Samacheer Kalvi Class 11 Commerce Solutions Chapter 31 Discharge and Breach of a Contract

I. Choose the Correct Answer

Question 1. On the valid performance of the contractual obligation by the parties, the contract
(a) Is discharged
(b) Becomes enforceable
(c) Becomes void
(d) None of the options
Answer: (a) Is discharged
In simple words: When both parties successfully do what they promised in a contract, the contract is finished and no longer active. All duties are completed.

🎯 Exam Tip: Performance is one of the most common ways a contract is discharged, meaning all obligations are fulfilled.

Question 2. An agreement to do an act impossible in itself under Section.56 is
(a) Void
(b) Valid
(c) Voidable
(d) Unenforceable
Answer: (a) Void
In simple words: If an agreement asks for something that cannot be done, it is automatically invalid from the start. For example, agreeing to find treasure on a non-existent island would be a void agreement.

🎯 Exam Tip: Remember that agreements for impossible acts are always void from the beginning, having no legal effect.

Question 3. Any agreement which becomes impossible to perform under various circumstances
(a) Voidable
(b) Void
(c) Valid
(d) None of the options
Answer: (b) Void
In simple words: If a contract was possible when made but later becomes impossible to perform due to new situations, it becomes invalid. This is called supervening impossibility.

🎯 Exam Tip: Differentiate between initial impossibility (void from the start) and subsequent impossibility (becomes void later).

Question 4. Discharge by mutual agreement may involve
(a) Novation
(b) Rescission
(c) Alteration
(d) All of the options
Answer: (d) All of the options
In simple words: When parties agree to end a contract, they can do it in several ways, such as creating a new contract (novation), canceling the old one (rescission), or changing the terms (alteration). All these methods end the original agreement.

🎯 Exam Tip: Be familiar with the different methods of discharging a contract when both parties agree to end it.

Question 5. The compensation given for breach of contract is
(a) Damage
(b) Remuneration
(c) Money
(d) Cheque
Answer: (a) Damage
In simple words: When a contract is broken, the money paid to the party who suffered a loss is called damage. This payment aims to cover the loss.

🎯 Exam Tip: Understand that 'damage' refers to the loss itself, while 'damages' (plural) refers to the monetary compensation for that loss.

II Very Short Answer Questions

Question 1. What are the kinds of consent?
Answer: Consent can be given in two main ways:
1. Express: This is when consent is clearly stated, either spoken or written.
2. Implied: This is when consent is understood from a person's actions or behavior, rather than being directly stated.
In simple words: Consent can be either clearly said or written (express) or shown through actions without words (implied). For example, if you enter a bus, your consent to pay the fare is implied.

🎯 Exam Tip: Provide clear examples for both express and implied consent to illustrate your understanding.

Question 2. What are the types of Impossibility of Performance?
Answer: There are two primary types of impossibility of performance in a contract:
1. Impossibility existing at the time of the agreement: This means the task was impossible from the very beginning.
2. Impossibility arising subsequent to the formation of the contract: This means the task became impossible after the contract was made, due to an unforeseen event.
In simple words: Sometimes, a contract is impossible from the start. Other times, it becomes impossible later because of something unexpected. For example, if you agree to paint a house that has already burned down, that's existing impossibility. If the house burns down *after* you sign the contract, that's subsequent impossibility.

🎯 Exam Tip: Clearly distinguish between impossibility that exists when the contract is formed and impossibility that arises afterward.

Question 3. What is Quantum merit?
Answer: The phrase "quantum merit" means "as much as earned." It refers to a claim for payment for the reasonable value of services performed or goods supplied, even if there isn't a formal contract or the contract is later found to be invalid. This ensures a person is paid for work they have already done.
In simple words: "Quantum merit" means you get paid for the work you've already done, even if there isn't a proper contract or it got broken. It's about getting a fair amount for your effort.

🎯 Exam Tip: Connect 'Quantum merit' with receiving payment for services rendered when a contract is incomplete or voidable.

III. Short Answer Questions

Question 1. What are the different modes of discharge by implied consent?
Answer: A contract can be discharged by implied consent through several methods, where the parties' actions or new agreements show they intend to end the original contract. These modes include:
• Novation: Replacing an old contract with a completely new one.
• Alteration: Making changes to the terms of an existing contract.
• Rescission: Canceling the contract by mutual agreement.
• Remission: Accepting less than what was due under the contract.
• Accord and Satisfaction: Agreeing to accept something different as fulfillment of the original obligation.
• Waiver: Giving up a right or claim under the contract.
• Merger: When an inferior right under a contract combines with a superior right in the same person, ending the inferior right.
In simple words: Contracts can end because the people involved indirectly agree to it in many ways, such as replacing the contract, changing its terms, canceling it, or forgiving part of what's owed. For instance, if you agree to accept a different item instead of the original one promised, it's a discharge by accord and satisfaction.

🎯 Exam Tip: List all the modes of discharge by implied consent and briefly define each to show a complete understanding.

Question 2. Define discharge by Performance.
Answer: Discharge by performance means that a contract is ended because all parties have fully carried out their responsibilities and obligations as stated in the agreement. The performance must match the true intentions of the contract and be completed exactly according to the agreed time and method. This is the most common way a contract ends.
In simple words: Discharge by performance means that a contract is finished when everyone has done what they promised to do, exactly how and when they said they would.

🎯 Exam Tip: Emphasize that for a contract to be discharged by performance, the performance must be complete and exact as per the contract's terms.

Question 3. What are the reasons for impossibility arising after the formation of a contract?
Answer: A contract can be discharged if its performance becomes impossible after it has been formed. This principle is based on the idea that the law does not expect people to do impossible things. The main reasons for this include:
• The law does not recognize what is impossible, meaning it won't enforce an impossible act.
• What is impossible does not create an obligation, so no one can be forced to do an impossible task.
In simple words: If a contract becomes impossible to do after it's made, it ends. This is because the law understands that some things cannot be done, and it won't make you do them. For example, if a specific singer is hired for a concert but falls seriously ill before the event, the contract may be discharged due to impossibility.

🎯 Exam Tip: Focus on the legal maxims that explain why supervening impossibility leads to discharge of a contract.

Question 4. What are the various rules regarding damages?
Answer: Courts generally grant specific performance (an order to fulfill the contract) rather than just monetary damages in certain situations. These rules apply when money is not enough to compensate for a breach:
1. When money compensation for non-performance is not sufficient.
2. When it is likely that money compensation cannot be received for the non-performance.
3. When there is no clear way to determine the actual damage caused by non-performance.
In simple words: Sometimes, just giving money isn't enough to fix a broken contract. A court will then make the person do what they promised, especially if the loss is hard to count in money, or if money won't properly solve the problem.

🎯 Exam Tip: Understand that specific performance is an alternative remedy to damages, used when monetary compensation is inadequate.

IV. Long Answer Questions

Question 1. Explain the ways of discharge of Contract?
Answer:
Meaning: Discharge of contract means the ending of the agreement between the parties. A contract is considered discharged when it no longer has any effect, and all the rights and duties created by it have finished.

Discharge by Performance: This is when both parties fulfill all their promises and obligations exactly as agreed in the contract. This is the most common way a contract ends. Performance can be either 'actual performance' (when everything is completed) or 'attempted performance' (when one party tries to perform but is prevented by the other).

By Agreement on Consent: A contract is made by agreement, so it can also be ended by agreement. If the parties mutually agree to terminate the contract, it is discharged. This can involve:
• Novation: Replacing an old contract with a new one.
• Alteration: Changing the terms of the existing contract.
• Rescission: Canceling the contract by mutual consent.
• Remission: Accepting a lesser sum or performance than what was due.
• Waiver: Giving up rights under the contract.
• Merger: When a lesser right merges into a greater right.

By Impossibility of Performance: A contract is discharged if its performance becomes impossible. This applies to two situations:
1. Impossibility existing at the time of the agreement: The task was impossible from the start.
2. Impossibility arising subsequent to the formation of the contract: The task became impossible after the contract was made, for example, due to destruction of the subject matter.

By Lapse of Time: According to the Limitation Act, 1963, a contract must be performed within a specific time. If it is not performed within this period and no legal action is taken, the contract is discharged, and the promisee loses their right to legal remedy.

A contract can also be discharged by the operation of law, which means it ends automatically due to legal principles. These include:
• By Death: If a contract depends on the personal skill of a party, their death can discharge it.
• By Merger: When a lesser contractual right is absorbed by a greater right, both held by the same person.
• By Insolvency: If a person becomes bankrupt, they are released from most past contractual liabilities.
• The unauthorized alteration of terms of a contract: If one party makes major changes to the contract without the other's consent, the contract can be avoided.
• Rights and liabilities vesting in the same person: When the person who has the right and the person who has the duty under a contract become the same.
In simple words: A contract can end in several ways. It can finish if everyone does what they promised (performance), or if they all agree to end it (agreement). It can also end if it becomes impossible to do, or if a certain time limit passes. Finally, contracts can end automatically because of legal rules like someone dying or going bankrupt.

🎯 Exam Tip: Organize your answer using clear headings for each mode of discharge and provide a concise explanation for each.

Question 2. Write about the various remedies for breach of contract:
Answer: When one party breaks a contract, the other party (the injured party) has several legal options, or remedies, to seek justice. These remedies help to put the injured party in a position they would have been in if the contract had been performed. The main remedies are:

1. Rescission of Contract: The injured party can choose to cancel the contract. This releases them from all their own duties under the contract and allows them to claim compensation for any losses.

2. Claim for Specific Performance: In cases where monetary compensation is not enough (e.g., for unique goods), the court can order the breaching party to actually perform what they promised in the contract.

3. Claim for Injunction: An injunction is a court order that stops a person from doing a specific act. It is used to enforce negative terms of a contract (e.g., preventing a former employee from working for a competitor).

4. Claim for Quantum Merit: This means "as much as earned." If a party has done some work under a contract but the contract is later breached, they can claim payment for the value of the work already performed.

5. Claim for Damages: This is the most common remedy. The injured party can claim monetary compensation for the loss or injury suffered due to the breach. The purpose of damages is to financially compensate the injured party for their loss.
In simple words: If someone breaks a contract, the person who was harmed can get help from the court. This help can be to cancel the contract, make the other person do what they promised, stop them from doing something harmful, pay for the work already done, or simply pay money for the losses caused.

🎯 Exam Tip: Clearly list and briefly describe each of the main remedies for breach of contract, providing a short example for better clarity.

Question 3. Discuss the different types of damages awarded to the injured party.
Answer: Damages are monetary compensation awarded by the court to the injured party for the loss or injury suffered due to a breach of contract. The main purpose of awarding damages is to put the injured party in the same financial position they would have been in if the contract had been properly performed. This is also known as the doctrine of restitution. Section 73 of the Indian Contract Act, 1872, deals with compensation for losses. There are mainly four types of damages:

1. Ordinary Damages: These are damages that arise naturally and directly from the breach of contract in the usual course of things. They are the most common type and compensate for direct financial loss.

2. Special Damages: These are damages that arise from special circumstances known to both parties at the time the contract was made. They can only be claimed if the breaching party was aware of these special circumstances that would lead to additional losses.

3. Vindictive or Exemplary Damages: These are awarded not just to compensate for loss, but also to punish the breaching party for their bad conduct and to set an example. They are typically given in cases of breach of promise to marry or wrongful dishonor of a cheque.

4. Nominal Damages: These are a small sum of money awarded when there has been a breach of contract, but the injured party has not actually suffered any real financial loss. They acknowledge that a legal right was violated.
In simple words: When a contract is broken, the court gives money (damages) to the person who lost something. This money helps fix the loss. There are different kinds: normal damages for direct losses, special damages for unique losses both parties knew about, punishment damages for very bad behavior, and small damages just to show a rule was broken, even if no big loss happened.

🎯 Exam Tip: Remember to name all four types of damages and provide a brief, clear description for each, highlighting their purpose.

Additional Important Questions and Answers

I. Choose the Correct Answer:

Question 1. In case of breach of contract, which of the following remedies is not available to the aggrieved party?
(a) suit for rescission
(b) suit for damages
(c) suit for specific performance
(d) a suit under Indian Penal Code
Answer: (d) a suit under Indian Penal Code
In simple words: If someone breaks a contract, you cannot use the Indian Penal Code because that law is for criminal acts, not for disagreements about agreements. Contract issues are civil matters.

🎯 Exam Tip: Understand that contract breaches are civil wrongs, not criminal offenses, and are therefore handled under contract law, not criminal law.

Question 2. The time of limitation for enforcement of contractual rights is ............
(a) 2 years
(b) 3 years
(c) 4 years
(d) 5 years
Answer: (b) 3 years
In simple words: You usually have three years from when a contract is broken to take legal action. After this time, you might lose your right to sue.

🎯 Exam Tip: Remember that legal actions for contract breaches have a specific time limit, commonly referred to as the limitation period.

Question 3. If a new contract is replaced in the place of a prevailing contract is called
(a) alteration
(b) novation
(c) waiver
(d) remission
Answer: (b) novation
In simple words: When people agree to end an old contract by making a completely new one, this process is called novation. The new contract takes the place of the old one.

🎯 Exam Tip: Distinguish novation (replacing an entire contract with a new one) from alteration (changing terms within the existing contract).

Question 4. Discharge by mutual agreement involves which of the following?
(a) Novation
(b) Rescission
(c) Alteration
(d) All of the options
Answer: (d) All of the options
In simple words: When people involved in a contract agree to end it, they can do so by replacing it with a new one (novation), canceling it completely (rescission), or making changes to it (alteration). All these are ways to end a contract by mutual consent.

🎯 Exam Tip: Remember that mutual agreement offers various ways to discharge a contract, each with its own specific legal effect.

Question 5. Which of the following is the usual law remedy?
(a) Injunction
(b) Specific Performance
(c) Damages
(d) Penalty
Answer: (c) Damages
In simple words: The most common legal solution for a broken contract is to give money (damages) to the person who was harmed, to cover their losses.

🎯 Exam Tip: Understand that monetary damages are the standard remedy, with specific performance and injunctions being granted in specific circumstances.

II. Very Short Answer Questions:

Question 1. What do you mean by the discharge of a contract?
Answer: Discharge of a contract means that the legal relationship between the parties to the contract comes to an end. All the duties and promises made in the contract are finished, and the contract stops being legally binding.
In simple words: Discharge of a contract means the agreement is officially over, and both parties have completed or been released from their promises.

🎯 Exam Tip: Define discharge of a contract as the termination of the contractual obligations and rights of the parties.

Question 2. What are all the types of performance of a contract?
Answer: The performance of a contract can be classified into two main types:
1. Actual Performance: This is when a party fully and completely fulfills all their obligations and promises as stated in the contract.
2. Attempted Performance (or Tender of Performance): This occurs when a party offers to perform their part of the contract, but the other party refuses to accept or cooperate with the performance.
In simple words: There are two ways a contract can be performed: either by fully doing what was agreed (actual performance), or by trying to do it but being stopped by the other person (attempted performance).

🎯 Exam Tip: Distinguish clearly between actual performance, where the contract is successfully completed, and attempted performance, which is an offer to perform.

III. Short Answer Questions:

Question 1. State some cases, in which the court grants specific performance:
Answer: A court may order specific performance (making a party fulfill the contract directly) in situations where simply giving money as compensation would not be an adequate remedy. This happens in the following cases:
• When the act agreed to be done is such that money compensation for its non-performance is not sufficient to fully compensate the injured party.
• When it is probable that money compensation cannot be received from the breaching party for the non-performance of the act.
• When there is no standard for figuring out the actual damage caused by the non-performance of the act.
In simple words: A court will usually make someone do what they promised (specific performance) if giving money won't properly fix the problem, or if it's hard to calculate how much money is needed to cover the loss. For example, specific performance is often ordered for contracts involving unique properties.

🎯 Exam Tip: Remember that specific performance is an equitable remedy, granted when monetary damages are inadequate or difficult to assess.

Question 2. At what circumstances the court may order an injunction at the time of claim?
Answer: A court may order an injunction, which is a judicial order to do or refrain from doing a particular act, in various circumstances to prevent a breach of contract or to enforce contractual terms. Key situations include:
• To prevent a party from breaching a negative covenant in a contract (e.g., stopping someone from working for a competitor as per a non-compete clause).
• When monetary damages are insufficient to compensate for the harm caused by the breach.
• To maintain the status quo until the full legal dispute is resolved.
• When there is a serious question to be tried and the balance of convenience favors granting the injunction.
In simple words: A court can order an injunction to stop someone from breaking a contract or from doing something harmful. This is often used when money cannot fix the problem, or to make sure someone follows a "do not do" part of their agreement.

🎯 Exam Tip: An injunction is a powerful court order used to either compel or prohibit specific actions, often to prevent irreparable harm.

IV Long Answer Questions

Question 1. Explain the ways by which a contract can be discharged by operation of law:
Answer: A contract can be discharged by operation of law, meaning it ends automatically due to legal principles, without the need for performance or mutual agreement by the parties. The main ways this happens are:

By Death: If a contract involves personal skill or ability (e.g., an artist hired to paint a portrait), the death of the party possessing that skill discharges the contract. If the contract could be performed by anyone, it might continue with the deceased's legal representatives.

By Merger: This occurs when an inferior right under a contract blends into a superior right, both belonging to the same person. For example, if a tenant buys the house they are renting, the lease agreement (inferior right) merges into the ownership (superior right), and the lease is discharged.

By Insolvency: When a person is declared insolvent (bankrupt) by a court, they are released from most of their debts and contractual obligations that existed before the insolvency declaration.

Unauthorized Alteration of the Terms of a Contract: If one party makes a material change to the contract's terms without the consent of the other party, the other party can choose to treat the contract as discharged.

Rights and liabilities vesting in the same person: If, by some event, the rights and obligations under a contract come to rest with the same person, the contract is discharged. This means one person cannot owe money to themselves.
In simple words: A contract can end automatically by law for several reasons. This includes when a party dies (especially for contracts needing special skills), when a smaller right combines with a bigger one (merger), or when someone becomes bankrupt (insolvency). Also, if one person changes the contract without permission, or if the same person becomes both the giver and receiver of the promise, the contract ends.

🎯 Exam Tip: Focus on events that legally terminate a contract without requiring specific actions from the parties, such as death or bankruptcy.

Question 2. What are all the reasons for not granting the specific performance by the court?
Answer: Specific performance is a remedy where the court orders a party to fulfill their exact promises in a contract, rather than just paying damages. However, courts generally do not grant specific performance in several situations, including:
• Damages are an adequate remedy: If monetary compensation can fully and fairly compensate the injured party, specific performance will not be granted.
• The contract is not certain: If the terms of the contract are vague or unclear, the court cannot effectively order specific performance.
• The contract is inequitable to either party: If enforcing the contract would be unfair or cause hardship to one of the parties.
• The contract is of revocable nature: If a contract can be canceled by either party, specific performance is usually not granted.
• The contract is made by the trustee in breach of trust: If a trustee makes a contract by violating their duties, the court will not enforce it.
• The contract is of a personal nature: Contracts requiring personal skill, such as a contract to marry or to perform artistic work, are generally not subject to specific performance.
• The contract made by a company ultra-vires of its Memorandum of Association: If a company enters into a contract that is beyond its powers as defined in its founding documents, it cannot be specifically enforced.
• The court cannot supervise its carrying out: If the contract requires continuous supervision by the court (e.g., a long-term construction project), specific performance may be refused.
In simple words: A court usually won't force someone to do what they promised (specific performance) if money can fix the problem, or if the contract is unclear, unfair, or involves personal services like marriage. Also, if a company acts outside its rules or if the court can't easily watch over the contract's completion, specific performance won't be ordered.

🎯 Exam Tip: List the conditions that make specific performance an inappropriate remedy, focusing on practical difficulties and fairness.