Business Management · Sources of Indian law and valid contracts

Discharge and Breach of Contract, and Remedies Explained

Updated 11 October 2026 · Fact-checked

A contract is discharged when the parties' obligations end: by performance, agreement, impossibility (frustration) or breach. If one party breaks the contract, the other may claim damages, ask the court for specific performance, or seek an injunction. Damages compensate loss. Specific performance and injunction are equitable remedies ordered at the court's discretion.

Understand Discharge and Breach of Contract, Remedies

A contract creates obligations. Discharge means those obligations come to an end. Once a contract is discharged, neither party can be forced to do anything more under it. Contracts can end in four main ways. Performance ends the obligations once each party has done what was promised. Impossibility ends them by operation of law. Agreement ends them by consent (sections 62 and 63), although remission is the promisee's own act. Breach gives the innocent party an option: it may treat the contract as ended, but the contract is not ended automatically.

Discharge by performance. Each party does what was promised. If the performance is exact and on time, the contract ends. Under section 38, if a promisor makes a valid tender of performance and the other party refuses it, the promisor is not responsible for non-performance and does not lose his rights under the contract. A refused tender of performance therefore relieves the promisor of liability for non-performance and preserves his rights. A tender of money is different. If a tender of money is refused, the debt itself is not discharged, because the debtor remains liable to pay.

Discharge by agreement. The parties agree, or the promisee chooses, to end or change the contract. Sections 62 and 63 cover this.

Novation (section 62): a new contract replaces the old one.
Rescission (section 62): the contract is cancelled.
Alteration (section 62): the terms are changed.
Remission (section 63): the promisee dispenses with, or accepts less than, the promised performance.

Novation, rescission and alteration need the agreement of all parties. Remission is the promisee's own act and needs no fresh consideration.

Discharge by impossibility. Keep two situations apart.

Initial impossibility. Under the Indian Contract Act, 1872, an agreement to do an act that is impossible in itself is void from the start (section 56, first paragraph). This is not frustration, because the problem existed when the contract was made.
Supervening impossibility (frustration). If an act becomes impossible or unlawful after the contract is made, due to an event the promisor could not prevent, the contract becomes void when the act becomes impossible or unlawful (section 56, second paragraph). This is the doctrine of frustration. Examples: destruction of the subject matter, a change in law, or the event that was the whole basis of the contract not happening. Mere hardship or higher cost does not frustrate a contract.

Section 56 also has a compensation rule. If a promisor promised something that he knew, or with reasonable diligence could have known, was impossible or unlawful, and the promisee did not know this, the promisor must compensate the promisee for the loss (section 56, third paragraph).

Discharge by breach. A breach occurs when a party fails to perform, or refuses to perform, without lawful excuse. An actual breach happens on or after the due date. An anticipatory breach happens when a party declares, before the due date, that it will not perform. Breach does not end the contract by itself. It gives the innocent party a choice. Under section 39, if a party refuses wholly to perform, the other party may put an end to the contract, unless that other party has by words or conduct agreed to let it continue. The rule on anticipatory breach is also developed by case law, and section 73 governs damages. The innocent party can therefore treat the contract as discharged and sue at once, or keep it alive and wait for the due date. If it keeps the contract alive, it keeps its own obligations and takes the risk of a later event, such as frustration, ending the contract.

The innocent party's remedies are: damages (money to compensate loss), specific performance (a court order to perform), injunction and, in some cases, quantum meruit (reasonable payment for work already done). A prohibitory injunction is a court order to stop doing something, and it typically enforces a negative promise. A mandatory injunction orders a wrongful act to be undone. Damages are the usual remedy. Courts give specific performance and injunctions only when money is not adequate, and at their discretion.

Key rules to remember

Modes of discharge: Performance | Agreement | Impossibility (frustration) | Breach; Use these four headings to organise any answer on discharge. Breach ends the contract only if the innocent party chooses to treat it as ended.
Initial impossibility: Act impossible in itself when the contract is made → agreement is void (section 56, first paragraph); This is not frustration. A promisor who knew, or could have known, of the impossibility must compensate a promisee who did not know (section 56, third paragraph).
Frustration (impossibility after contract): Act becomes impossible or unlawful after the contract + not caused by the promisor → contract becomes void (section 56, second paragraph); Higher cost, delay or inconvenience alone is not enough.
Anticipatory breach: Refusal before due date → innocent party may put an end to the contract and sue now, or keep it alive and wait until the due date (section 39 covers a party refusing wholly to perform; the wider rule on anticipatory breach is developed by case law). Damages are governed by section 73; If you keep the contract alive, you keep your own obligations and risk a later event, such as frustration, ending the contract. Damages are generally assessed by reference to the time of breach, and you cannot recover loss you could reasonably have avoided.
Damages (general rule): Compensation for loss that arises naturally from the breach, or that both parties knew was likely when contracting; Remote loss is not recoverable. This is the rule in section 73.
Mitigation: Recoverable damages = loss caused by breach − loss that reasonable steps could have avoided; The innocent party must take reasonable steps to reduce loss.
Specific performance: Available when damages are not an adequate remedy; discretionary; Typical for unique goods or land. Rarely for personal service or contracts needing constant supervision.
Injunction: Prohibitory injunction: court order restraining a breach, typically of a negative promise. Mandatory injunction: court order to undo a wrongful act; Temporary or perpetual. Granted at the court's discretion.

How to solve Discharge and Breach of Contract, Remedies questions

Use this order for any problem or essay question on how a contract ended and what the injured party can claim.

1Identify the contract and the parties. Check that a valid contract existed.
2Ask whether the contract was performed, or a valid tender of performance was made. If so, it is discharged by performance.
3Ask whether the parties agreed to end or change it (novation, rescission or alteration under section 62), or whether the promisee remitted performance (remission under section 63).
4Ask whether something after the contract made performance impossible or unlawful, with no fault of the promisor. If so, apply frustration.
5If none of these apply, decide if there is a breach. Is it actual or anticipatory? Did the party have a lawful excuse?
6Choose the remedy. Damages first. Check remoteness and mitigation. Then consider specific performance or injunction if damages are inadequate.
7State the conclusion clearly, with the reason in one line.

Quickest way: Four exits, then remedy

When to use it: Multiple-choice questions and short case-study questions where time is tight.

Underline the key event: done, agreed, became impossible, or refused.
Match it to the exit: performance, agreement, frustration or breach.
For breach, ask: is money enough? If yes, damages. If the item is unique, specific performance. If someone must be stopped, injunction.
For damages, check two filters: is the loss foreseeable, and did the claimant mitigate?

Common mistakes in Discharge and Breach of Contract, Remedies

Treating a contract that has become more expensive or difficult as frustrated.
Students confuse hardship with impossibility.
Fix: Frustration needs the act to become impossible or unlawful, or the basis of the contract to vanish. Extra cost alone is not enough.
Saying the contract is automatically ended by any breach.
The heading 'discharge by breach' is read as automatic discharge, like performance.
Fix: Breach gives the innocent party a right to treat the contract as ended (section 39 where a party refuses wholly to perform) and to claim damages. The innocent party may instead choose to keep the contract alive. The contract is not discharged unless that choice is made.
Awarding damages for every loss, however remote.
Students forget the remoteness limit.
Fix: Only loss arising naturally, or loss both parties knew was likely, is recoverable. Remote loss is excluded.
Ignoring the duty to mitigate.
The focus stays on the loss, not on the claimant's conduct.
Fix: Always check whether reasonable steps could have reduced loss. Deduct the avoidable part.
Offering specific performance as the first remedy.
It sounds stronger than damages.
Fix: Damages are the normal remedy. Specific performance is for cases where money is inadequate and is at the court's discretion.
Mixing up injunction and specific performance.
Both are court orders.
Fix: Specific performance forces a party to do what it promised. A prohibitory injunction stops a party from doing something, typically something it promised not to do. A mandatory injunction orders a wrongful act to be undone.

Worked examples

Example 1

A supplier agrees on 1 March to deliver 500 units of a software licence to a company on 1 June. On 10 April the supplier writes that it will not deliver at all. What is the legal position, and what can the company do?

Show the solution

Identify the event: the supplier announces before the due date that it will not perform.
Classify it: this is an anticipatory breach, and the supplier refuses wholly to perform.
State the choices: under section 39, the company may put an end to the contract and claim damages immediately, or keep the contract alive and wait until 1 June to see if the supplier performs.
Note the risk of waiting: if the company keeps the contract alive, it keeps its own obligations too and takes the risk of a supervening event, such as frustration, ending the contract. The supplier may also change its mind and perform.
Mention the remedy: damages under section 73 for the loss arising naturally from the breach, generally assessed by reference to the time of breach. Mitigation applies to loss that could reasonably be avoided, such as by buying a replacement licence, and the company cannot recover that avoidable loss even if it chose to wait.

Answer: The supplier has committed an anticipatory breach. The company may end the contract and claim damages now, or keep it alive and wait until 1 June, keeping its own obligations and risking a supervening event. Damages are the normal remedy and are subject to remoteness and mitigation of loss that could reasonably be avoided.

Example 2

A owns a unique painting and agrees to sell it to B for ₹40,00,000. A later refuses to hand it over. Which remedy is most suitable, and why? Would your answer change if the item were 100 ordinary chairs?

Show the solution

Identify the breach: A refuses to perform the sale after agreeing.
Test adequacy of damages: a unique painting has no exact substitute, so money may not put B in the same position.
Conclude that specific performance is suitable: the court may order A to deliver the painting on payment of ₹40,00,000, at its discretion.
Consider the chairs: ordinary goods can be bought elsewhere, so damages are adequate.
For the chairs, damages are the difference between contract price and the market price B must pay, subject to mitigation and remoteness.

Answer: For the unique painting, specific performance is the most suitable remedy because damages are not adequate. For 100 ordinary chairs, damages are the right remedy because replacements are available in the market.

Exam tips

Name the mode of discharge before discussing remedies. Examiners reward a clear structure.
For frustration questions, check whether the event was foreseen or caused by the promisor. If so, frustration usually fails.
For remedies, always give the reason damages are or are not adequate. This decides between damages and specific performance.
In multiple-choice questions, watch for the word 'always'. Specific performance and injunctions are discretionary, so 'always' is usually wrong.
Link the law to actuarial practice where asked, for example an engagement letter breached by a client or a consultant.

Practice questions from Sources of Indian law and valid contracts

Discharge and Breach of Contract, Remedies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Discharge and Breach of Contract, Remedies: frequently asked questions

What are the modes of discharge of a contract under the Indian Contract Act?

The main modes are performance, agreement between the parties, impossibility or frustration, and breach. Agreement covers novation, rescission and alteration (section 62) and remission (section 63). The first three need the agreement of all parties. Remission is the promisee's own act and needs no fresh consideration. Breach discharges the contract only if the innocent party chooses to treat it as ended. Learn the four headings and one example for each.

What is the doctrine of frustration in section 56?

It says that if an act promised becomes impossible or unlawful after the contract is made, and the promisor could not prevent it, the contract becomes void. An act that is impossible from the start makes the agreement void at once, which is initial impossibility and not frustration. Mere hardship or higher cost is not enough.

What is the difference between damages and specific performance?

Damages are money paid to compensate for loss caused by the breach. Specific performance is a court order requiring the party to perform the contract. Courts grant it only when damages are not an adequate remedy, and at their discretion.

When is an injunction used for breach of contract?

A prohibitory injunction restrains a party from doing something, typically in breach of a negative promise in the contract. A mandatory injunction orders a wrongful act to be undone. Either can be temporary or perpetual. The court grants it at its discretion, usually when damages would not be enough.