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discharge of contract

Last modified: Thu Feb 23 16:37:37 2006

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 not always clear when a contract has been performed, or what should happen in the event of PartPerformanceOfContract.
• 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 fulfilled 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
• Legal reasons for discharge without performance. There are few of these; the most common is FrustrationOfContract; if a contract is frustrated (i.e., impossible to perform) then it may be considered discharged without legal consequences.
• Breach. A BreachOfContract is a refusal by one party to abide by its terms, without legal excuse (e.g., frustration).

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