By Rescission: (Sec 64) When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform his promise. He is discharged from his liability under the contract. If the party rescinding a voidable contract, has received any benefit there under from another party to such a contract , he must, restore such benefit, so far as may be, to the person from whom it was received.
When a person rightfully rescinds the voidable contract, he is entitled to compensation for damages which he has sustained. On treating the contract as voidable, the agreement becomes void.
Rescission may occur by mutual consent of the parties or when one party fails to perform his obligation the other party may rescind the contract. Rescission of a contract cannot be in part only. The entire contract must be rescinded.
(1) A induces B to enter into a contract by fraud. The contract is voidable at the option of B. He may, therefore, rescind the contract.
(2) A, singer, contracts with B, the manager of a theatre to sing at his theatre for two nights every week during the next two months, and B engages to pay her Rs 100 for each night’s performance. On the sixth night, A willfully absents herself from the theatre, and B in consequence rescinds the contract. B is entitled to claim compensation for the damages which he has sustained through the non fulfillment of the contract.
Rescission may take place in any of the following modes:
(a) By mutual consent
(b) If a contract is voidable, one of the parties may rescind the contract.
(c) By alteration or change in the terms of the contract.
(d) By non-performance of a contract by both the parties for a long period. This may amount to implied rescission.
By promise failing to offer facilities for performance: (Sec 67) If the promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal to any non-performance caused thereby.
A contracts with B’s house for repairs B neglects or refuses to point out to A the places in which his house requires repair. A is excused for the non-performance of the contract, if it is caused by such neglect or refusal.
By operation of law: A contract is discharged or terminated by operation of other laws in the following:
By insolvency or bankruptcy: On a person being adjudicated insolvent he is released from all his debts and liabilities provable in insolvency. The rights and liabilities are transferred to an Official Assignee or an Official Receiver under the Presidency Towns Insolvency Act or under Provincial Insolvency Act, as the case may be. The order of discharge gives a new lease of life to the insolvent. He is discharges gives a new lease of life to the Insolvent. He is discharged from all obligations arising from all earlier contracts.
By merger: Merger of superior right into an inferior right, for example, when a higher security is accepted in place of the lower security. Inferior or lower security vanishes or merges into a higher security, for example, an ordinary debt is merged into a mortgage, higher security; or the right of lessee is changed into a right of ownership.
By authorized material alteration of a contract: In cases of material alteration by one party to the contract without the consent of the other party, the contract is discharged. A material alteration changes the character of the contract or alters the rights and liabilities of parties to the contract. Any alteration is material which affects the substances of the contract. It varies the legal effect of the instrument. Alteration of document also, which affects the nature or identification of the document discharges the contract. However, alteration in a deed made in good faith in order to give effect to the real intention of the parties cannot be said to be material alteration. An altered document may however, be received in evidence on behalf of the person in whose favor it is executed for providing the right, title and interest crated by such a document.