Understanding Contract Discharge and Rescission

In contract law, the term 'discharge of contract' refers to the termination of the contractual relationship between parties. Once a contract is discharged, the parties are no longer bound by its terms and obligations.

A contract can be discharged through various methods, including performance, agreement, breach, or impossibility of performance. One specific method of discharge is by rescission.

What is Contract Rescission?

Rescission of a contract means cancelling or revoking the contract from the beginning, as if it never existed. When a contract is rescinded, the parties are restored to their original positions before the contract was made. Rescission can happen by mutual agreement between the parties, or by one party exercising a legal right to avoid the contract (e.g., in cases of misrepresentation, fraud, undue influence, coercion, or breach of a fundamental term, making the contract voidable).

Analyzing the Given Options

Let's examine each option provided in the question to determine which ones describe situations where a contract is discharged by rescission or a related method of termination:

Option A: When terms of a contract are altered

Alteration of a contract involves changing one or more terms of an existing contract with the consent of all parties. While this modifies the original agreement, it doesn't necessarily discharge the entire contract from the beginning. The altered contract remains in force.

Option B: When a party makes novation of a contract

Novation occurs when a new contract is substituted for an existing one, either between the same parties or by introducing new parties. The original contract is discharged, but it's replaced by a new one. This is a form of discharge by agreement, but it's specifically novation, which involves substitution, rather than simply cancelling the original agreement without replacement.

Option C: When an aggrieved party exercises his option to avoid the contract

This describes a situation where a contract is voidable, often due to factors like misrepresentation, fraud, coercion, or undue influence. The aggrieved party (the one wronged) has the option to either affirm the contract or avoid (rescind) it. If the party chooses to avoid the contract, they are exercising their right to rescind it, thereby discharging the contract and seeking to return to the pre-contract position. This is a clear instance of discharge by rescission.

Option D: When a party to a contract waives his rights under the contract

Waiver means voluntarily giving up a known right under the contract. This might affect specific obligations or terms but does not necessarily discharge the entire contract. The remaining terms and obligations of the contract usually remain binding.

Option E: Where none of the parties has performed its part for a long time and no other party has objected against it

This situation describes contract abandonment. When both parties to a contract fail to perform their respective obligations for a significant period, and neither party insists on performance or objects to the non-performance of the other, it can be inferred that the parties have mutually agreed to abandon or give up the contract. Abandonment is considered a form of discharge by mutual agreement, which is akin to rescission by consent.

Summary of Analysis

Based on the analysis:

• Option A (Alteration) modifies, but does not necessarily discharge the contract from the beginning.
• Option B (Novation) replaces the contract with a new one.
• Option C (Aggrieved party avoids) is a direct description of one way a contract is discharged by rescission (in the case of a voidable contract).
• Option D (Waiver) affects rights but not necessarily the entire contract's discharge.
• Option E (Non-performance by both, no objection) implies abandonment, a discharge by mutual agreement, similar to rescission by consent.

Conclusion

Option C directly describes the rescission of a voidable contract by the aggrieved party. Option E describes a scenario (abandonment) that is treated as a discharge by mutual agreement, which has a similar effect to rescission by consent, effectively cancelling the contract due to the parties' conduct.

Therefore, the situations where a contract is said to be discharged by rescission or a very closely related form of discharge by agreement include C and E.

Revision Table: Contract Discharge Methods

Additional Information: Key Concepts in Contract Law

Understanding different ways contracts end is crucial. While rescission aims to unwind the contract completely, other methods like breach might lead to a claim for damages, and novation creates a new binding agreement. A 'voidable contract' is valid until it is rescinded by the party entitled to do so (the aggrieved party). Situations like misrepresentation, fraud, or coercion make a contract voidable, giving the innocent party the right to choose to either uphold or rescind the contract.