(a) What are the various modes in which a contract may be discharged ? Explain in the light of decided cases. 20 (b) Dwell on…

(a)

• Meaning: a contract is discharged when the contractual obligations come to an end and the parties are released.
• Modes of discharge under the Indian Contract Act, 1872:

1. By performance

• Actual performance (s.37): the parties must perform or offer to perform their promises.
• Attempted performance, or tender (s.38):
• a valid tender of performance that is refused discharges the promisor. He is not responsible for non-performance and does not lose his rights;
• the tender must be unconditional, made at the proper time and place, and give a reasonable opportunity to inspect;
• Startup v Macdonald (1843): oil tendered late on a Saturday evening, but within the agreed time, was a valid tender, and the refusal made the buyer liable.
• Performance by a third person: if the promisee accepts performance from a third person, he cannot afterwards enforce it against the promisor (s.41).

2. By mutual agreement

• Novation, rescission and alteration (s.62): if the parties agree to substitute a new contract, or to rescind or alter it, the original contract need not be performed.
• Lata Construction v Dr Rameshchand Ramniklal Shah (2000): the novation must be a genuine new contract, and a mere promise to pay later does not discharge the original.
• Remission and waiver (s.63): the promisee may dispense with or remit performance, wholly or partly, or extend the time.
• Kapur Chand Godha v Mir Nawab Himayatalikhan Azamjah (1963): accepting a lesser sum in full satisfaction discharged the debt.
• Implied discharge: a contract may also end by conduct, or by the rescission of a voidable contract (s.64).

3. By impossibility (s.56)

• The rule: a contract to do an act that becomes impossible or unlawful after it is made becomes void.
• Taylor v Caldwell (1863): the music hall was destroyed by fire;
• Satyabrata Ghose v Mugneeram Bangur (1954): "impossible" means impracticable or useless from the point of view of the object of the contract;
• Sushila Devi v Hari Singh (1971): an agreement to lease was frustrated by Partition.
• What does not discharge a contract:
• increased cost or hardship (Alopi Parshad v Union of India (1960); Energy Watchdog v CERC (2017));
• obstacles that can be overcome, such as an import licence that was still obtainable (Naihati Jute Mills v Khyaliram Jagannath (1968));
• self-induced frustration (Maritime National Fish v Ocean Trawlers (1935)).

4. By lapse of time

• The effect: if a suit is not filed within the period prescribed by the Limitation Act, 1963, the remedy is barred, although the debt may be revived by a written promise (s.25(3)).

5. By operation of law

• Death: in contracts involving personal skill (s.37).
• Insolvency: under the Insolvency and Bankruptcy Code, 2016, resolution or discharge extinguishes claims.
• Merger: an inferior right merges into a superior right, for example when a judgment is obtained on the contract.
• Unauthorised material alteration: an unauthorised material alteration of a written contract by one party.
• Rights and liabilities vesting in the same person.

6. By breach

• Actual breach: failure to perform on the due date.
• Anticipatory breach (s.39): where a party refuses to perform, or disables himself from performing, before the due date, the promisee may put an end to the contract and sue at once, or wait for the due date.
• Hochster v De la Tour (1853): a courier repudiated his engagement before it began, and the employer could sue immediately;
• Avery v Bowden (1855): where the promisee keeps the contract alive, a later supervening event, such as war, may discharge both parties.
• Consequences of breach: compensation (ss.73–75), and restitution where a contract is rescinded (s.75).

7. By the promisee's neglect or refusal to cooperate (s.67)

• The rule: if the promisee neglects or refuses to afford the promisor reasonable facilities for performance, the promisor is excused for non-performance caused by that neglect.

(b) The provision

• What s.66A punished: inserted by the IT (Amendment) Act, 2008, s.66A punished sending, by a computer resource or communication device, any information that was:
• grossly offensive or of a menacing character; or
• known to be false, sent for the purpose of causing annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred or ill will; or
• an e-mail sent to cause annoyance or to mislead about its origin.
• Punishment: up to three years' imprisonment and fine.
• Misuse: it was widely misused, for example in the arrests of two young women in Palghar in 2012 over a Facebook post, and of a professor in West Bengal for circulating a cartoon.

Shreya Singhal v Union of India (2015)

• Result: a two-judge bench (Nariman and Chelameswar JJ) struck down s.66A in its entirety as violating Art 19(1)(a), not saved by Art 19(2).
• Reasoning:
• no proximate nexus with public order: the section did not distinguish discussion, advocacy and incitement. Only incitement has a proximate relationship with public order, following the "spark in a powder keg" test (Ram Manohar Lohia (1960); S. Rangarajan v P. Jagjivan Ram (1989));
• "annoyance", "inconvenience" and "grossly offensive" are not grounds in Art 19(2);
• vagueness: its terms were undefined and open-ended, so ordinary people and police could not know what was prohibited, and the section was arbitrary;
• overbreadth and chilling effect: it captured innocent and protected speech, and deterred legitimate expression;
• not severable: since the whole section was infected, it could not be read down;
• Art 14 challenge rejected: the Court held that there is an intelligible differentia between speech on the internet and other speech. The failure was under Art 19, not Art 14.
• Related holdings in the same case:
• s.79 and the Intermediary Rules were read down: intermediaries must take down content only on a court order or government notification that relates to Art 19(2) grounds;
• s.69A (blocking) was upheld, because it has procedural safeguards and requires reasons;
• s.118(d) of the Kerala Police Act was also struck down.

After the judgment

• Continued prosecutions: police continued to register cases under the invalid section.
• The Supreme Court's response: in PUCL v Union of India (orders of 2019–2022), the Court directed that no prosecution can be initiated or continued under s.66A, and that pending cases be dropped.
• Other laws still available: online speech remains subject to other laws that fit Art 19(2), such as those on promoting enmity, defamation and obscenity (BNS ss.196, 299 and 356, formerly IPC ss.153A, 295A and 499; IT Act ss.67 and 69A).
• Significance: the case is a landmark on free speech online. It applies the vagueness and overbreadth doctrines and requires a proximate link between a restriction and the grounds in Art 19(2).

(c) (i) Caveat emptor ("let the buyer beware")

• The rule: under s.16 of the Sale of Goods Act, 1930, there is no implied condition as to the quality or fitness of goods sold. The buyer must examine the goods and rely on his own judgment.
• Exceptions:
• fitness for a particular purpose, where the buyer makes the purpose known and relies on the seller's skill in goods the seller deals in (s.16(1); Priest v Last (1903));
• merchantable quality, in a sale by description by a dealer (s.16(2); Grant v Australian Knitting Mills (1936)). A buyer who has examined the goods is not protected against defects that examination ought to have revealed;
• usage of trade (s.16(3));
• sale by description or sample (ss.15, 17);
• fraud or concealment by the seller.
• Modern trend: the Consumer Protection Act, 2019, with its product liability and unfair trade practice provisions, has shifted the emphasis towards caveat venditor ("let the seller beware") in consumer transactions.

(ii) Uberrima fides ("utmost good faith")

• Where it applies: certain contracts require full disclosure of all material facts by the party with superior knowledge, even without being asked. These include:
• insurance contracts (the leading example);
• family settlements;
• partnership;
• fiduciary relationships;
• contracts to take shares under a prospectus.
• ***Carter v Boehm* (1766), per Lord Mansfield: the insured knows the facts, and the insurer relies on his disclosure. Non-disclosure of a material fact makes the policy voidable**.
• Indian cases:
• Satwant Kaur Sandhu v New India Assurance (2009): a material fact is anything that would influence a prudent insurer;
• Reliance Life Insurance v Rekhaben Nareshbhai Rathod (2019): non-disclosure of earlier policies justified repudiation;
• Manmohan Nanda v United India Assurance (2022): the duty applies both ways, so the insurer must also disclose the terms fairly.
• Statutory limit: under s.45 of the Insurance Act, 1938 (as amended in 2015), a life policy cannot be questioned on any ground after three years.
• Contrast with ordinary contracts: in ordinary contracts, mere silence is not fraud (Explanation to s.17, Contract Act).

(iii) Nemo dat quod non habet ("no one can give what he does not have")

• The rule: a person who is not the owner, and has no authority, cannot transfer a better title than he has (s.27, Sale of Goods Act). This protects ownership.
• Exceptions (to protect bona fide buyers and commerce):
• estoppel, where the owner by conduct precludes himself from denying the seller's authority (s.27);
• sale by a mercantile agent in possession of the goods with the owner's consent, in the ordinary course of business (proviso to s.27);
• sale by one of several joint owners in sole possession (s.28);
• sale by a person in possession under a voidable contract not yet rescinded (s.29);
• seller in possession after a sale (s.30(1)), and buyer in possession with the seller's consent (s.30(2); Cahn v Pocketts Bristol Channel Steam Packet Co (1899));
• resale by an unpaid seller (s.54(3));
• a holder in due course of a negotiable instrument, who takes free of defects in title (NI Act, ss.9 and 53);
• pledges by mercantile agents and by persons in possession under voidable contracts (Contract Act, ss.178 and 178A).
• Market overt: the English exception of sales in market overt was abolished in 1995 and never applied in India.