Introduction

Section 2h of the Indian Contract Act, 1872 defines a contract as “An agreement enforceable by law” . A proposal coupled with acceptance becomes a promise. A promise with a consideration leads to an agreement and an agreement enforceable by law is termed as a contract. There are some basic essentials of a contract under section 10 of the ICA, 1872 which are that a person should be competent to contract, of sound mind, of the age of majority and the contract should be for lawful object and consideration. A contract is said to be completed when it is discharged. Let us understand the Discharge of the Contract and its types.

What is Discharge of Contract and its modes?

Discharge of contract refers to the culmination of the contractual obligations that were laid down by the parties at the time of formation of contract. This was the reason why the obligations were laid down and relationship was formed when the contract was entered into by the parties. A discharge is done through various modes in both positive (performance) or in negative (breach) way. These modes are:

• Discharge by performance – It is when the contract is discharged by performance of the obligations by both the parties. Section 38 of the Indian Contract Act deals with Attempted performance as well which states that if a party has attempted to perform its obligation and the other party didn’t turn up or is not accepted by the other party, it is known as tender of performance or attempted promise.
• By agreement or consent - Section 62 of the ICA,1872 states that “if the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed”. It is done through novation, recission or altercation of contract.
• By lapse of time - The limitation Act of 1963 deals with time period in which a contract must be performed and if that time limit is not adhered to by any of the parties, the contract is said to be discharged due to lapse of time prescribed.
• By operation of a law - Discharge is also done due to death of any of the party or judgement of the courts.
• By breach of contract - Contract is discharged by its breach or failure to perform the obligation under the contract by either of the parties without any lawful justification.
• By impossibility of performance - Section 56 of the ICA, 1872 deals with the impossibility of the act and states that “An agreement to do impossible act is void ab-initio.” It means something which is not possible in the eyes of law. It can be initial or subsequent impossibility.

Discharge by Breach of Contract

There is a maxim which is frequently used in contracts and this is “pacta sunt servanda” which means the parties which are part of the contract are required to respect the agreement and to fulfil all the obligations which are imposed upon them through that contract. If the parties fall short of their actions towards the fulfilment of the terms of contract, they can be charged for breach of contract. Breach can be of two forms: Actual breach and Anticipatory breach. In case of Actual Breach, the contract is not discharged when it was supposed to be done and therefor the promisee’s right of action to claim damages sustains. On the other hand, in Anticipatory breach, it takes place before the date and thus, the promisor cannot file a suit for damages and instead can also opt out from performing his/her part of the contract. In the case of Hochster vs De La Tour , a contract was entered into in April where the claimant on a foreign tour will be the courier. The contract was to begin on 1st June but on 11th may itself, the defendant informed the claimant that the services are terminated as they are no longer required. It was held that the claimant can sue the defendant before the actual performance day and doesn’t need to wait.

What is Mora Debitoris and its consequences?

The unwarranted failure of the debtor to perform the obligations under the contract within pre-decided/ reasonable period of time is known as Mora Debitoris. Mora is a Latin word which means an intentional delay in performance of obligations fixed under contract. There is a positive obligation which a party to a contract is bound to perform but fails to discharge. There are some essentials to this principle:

• The debt must be due and unenforceable – It is one of the requirements under Mora Debitoris that the debt is due to be given. The creditor has a right to get the claim performed either immediately after the conclusion of contract or thereafter based on circumstances. There are also some exceptions to the rule if the parties have previously agreed to any kind of delay or if the debt is extinguished or if the performance of debtor is contingent upon the debtor’s performance of some obligation, etc.
• The time for performance must be fixed and this is not adhered to by the debtor and thus fails to perform – Inability to perform an obligation timeously cannot result in mora unless there is a time prescribed or fixed beforehand. This time may be fixed under the agreement or subsequent decision by them. It is of two kinds:
• Mora ex re – It is when the time is specified but the debtor doesn’t adhere to that stipulation and fails to perform the act timeously.
• Mora ex persona – It is when there is no time stipulated under the contract or any subsequent obligation. Here, a mere delay in performance cannot result in mora automatically. The creditor must impose mora by demanding the performance on a specific day that is rational.
• The non-performance should not be justified under any law – It is also an essential for constituting Mora Debitoris that the delay is not legally justified. The courts can let a debtor free if he comes up with some legally sound reason for the delay. Impossibility of performance which is given under section 56 is excusatio a mora (reasonable excuse) provided that it is not arising out of the debtor’s default.

Consequences:

Mora Debitoris gives rise to general remedies for breach which are:

• Damages – the debtor under a contract is bound to compensate for all the loses the creditor has suffered owing to the delay irrespective of whether the contract was eventually performed or not. In the condition when liquidated damages need to be paid, interest is calculated as from the date of the start of that delay (mora) and the interest rate would be as prescribed under section 1 of the Prescribed Rate of Interest Act.
• Recission – In cases of contracts where time is of essence, if the debtor is causing unreasonable delay, then the creditor can rescind the contract. In case of Nel vs Cloete, the time as an essence was discussed as to when:
  - The parties have agreed during the contract that in case of failure, recission of contract can be done
  - The time is made essence in subsequent obligations by sending a notice to the debtor by creditor. The notice should be unambiguous, given extra-judiciously, etc.

What is Mora Creditoris and its consequences?

The creditor performs a passive role under a contractual obligation i.e., to receive the object of the performance when debtor provides it. The creditor, however needs to show positive co-operation and the failure to give that co-operation to the debtor can result in mora creditoris. Both mora creditoris and mora debitoris cannot exist together in contract. The creditor’s delay in receiving payment eliminates the possibility of mora debitoris and vicely versa. There are some requirements that need to be fulfilled which are:

• There must be an obligation to perform - The debtor under the contract should be bound to perform its part of contract. It must be a natural obligation. The debt need not be due and debtor is entitled to perform his obligation beforehand. The creditor may refuse to accept the performance if debt is subject to any undischarged condition
• Co-operation - It is the very essential expected from any creditor that they would show co-operation so that debtor can perform his part of the obligation successfully. There will be no mora creditoris if there is a negative obligation or a positive one without the requirement of creditor’s cooperation.
• Delay – For mora creditoris to exist, there must be lack of cooperation they must have shown in the sense that they delayed in accepting the performance. Where there is time for performance prescribed, it is obvious that mora creditoris exists.
• Tender of Performance – It is the obligation of the debtor to attempt on his part to fulfil the obligation and it should be performed completely by him, giving reasonable time to the creditor to accept the performance. If the creditor doesn’t accept the obligation, then its mora creditoris.
• Fault – There must be a fault on the account of creditor and not because of the act by a superior force (vis major) or an accident (caus fortuitus)

Consequences:

• Damages – whether the contract is cancelled or kept alive, the debtor is entitled to damages for any losses due to the failure to show cooperation by the creditor.
• Cancellation – the contract can be brought to an end in same way as in mora debitoris if time is of essence under the contractual obligation and if not, the time is specified in any manner which creditor failed to comply with.

Conclusion

There are various modes of discharge of a contract and one of the most essential is discharge by breach of contract. It is a civil wrong when one of the parties to a contract do not fulfil the obligations which a person is bound to do either completely or partially. It is of two types i.e., Actual and Anticipatory breach. Any breach gives birth to a right to seek damages to make good, all the loses that are incurred due to the breach. The important forms of breach of contract are Mora debitoris and Mora creditoris. They deal with failure to perform the obligation timeously in case of debtor and failure to cooperate in case of creditor. Both these forms cannot exist at same time in a contract and are independent of each other although they may overall in some exceptional cases. In case of Mora creditoris, the debtor is entitled to damages and in case of Mora debitoris, the creditor is entitled. There are remedies and consequences for both the terms and are not very commonly known to all the people. I hope that this article will solve many of the doubts pertaining to these two terms.

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