Page 68 - DCOM103_COMMERCIAL_LAW

Unit 6: Discharge of Contract

Notes
Example: X borrowed ` 10,000 from Y to be repaid by a certain date. X dies before
the debt becomes due for repayment. X’s legal representative shall be liable to pay the
amount. Of course, the legal representative’s liability is limited to the extent of the value
of the assets inherited by him.

3. Subsequent illegality. Where by subsequent legislation, the performance of a contract is
forbidden by law, the parties are absolved from liability to perform it. A contracts to supply
B 100 bottles of whisky. Before the contract is executed, i.e., bottles supplied, dealings in all
sorts of liquor are declared forbidden, the contract becomes void.
4. Declaration of war. If war is declared between two countries subsequent to the making
of the contract, the parties would be exonerated from its performance. A contracts to take
indigo for B to a foreign port. A’s government afterwards declares war against the country
in which the port is situated. The contract becomes void when war is declared.

5. Non-existence or non-occurrence of a particular state of things. When certain things
necessary for performance cease to exist, the contract becomes void. A contracted to have
a flat for viewing the coronation procession of the king. The procession had to be cancelled

on account of king’s illness. In a suit for recovery of the rent it was held that the contract
became impossible of performance, and that the hirer need not pay the rent (Krell v Henry
(1903) 2 K.B. 740).
Circumstances in which a contract is not discharged on the ground of subsequent impossibility.

Except for the five cases mentioned above, subsequent impossibility does not discharge
contracts. He who agrees to do an act must do it, unless absolutely impossible under the fi ve
cases mentioned above. There are at least five cases, where the performance is not excused on

account of subsequent impossibility. These are:

1. Difficulty of performance. The mere fact that performance is more difficult or expensive or
less profitable than the parties anticipated, does not discharge the contract. A promised to

send certain goods from Mumbai to Antiwerp in September. In August, war broke out and
shipping was not available except at very high rates. Held, the increase of freight rates did
not excuse performance.
2. Commercial impossibility. It means that if the contract is performed, it will result in a
loss to the promisor. Commercial impossibility to perform a contract does not discharge
the contract. A contract to lay gas mains is not discharged because the outbreak of war
makes it expensive to procure the necessary materials [M/s Alopi Pd. v. Union of India (1960)
S.C. 589].
3. The promisor is not exonerated from his liability if the third person, on whose work the
promisor relied, fails to perform. Thus, a wholesaler’s contract to deliver goods is not
discharged because a manufacturer has not produced the goods concerned.

4. Strikes, lockouts and civil disturbances. Events like these do not terminate contracts
unless there is a clause in the contract to that effect. A agreed to supply B certain goods
to be produced in Algeria. The goods could not be produced because of riots and civil
disturbances in that country. Held, there was no excuse for non-performance of the contract
(Jacob v. Credit Lyonnais (1884) 12 Q.B.D 589].

5. Failure of one of the object. If the contract is made for several purposes, the failure of one
of them does not terminate the contract. A agreed to let a boat to H to
(a) view the naval review at the coronation and

(b) to cruise around fleet. Owing to the king’s illness the naval review was cancelled but
the fleet was assembled and the boat could have been used to cruise round the fl eet.

Held, the contract was not discharged (Herne Bay Steamboat C v.Hutton K.B 740).

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