Page 72 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes
Example: A who owes B ` 2,00,000 enters into an arrangement with him thereby giving B a
mortgage of his estate for ` 1,50,000. This arrangement constitutes a new contract and terminates
the old one.
Rescission means cancellation of all or some of the terms of the contract. Where parties mutually
decide to cancel all or some of the terms of the contract, the obligation of the parties thereunder
terminates.
Alteration: If the parties mutually are to change certain terms of the contract, it has the effect of
terminating the original contract. There is, however, no change in the parties.
Remission (s.63): It is the acceptance of a lesser sum than what was contracted for or a lesser

fulfillment of the promise made. A owes B ` 5,000. A pays to B ` 1,000 and B accepts them in
satisfaction of his claim on A. This payment is a discharge of the whole claim. It may be noted
that the promisee may remit or give up a part of his claim and the promise to do so is binding
even though there is no consideration for doing so.

Example: A owes B ` 5,000. A pays to B who accepts, in satisfaction of the whole debt,
` 2,000 paid at the time and place at which ` 5,000 were payable. The whole debt is discharged.
Waiver: It means relinquishment or abandonment of a right. Where a party waives his rights
under the contract, the other party is released of his obligations. A promises to paint a picture for
B. B afterwards forbids him to do so. A is no longer bound to perform the promise.
Merger: A contract is said to have been discharged by way of merger where an inferior right
possessed by a person coincides with a superior right of the same person. A, who is holding a
certain property under a lease, buys it. His rights as a lessee vanish; they are merged into the
rights of ownership which he has now acquired. The rights associated with lease were inferior to
the rights associated with the ownership.

Task
Ram owes B ` 7,000. Ram pays to Sahil who accepts in satisfaction of the whole
debt ` 3000 paid at the time and place at which ` 7,000 were payable. Discuss the debt
discharged or not?

5.5 Discharge of Contracts by Impossibility of Performance

A contract may be discharged because of impossibility of performance. There are two
types of impossibility: (i) Impossibility may be inherent in the transaction (i.e., the contract),
(ii) Impossibility may emerge later by the change of certain circumstances material to the
contract.

Examples of Inherent Impossibility:

1. A promises to pay B ` 50,000 if B rides on a horse to the moon. The contract is void ab
initio.
2. A agrees with B to discover treasure by magic. The agreement is void ab initio, as there is
an impossibility inherent therein.
“Subsequent or supervening impossibility” as a mode discharge of contract (s.56). Where a
contract originates as one capable of performance but later due to change of circumstances its
performance becomes impossible, it is known to have become void by subsequent or supervening
impossibility. The subsequent impossibility is known as ‘Doctrine of Frustration’ under the
English law.

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