharged. However, suppose I pay in advance and the painter does not turn up. I may decide that it is not worth my while to compel the painter to work or to take legal action and agree to write off the payment and discharge the contract. If I later decide to take legal action against the painter, the agreement to discharge will not be binding because the painter offered no consideration
• There are legal reasons for a discharge without performance. There are a few of these; the most common is frustration with a contract. If a contract is frustrated (i.e., impossible to perform), then it may be considered discharged without legal consequences.
• Breach. A breach of contract is a refusal by one party to abide by its terms without legal excuse (e.g., frustration).

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 10th April 2024.