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 PREV Previous Chapter

6. The Indian Contract Act 1872: Performance of Contract

NEXT Next Chapter

8. The Indian Contract Act 1872: Remedies for Breach of Contract and Quasi-contract

7
The Indian Contract Act 1872: Discharge of a
Contract
Learning Objectives
In this chapter, the students will come to know the

 What is discharge of a contract?

 Various methods of discharge of a contract.
 Initial and supervening impossibility of a performance.
 Breach of a contract and its consequences.

7.1 DISCHARGE OF A CONTRACT

Discharge of a contract means termination of the contractual relations between

the parties to the contract. The contract may be discharged in the following six
modes as shown in Figure 7.1.

 
 

Figure 7.1 Mode of discharge of a contract.

7.2 DISCHARGE OF A CONTRACT ON PERFORMANCE

A contract can be discharged by performance in any of the following ways.

7.2.1 By an Actual Performance

It means the parties to contract have performed their respective promises under
the contract.

7.2.2 By an Attempted Performance or a Tender

It means the promisor has made an offer of the performance of promise but it
has not been accepted by the promisee.

7.3 DISCHARGE OF A CONTRACT BY A MUTUAL AGREEMENT OR BY AN

IMPLIED CONSENT

A contract can be discharged by mutual agreement in any of the following

ways.
 7.3.1 Novation
The novation means a new contract is entered into in consideration of the old
contract. The new contract is entered into between the same parties or the new
parties. The novation is valid when all the parties must consent it. The new
contract must be valid and enforceable, otherwise the old contract will continue
valid.

Example

A owed   100 to B, under contract. B owed   100 to C. It was agreed among A,

B and C that A would pay   100 to C.

7.3.2 Alteration
An alteration of a contract means a change in one or more terms of the contract
with the mutual consent of the parties. The alteration discharges the original
contract and creates a new contract. However, the parties to the new contract
remain the same. In case of alteration of the contract, the old terms and
conditions need not to be performed while the new terms and conditions must
be performed.

Example

A agreed with B to supply 100 TV sets at a certain price by the end of October.
Subsequently, A and B mutually agree that the supply be made by the end of
November. This is an altercation in the terms of the contract by consent of both
the parties.

7.3.3 Rescission
The rescission of a contract means the cancellation of the contract by one or all
the parties to contract. It may take place:

1. With the mutual consent of the parties.

2. By a party whose consent was not freely obtained (voidable contract).
3. One party may rescind the contract, if a breach of contract by the other party.
4. The party rescinding the contract must restore the benefit received from the other
party.

No partial rescission. The party may rescind the entire contract. The rescission
of the contract in part is not possible. Just as a proposal has to be
communicated, the rescission should also be communicated. A rescission may
be revoked in the same manner as a proposal is revoked.
 7.3.4 Remission
The remission means the acceptance of a lesser consideration than what is
agreed under the contract. It takes place when the promisee:

1. Dispenses with a part or whole of the performance of a promise.

2. Extends the time for a performance by the promisor.
3. Accepts a lesser sum.
4. Accepts any other consideration, than agreed in the contract.

Example

A owes B   5000. A pays   2000 to B and B accepts the amount in satisfaction

of the whole debt. The whole debt is discharged.

It may be noted that when a party accepts a lesser sum in satisfaction of a larger
sum due under the contract it is called ‘accord and satisfaction’ in the English
Law. The promisee accepts a lesser sum than what is due under the contract is
known as ‘Accord’ and the actual payment is the satisfaction. This is a valid
contract.

7.3.5 Waiver
It means the abandonment (i.e., giving up) of right by the party under the
contract. No consideration is necessary for the waiver.

Example

A promises to supply goods to Y. Later on, Y exempts A from carrying out the
promise. It amount as waiver of right of performance on part of Y.

7.3.6 Merger
The conversion of the inferior right into superior right is called as merger. It is
also called as vesting of rights and liabilities in the same person.

Example

A person holds property under lease, purchases the property. On purchase, his
lease agreement is discharged.

Case Study
A bill of exchange which was accepted by B, reaches B's hands after being
negotiated and endorsed through several other parties. Is it a valid contract? Is B
require to make payment on bill?

Case Study
A took a house on rent from B. During tenancy, A purchases that house. Now
does he requires to pay the rent? Why?

7.4 DISTINGUISH BETWEEN A NOVATION AND AN ALTERATION

Matter Novation Altera

Meaning It means a new contract is entered into in the place of Alteration means a change
the old contract. of the contract with the co

Different Parties Novation may involve different parties. In the case of alteration, p

Change in terms Novation may or may not involve changes in the terms Alteration always requires
and Conditions and conditions. Generally, novation includes more terms and conditions
alteration.

7.5 DISTINGUISH BETWEEN A RESCISSION AND AN ALTERATION

Matter Rescission Alterat

Meaning It means cancellation of the contract. It means change in one or m

contract with the consent of

Mutual Novation takes place with the mutual consent or by Alteration cannot take place
consent aggrieved party or a party whose consent is not free. consent.

Effect On cancellation, the contract comes to an end. The parties are legally boun
the altered contract.

7.6 DISCHARGE OF A CONTRACT BY IMPOSSIBILITY OF PERFORMANCE

Sometimes, the performance of a contract is impossible. In such a case, the

contract is discharged. This is based on the principle that law does not recognize
what is impossible. The impossibility of performance may be of two types,
namely (a) the initial impossibility and (b) the subsequent impossibility.

7.6.1 Initial Impossibility or Pre-contractual Impossibility

It means impossibility exists at the time of making a contract. The initial
impossibility may be (i) known or (ii) unknown to the parties at the time of
making the agreement.

7.6.2 Known Impossibility

It means one or both the parties have a knowledge that a promise is impossible
to perform even though they enter into an agreement.

Example

A agrees with B to bring a dead man to life. It is known to the parties at the time
of making the agreement that the performance is impossible. The agreement is
void ab initio.

7.6.3 Unknown Impossibility

It means both the parties genuinely believe that the performance of a promise is
possible but it is impossible to perform. It can also be said here that there is a
bilateral mistake of parties.

Example

A agrees to sell certain goods to B, supposed to be on their way from Mumbai

to Kolkata in a certain ship. Unknown to both the parties, the ship had already
sunk in the deep sea, and the goods ceased to exist at the time of contract. The
contract becomes void when the impossibility of performance is discovered.

7.6.4 Supervening Impossibility or Post-contractual Impossibility

The contract becomes void on account of the subsequent impossibility only if
the following conditions are satisfied.

1. The act should have become impossible after the formation of the contract.
2. The impossibility should have been caused by a reason of some event which was
beyond the control of the promisor.
3. The impossibility must not be the result of some act or negligence of the promisor
himself.

Example

A and B contract to marry each other. Before the time fixed for the marriage, A
becomes mad. The contract becomes void.
 Case Study
A, a Hindu, who was already married, contracts to marry B, a Hindu girl. Is it a
valid contract? Why?

7.7 SPECIFIC GROUNDS OF SUBSEQUENT IMPOSSIBILITIES

It is also known as the doctrine of frustration under the English law. In the
following cases, the contract is discharged on the ground of the supervening
impossibility.

7.7.1 Destruction of Subject–Matter

The destruction of the subject–matter after a contract is made without the fault
of any party discharge the contract. But if the destruction of the subject matter is
due to the fault of any party, he is liable for the damage to the other party.

Example

A music hall and a garden was let out by A to B for a series of concerts on four
different days. The hall was burnt-down before the date of the first concert.
Held, the contract became void by the supervening impossibility.

7.7.2 Incapacity or Death

Incapacity or death of the promisor and the contract is for personal service or
skill. The contracts involving the use of personal skill or ability of the promisor
are discharged on the illness, death, or incapacity of the promisor.

Example

A piano player agreed to perform a concert on a particular day. She was not able
to give her performance due to her illness. Held, the contract was discharged
due to her illness.

7.7.3 Change in Law or Circumstances

Sometimes, certain circumstances arise subsequent to the formation of a
contract, which makes the performance of the contract impossible, as
contemplated by the parties. In such circumstances, the contract is discharged.

Example
A agreed to sell his land to B. Subsequently, the land was acquired by the
government. Held, the contract was discharged.

7.7.4 Declaration of War

The pending contract at the time of declaration of a war is either suspended or
declared void. Generally, the contract at the time of the declaration of a war is
void, when the government declares it against the public interest or national
interest.

Example

A contracts to take in a cargo for B at a foreign port. A's government,

afterwards, declares a war against the country in which the port is situated. The
contract becomes void when war is declared.

Case Study
A contracts with the Indian Cricket Board to play for IPL-4 at South Africa. A
falls ill and is advised by the doctor to rest. What will be the impact on the
contract?

Case Study
A musical hall was agreed to be let out on certain dates but before those dates
the hall was destroyed by fire. What will be the status of the contract?

7.8 CASES WHERE A CONTRACT IS NOT DISCHARGED ON THE GROUND

OF SUPERVENING IMPOSSIBILITY

In the following cases, the contract is not discharged on the ground of

supervening impossibility. Such excuses are not recognized by the law.

7.8.1 Performance becomes Difficult

When the performance of the contract becomes difficult, the contract is not
discharged. Difficulty is not impossibility. A party can perform it with more
effort or hardship.

7.8.2 Commercial Impossibility

The party is not discharged from the performance on the ground that it will be
non-profitable for him to perform the contract.

Example

A agreed to sell to B, dhotis manufactured in a particular mill. The mill got into
repairs and so, dhotis did not manufacture. Held, the contract was not frustrated
as the stipulation as to delivery did not make the delivery by the mills, a
condition precedent. It was a breach of the contract.

7.8.3 Impossibility Due to the Conduct of Third Party

If a promisor could not perform the promise because of default of the third
party, he cannot make an excuse and claims that it is impossible to perform the
promise. The third party's fault or conduct has nothing to do with the contract.
The contract is not discharged because of third party's default.

Example

A agreed with B to supply certain cloth manufactured by a specified mill. The

terms of the agreement stipulated that A could supply goods as soon as they are
supplied to him by the mill. The mill failed to supply the goods to A. Held, A
was liable to supply as the terms only indicated the process of delivery.

7.8.4 Strikes, Riots or Civil Disturbances

Strikes, riots, or civil disturbances do not discharge the contract. When such an
event takes place, the performance of a promise under the contract becomes
impossible for the time being. Once a strike is called off or life becomes normal,
it is possible to perform the promise.

Example

A agreed to supply certain goods to B which were to be imported from Algeria.

The goods could not be imported due to the riots and civil disturbances in that
country. Held, A cannot be excused for the non-performance of the contract.

7.8.5 Self-induced Impossibility

If the performance of the contract becomes impossible due to the act of the
omission of a party, it is called as self induced impossibility. In such cases, the
contract is not discharged.
 7.8.6 Failure of Object
The failure of one of the object out of many objects, do not discharge the
contract. But, if all the objects of the contract fail, the contract becomes
discharged.

Case Study
A entered into a contract with B for supply of 100 bicycles manufactured by C.
C did not manufacture it. Can A discharge from the contract?

Case Study
A agreed to supply certain goods to B. As a result of an increase in the raw
material costs, it is no longer profitable for A to supply them at the agreed rate.
A refused to perform the contract on the argument of impossibility. Is argument
of A justifiable? Why?

Case Study
Akhilesh entered into an agreement with Shekhar to deliver him (Shekhar) 5000
bags, to be manufactured in his factory. The bags could not be manufactured
because of the strike by the workers, and Akhilesh failed to supply the said bags
to Shekhar. Decide whether Akhilesh can be exempted from liability under the
provisions of the Indian Contract Act, 1872.

Case Study
‘A’ promised to ‘B’ that he would arrange for ‘B's marriage with his daughter.
‘A’ could not persuade his daughter to marry ‘B.’ ‘B’ sued ‘A’, who pleaded on
the ground of impossibility that he is not liable for any damages. Is he liable to
B? On what ground?

7.9 DISCHARGE OF A CONTRACT BY LAPSE OF TIME

Every contract and promise under the contract should be performed within a
time limit. The contract is discharged, if it is not performed or enforced within a
specified period called as the period of limitation.

Example
The period of limitation for recovering the debt is 3 years and 12 years for the
recovery of immovable property.

7.10 DISCHARGE OF A CONTRACT BY OPERATION OF LAW

In the following circumstances, the contract is discharged by the operation of

law.

7.10.1 Death
The contract that requires personal skill is discharged on the death of the
promisors. However, any benefit received before the performance shall be
returned by the legal representative of the deceased party.

7.10.2 Merger
The conversion of the inferior right into superior right is called as merger. It is
also called as vesting of rights and liabilities in the same person.

7.10.3 Insolvency
The insolvent is discharged from all the liabilities on all the contracts, entered
into, up to the date of insolvency.

7.10.4 Unauthorized Material Alteration

The alteration which changes the nature of the contract is material alteration. If
one party makes any material alteration in the terms of the contract without the
approval of the other party, the contract comes to an end.

Example

One of the parties without the consent of the other party changes the date of
payment or the place of delivery.

7.11 DISCHARGE OF A CONTRACT BY BREACH OF CONTRACT

It means the failure of a party to fulfill his obligation or promise under the
contract. When there is a breach of contract, certain remedy or consequences are
available to the aggrieved party. The aggrieved party means a party who is not
at a fault.
 7.11.1 Consequences of Breach of Contract
The aggrieved party is not required to perform his part of the promise. The
aggrieved party is having various remedies depending upon the type of breach.
The breach of contract is of the following two types:

1. Actual breach
2. Anticipatory breach

7.11.2 Actual Breach of Contract

An actual breach of contract means any party to contract refuses or fails to
perform his promise on the due date of performance, or during the performance.
The actual breach of contract may take place expressly or impliedly.

Examples

1. A agreed with B to sell 500 TV sets on 21 January. A refuses to deliver the TV sets
on the due date. This is a breach of contract on the due date.
2. A agreed with B to supply 3000 computers at a certain price to be delivered in three
installments of 1000 each. After 2000 computers had been supplied, B informs A to
deliver no more. This is the actual breach of contract during the performance by
express refusing, and B can claim damages for the breach.

Following are the consequences of the actual breach of contract:

1. If time is the essence of the contract

1. The contract is voidable at the option of the aggrieved party.

2. The aggrieved party can claim the compensation for the loss
for non-performance.
3. The aggrieved party cannot claim compensation when he
accepts delayed performance.

2. If time is not the essence of the contract

If time is not the essence, the contract is not voidable but the aggrieved party
can claim compensation for any loss caused for non-performance.

7.11.3 Anticipatory Breach of Contract

When any party declares his intention of not performing the contract before the
performance is due, it is called as anticipatory breach of contract.
Example

A agrees with B to sell his car on 21 January. Before this date he informs B that
he will not sell it. This is an anticipatory breach of contract.

There are two modes of anticipatory breach (a) express repudiation and (b)
implied repudiation. The express repudiation means when the party refuses
expressly to perform his obligation before the performance due. The implied
repudiation means the party acts in such manner that it becomes impossible for
him to fulfill his obligation under the contract. In the case of implied
repudiation, the party does something which indicates his unwillingness to
perform the contract.

Following are the consequence of anticipatory breach.

1. The aggrieved party may treat the contract as alive.

2. The aggrieved party can rescind the contract and claim damages.

Here, the damage will be equal to the difference between the contract price and
the price as on the date of communication.

Note:

When a contract becomes void, any benefit received under such contract is
bound to restore such benefit or to make compensation for such benefit to the
person from whom he received it.

Case Study
A contracts with B to deliver goods to B on 10 July. A fails to deliver goods on
10 July. Is it anticipatory breach of contract? Why?

Case Study
A contracted to supply 200 bags of rice to B on 30 December 2010. After
supply of 20 bags of rice, A informed B that he will not supply remaining the
bags of rice to B. What will be consequences for this contract? Explain.

Case Study
Mr. Dubious textile enters into a contract with a Retail Garments Show Room
for supply of 1000 pieces of cotton shirts at   300 per shirt to be supplied on or
before 31 December 2004. However, on 1 November 2004 Dubious Textiles
informs the Retail Garments Show Room that he is not willing to supply the
goods as the price of cotton shirts in the meantime has gone upto   350 per
shirt. Examine the rights of the Retail Garments Show Room in this regard.

LIST OF LANDMARK JUDGEMENTS

1. Cort vs. Ambergate Rly. Co. (1851)

The actual breach of contract also occurs when during the performance;
the party fails to perform his obligation.
2. Krell vs. Henri (1903)
The failure of the object due to non-occurrence of the contemplated
event discharges the contract.
3. Shiam Sunder vs. Durga (1966)
The contract is discharged if the performance becomes impossible due
to a change of law or a change in the government policy after the
formation of the contract.
4. Jacob vs. Credit Lyonnais (1884)
The strikes lock-out and civil disturbances is not the impossibility for
the performance of a contract and therefore, the contract is not
discharged.
5. Shankar Lal Damodar vs. A. Ajaipal (1946)
In the case of novation of a contract if the new contract is not
enforceable by law the existing contract is received and the parties are
bound by it.
6. Manohar Koyal vs. Thakur Dass Naker (1888)
The novation must take place before the breach of the original contract.
7. Loonkaran Sethia vs. Ivan E. John (1977)
Where one party, without the consent of the other party, changes the
date of payment or delivery of goods or substitutes, such words which
change the meaning and affect the contract, such changes are material
alterations to the contract.
8. Robinson vs. Davidson (1871)
The contract involving the use of personal skill or ability of the
promisor is discharged on the illness, death or incapacity of the
promisor.
9. Shanty Vijay and Co. vs. Princess Fatima Fouzia (1980)
The injunction order or stay order is in force, the performance of a
contract may be stayed. The contract cannot be enforced.
10. Blackburn Bobbin Co. vs. T. W. Allen and Sons (1918)
If the performance of a contract becomes difficult, in such a case, the
contract is not discharged.
11. H. B. Steamboat Co. vs. Hutton (1903)
 Where there are several objects for which a contract is entered into, the
failure of one of the objects will not discharge the contract.

TEST YOUR KNOWLEDGE

1. State the various methods of termination of a contract.

2. How is the contract discharged on the performance of a promise?

3. Explain with examples, the principle of novation, alteration and rescission, where the
contract need not to be performed.

4. Novation means entering into a new contract in place of the old contract. Explain.

5. Write a short note on the novation of the contract.

6. Write a short note on the alteration of the contract.

7. What do you understand by ‘accord’ and ‘satisfaction’? Write a short note on the
novation of a contract.

8. Explain the meaning of the term ‘remission’. Write a short note on the novation of a
contract.

9. Remission may be part or full. Is it correct statement?

10. Distinguish between a novation and an alteration.

11. Distinguish between a rescission and an alteration.

12. The law does not compel the impossible. Comment.

13. Discuss the impossibility of performance as the mode of discharge of a contract, statin
the difference between the initial and supervening impossibility.
14. Does the frustration discharge the contract in all cases? If not, then specify the
circumstances in which the contract is not discharged on the ground of frustration.

15. When may a contract be discharged by the operation of law?

16. Explain the meaning of the breach of contract.

17. Write a short note on the breach of contract.

18. Write the difference between the actual breach and the anticipatory breach of contract.

19. What remedy is available to party on the breach of contract?

20. What are the consequences for the actual breach of contract?

21. Write a short note on the anticipatory breach of contract.

MULTIPLE CHOICE QUESTIONS

1. A contract is discharged by the breach when a party to a contract

i. refuses to perform his promise.

ii. fails to perform his promise.
iii. disables himself from performing his part of the promise.
iv. all of the above.

2. A agrees to marry B, and B promises to bring stars for A in the consideration of

marriage. The agreement is

i. void.
ii. valid.
iii. voidable.
iv. illegal.

2. A agrees with B to bring back the life of the dead patient for   50,000. The
agreement is
 i. void.
ii. voidable.
iii. unenforceable.
iv. illegal.

2. Which of the following is correct?

i. The performance of a contract means discharge of the contract.

ii. The rescission of a contract cannot discharge a contract.
iii. A material alteration in a contract discharges the contract.
iv. Both (i) and (iii).

2. The breach of a contract may be

i. an actual breach.
ii. an anticipatory breach.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Which of the following is correct?

i. The performance of a contract means the contract becomes

void.
ii. The cancellation of a contract cannot discharge a contract.
iii. The alteration with the consent of the party discharges the
contract.
iv. None of the above.

2. Which of the following is incorrect?

i. The impossibility to perform a promise discharges the contract.

ii. A merger discharges the contract.
iii. An initial impossibility discharges the contract.
iv. All of the above.

2. The doctrine of impossibility of performance, rendering a contract void, is based on

i. a commercial impossibility.
ii. a supervening impossibility.
iii. just and reasonable ground.
iv. an unjust enrichment.

2. Because of supervening event, the promisor is excused from the performance of the
contract. This is known as

i. a doctrine of frustration.
 ii. an initial impossibility.
iii. a doctrine of ultra-vires.
iv. an operation of law.

2. A contract is not considered void by a commercial impossibility.

i. True
ii. Partly true
iii. False
iv. None of the above

2. Which of the following is correct?

i. A supervening impossibility never discharges a contract.

ii. An anticipatory breach of contract does not discharge the
contract, till the other party elects to treat the contract as
discharged.
iii. Both (i) and (ii).
iv. None of the above.

2. Which of the following is correct?

i. A supervening impossibility sometimes discharges a contract.

ii. An actual breach of contract takes place before the due date of
performance.
iii. Both (i) and (ii).
iv. None of the above.

2. The third party's failure to perform a promise, on whose performance your

performance of promise depends upon. In this case, the contract

i. is not discharged.
ii. is discharged.
iii. becomes void.
iv. becomes voidable.

2. When a contract becomes void, any benefit received under such contract is
bound ................ to the person from whom he received it.

i. to restore such benefit

ii. to make compensation for such benefit
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Which of the following is correct?

 i. A novation means making a new contract in the place of an old
contract.
ii. An alteration means making a new contract in the place of an
existing one.
iii. The performance of a contract is not a method of discharge of
contract.
iv. All of the above.

2. If the subject matter of a contract is destroyed after the formation of a contract,

without the fault of either party, the contract

i. is rendered voidable.
ii. becomes void.
iii. continues to be valid.
iv. becomes unlawful.

2. If the subject matter of a contract is destroyed after the formation of contract,

without the fault of either party, the contract is

i. voidable.
ii. discharged.
iii. not discharged.
iv. unlawful.

2. When the contract is made for several purposes, a failure of one of them

i. terminates the entire contract.

ii. does not terminate the entire contract.
iii. makes the contract unlawful.
iv. renders the object illegal.

2. Which of the following is incorrect?

i. Contracts are discharged by lapse of time.

ii. The discharge of a party and the discharge of a contract are
one and the same thing.
iii. The cancellation of contract discharges the contract.
iv. All of the above.

2. Where performance has become more difficult than estimated at the time of
entering into a contract, the contract

i. is not discharged.
ii. is discharged.
iii. becomes void.
iv. becomes voidable.
2. .......................... indicates that the parties are not further bound under the contract.

i. Waiver of a contract
ii. Breach of a contract
iii. Rescission of a contract
iv. Discharge of a contract

2. When a contract ceases to bind the parties to it, it is said to be

i. discharged.
ii. performed.
iii. obliged.
iv. rescinded.

2. In which of the ways can a contract be discharged?

i. By performance.
ii. By operation of law.
iii. By lapse of time.
iv. All of the above.

2. In which of the ways can a contract be discharged?

i. By impossibility of performance.
ii. By breach of contract.
iii. By mutual agreement.
iv. All of the above.

2. An obligation under a contract stands discharged by

i. dispensing with the performance.

ii. impossibility of performance.
iii. death of the party and contract is personal in nature.
iv. all of the above.

2. Which of the following is incorrect?

i. The performance of a contract and the discharge of a contract

have the same effects.
ii. A commercial impossibility is not an impossibility.
iii. A commercial impossibility does not make the contract void.
iv. The cancellation of a contract by mutual consent of both
parties is called waiver.

2. A contract stands discharged

 i. by performance of the contract.
ii. by breach of the contract.
iii. by agreement.
iv. all of the above.

2. A contract can be discharged by a performance in which of the following ways?

i. By an actual performance.
ii. By a valid tender.
iii. Either (i) or (ii).
iv. Both (i) and (ii).

2. A contracts to sell his scooter to B for   50,000 and B agrees to pay on delivery.
Both the parties perform promises. This is called

i. a waiver.
ii. breach of a contract.
iii. an attempted performance of contract.
iv. an actual performance of a contract.

2. Which of the following is correct?

i. An anticipatory breach of contract takes place after the due

date of performance.
ii. In case of anticipatory breach of contract, a contract may be
kept alive.
iii. In case of the actual breach of contract, a contract becomes
void, if the time is the essence of the contract.
iv. There is no consideration in the novation of a contract.

2. In which of the ways can a contract be discharged by the operation of law?

i. Death of the promisor.

ii. Insolvency of the promisor.
iii. Merger of rights.
iv. All of the above.

2. In which of the ways can a contract be discharged by the operation of law?

i. Unauthorized material alteration contract.

ii. Vesting of rights and liabilities in the same person.
iii. Neither (i) nor (ii).
iv. Both (i) and (ii).

2. In case of contracts involving personal skill or expertise of the promisor, the death
of the promisor leads to
 i. discharge of a contract.
ii. breach of a contract.
iii. rescission of a contract.
iv. waiver of a contract.

2. A promises to perform a dance in B's theatre. A dies. The contract is

i. void.
ii. discharged.
iii. rescinded.
iv. voidable.

2. Assignment by the operation of law takes place

i. by the mutual consent of the parties.

ii. by the will of either party.
iii. when the subject matter of a contract ceases to exist.
iv. by the death of a party to a contract.

2. When a person is declared insolvent, he is ............. all his contractual liabilities

incurred prior to the date of insolvency order.

i. penalized for
ii. responsible for
iii. discharged from
iv. both (i) and (iii).

2. Where any party makes any material alteration to the terms of a contract, with the
consent of the other party, the new contract is

i. void.
ii. voidable.
iii. valid.
iv. discharged.

2. Where any party makes any material alteration to the terms of a contract, without
the consent of the other party, the contract is

i. void.
ii. voidable.
iii. valid.
iv. discharged.

2. The alternation of a contract means alteration in the .... of an existing contract.

i. parties
 ii. time
iii. parties and terms
iv. terms

2. In which of the ways can a contract be discharged by the impossibility of

performance?

i. initial impossibility.
ii. supervening impossibility.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. In which of the ways can a contract be discharged by the impossibility of

performance?

i. Pre contractual impossibility.

ii. Post contractual impossibility.
iii. Either (i) or (ii).
iv. Neither (i) nor (ii).

2. In which of the ways can a contract be discharged by breach?

i. Anticipatory breach.
ii. Actual breach.
iii. Either (i) or (ii).
iv. Neither (i) nor (ii).

2. In which of the ways can a contract be discharged by agreement between the

parties?

i. Novation.
ii. Rescission.
iii. Alteration.
iv. All of the above.

2. In which of the ways can a contract be discharged by agreement between the

parties?

i. Novation.
ii. Merger.
iii. Remission.
iv. All of the above.

2. In which of the ways can a contract be discharged by agreement between the

parties?
 i. Remission.
ii. Waiver.
iii. Either (i) or (ii).
iv. Neither (i) nor (ii).

2. The original contract need not to be performed, if there is

i. rescission of contract.
ii. novation of contract.
iii. alteration of contract.
iv. all of the above.

2. If a new contract is substituted in the place of an existing contract, it is called

i. alteration.
ii. rescission.
iii. novation.
iv. waiver.

2. For a valid novation, a new contract must be made

i. before making of the original contract.

ii. during the continuance of the original contract.
iii. after the conclusion of the original contract.
iv. all of the above.

2. Novation may take place between

i. the same parties.

ii. different parties.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Alteration may take place between

i. the same parties.

ii. different parties.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Remission may take place between

i. the same parties.

ii. different parties.
iii. either (i) or (ii).
iv. neither (i) nor (ii).
2. Waiver may take place between

i. the same parties.

ii. different parties.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. In the discharge of a contract by novation, the consideration for the new contract is

i. the discharge of the old contract.

ii. separately supplied.
iii. decided by the parties.
iv. all of the above.

2. For discharge of a contract by novation, the consent of ............................... is

required.

i. the promisee only

ii. all the parties
iii. atleast two of the parties
iv. the promisor only

2. Rescission of a contract means

i. the termination of the contract.

ii. the renewal of the contract.
iii. the alteration of the contract.
iv. the substitution of the new contract in the place of the earlier
one.
2. Rescission may occur

i. by mutual agreement.
ii. where one party fails to perform his part of the promise.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Where a party under a voidable contract, decides to rescind the same, the other
party is

i. guilty of breach of contract.

ii. discharged from his promise.
iii. entitled for damages.
iv. all of the above.
2. Rescission of a voidable contract shall be communicated or revoked in the same
manner as the communication or revocation of

i. breach.
ii. acceptance.
iii. proposal.
iv. impossibility.

2. A contracts with B to deliver goods to B on 1st July. A does not deliver goods on
1st July. B may rescind the contract. The contract is rescinded due to

i. mutual decision.
ii. A's failure to perform.
iii. impossibility of performance.
iv. revocation of proposal.

2. When the parties mutually agree to change certain terms of the contract. This is
called

i. a rescission of the contract.

ii. the novation of a contract.
iii. an alteration of a contract.
iv. a remission of a contract.

2. In case of alteration, there is a change in the parties and new parties may be
included.

i. True
ii. Partly true
iii. False
iv. None of the above

2. If a person accepts a lesser sum of money, than what was contracted for, in the
discharge of the whole debt, it is known as

i. a waiver.
ii. a remission.
iii. an alteration.
iv. a rescission.

2. Remission is the acceptance of

i. a lesser sum than what was contracted for.

ii. a lesser fulfillment of the promise made.
iii. either (i) or (ii).
iv. neither (i) nor (ii).
2. Under remission, a promisee may

i. remit the whole or part of the performance of a promise.

ii. extend the time of performance.
iii. accept any other satisfaction instead of performance.
iv. all of the above.

2. A owes B   50,000. Due date for the payment is 25th March. A pays to B   30,000
on 25th March, who accepts it in full satisfaction of the debt. The debt is
discharged on account of

i. remission.
ii. extension time of performance.
iii. novation.
iv. all of the above.

2. Abandonment of a right under the contract is called

i. a waiver.
ii. a breach.
iii. a rescission.
iv. an alteration.

2. Intentional relinquishment of a right under the contract is called

i. a waiver.
ii. a breach.
iii. a rescission.
iv. an alteration.
2. Giving up of a right under the contract is called

i. a waiver.
ii. a breach.
iii. a rescission.
iv. an alteration.

2. No consideration is necessary for a waiver.

i. True
ii. Partly true
iii. False
iv. None of the above

2. In case of novation, there is

 i. a change to some of the terms and conditions of the original
contract.
ii. a substitution of an existing contract with the new one.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. In case of alteration, there is

i. a change to some of the terms and conditions of the original

contract.
ii. a substitution of an existing contract with the new one.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Novation can be made by

i. a change in the terms of the contract.

ii. a change in the contracting parties.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Alteration can be made by

i. a change in the terms of the contract.

ii. a change in the contracting parties.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. In case of alteration,

i. old terms and conditions need not to be performed.

ii. new terms and conditions must be performed.
iii. both (i) and (ii).
iv. neither (i) nor (ii).

2. Where one party to a contract fails or refuses to do his part of the promise, it is
called

i. breach of contract.
ii. cancellation of contract.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Actual breach may take place

i. expressly.
 ii. impliedly.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Actual breach may take place

i. on the due date of performance.

ii. during the course of performance.
iii. neither (i) nor (ii).
iv. either (i) or (ii).

2. Where one party to a contract declares his intention of not performing the contract
before the performance is due, it is called

i. an actual breach.
ii. an anticipatory breach.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. An anticipatory breach may take place

i. expressly.
ii. impliedly.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. An anticipatory breach may take place when a party

i. refuses to perform his promise under the contract.

ii. deliberately disables himself from performing the promise
before due date of performance.
iii. neither (i) nor (ii).
iv. either (i) or (ii).

2. A agreed to supply certain goods to B, which were to be imported by C. But C

failed to import the goods. In this case, the contract is

i. discharged.
ii. not discharged.
iii. voidable.
iv. impossible to perform.

2. The breach of contract means the

i. performance of a contract by both the parties.

ii. failure of a party to perform his obligations.
 iii. payment of compensation due to non-performance.
iv. postponement of the performance of contract.

2. A contract to marry B. Before the agreed date of marriage, A marries C. Here, B is

entitled to sue A for

i. actual breach in an express manner.

ii. anticipatory breach in an express manner.
iii. actual breach in an implied manner.
iv. anticipatory breach in an implied manner.

2. In case of an anticipatory breach, the promisee can

i. put an end to the contract.

ii. elect to keep the contract alive till the date of performance.
iii. either (i) or (ii).
iv. neither (i) nor (ii).

2. Where in an anticipatory breach, the promisee opts to put an end to the contract and
treats the anticipatory breach as the actual breach of contract, the promisee

i. is excused from the performance of his promise.

ii. has to perform his part of the promise.
iii. has to perform his part of the promise to the extent of benefits
received by him.
iv. has to consider the contract as illegal.

2. Where a party to contract transfers his rights under the contract to another person, it
is legally known as

i. novation of a contract.
ii. rescisson of a contract.
iii. waiver of a contract.
iv. assignment of a contract.

2. The assignment of a contract by operation of law takes place

i. on the death of the party.

ii. with mutual consent of the parties.
iii. on confirmation by the legal representatives.
iv. either (ii) or (iii).

2. The term ‘frustration’ is used in the English Law which is the parallel concept of

i. an initial impossibility.
ii. a supervening impossibility.
 iii. a commercial impossibility.
iv. a public policy.

2. A contract is void on the ground of initial possibility

i. only where it is unknown to the parties.

ii. only where it is known to the parties.
iii. whether it is known or unknown to the parties at the time of
agreement.
iv. when it is known to the third parties.

2. In case the performance of a contract becomes more difficult due to some

unexpected events, then the contract

i. becomes void on account of impossibility.

ii. becomes voidable on account difficulty.
iii. is discharged on account of impossibility.
iv. is not discharged on account of impossibility.

2. A contracts to buy B's scooter for   10,000 but breaks the promise. What
compensation must A pay to B?

i. The excess amount of the contract price, over the price which
B can obtain for the scooter at the time of breach of promise.
ii. The contract price of   10,000.
iii. The price which B demands.
iv. None of the above.

2. In ........., the contracting parties may not remain the same.

i. remission
ii. recession
iii. novation
iv. alteration

ANSWERS—MULTIPLE CHOICE QUESTIONS

1 (iv) 2 (i) 3 (i) 4 (iv)

6 (iii) 7 (iii) 8 (ii) 9 (i)

11 (ii) 12 (iv) 13 (i) 14 (iii)

16 (ii) 17 (ii) 18 (ii) 19 (ii)

 21 (iv) 22 (i) 23 (iv) 24 (iv)

26 (i) 27 (iv) 28 (iii) 29 (iv)

31 (iv) 32 (iv) 33 (i) 34 (ii)

36 (iii) 37 (iii) 38 (iv) 39 (iv)

41 (iii) 42 (iii) 43 (iv) 44 (iv)

46 (iv) 47 (iii) 48 (ii) 49 (iii)

51 (i) 52 (i) 53 (i) 54 (ii)

56 (iii) 57 (ii) 58 (iii) 59 (ii)

61 (iii) 62 (ii) 63 (iii) 64 (iii)

66 (i) 67 (i) 68 (i) 69 (i)

71 (i) 72 (iii) 73 (i) 74 (iii)

76 (iii) 77 (iv) 78 (ii) 79 (iii)

81 (ii) 82 (ii) 83 (iv) 84 (iii)

86 (iv) 87 (i) 88 (ii) 89 (iii)

91 (i) 92 (iii)

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