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What Is a Discharge of a Contract?

A discharge of a contract occurs when an employee's services are no longer needed.
Discharge of a contract occurs when contract is legally completed.
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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 October 2014
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Discharge of a contract occurs when contract is legally completed. Either by court order, mutual decision, or completion of all terms, discharge of a contract ends all obligations and requirements imposed by the contract. There are many different ways that a contract can be discharged, the most satisfactory usually being when all involved parties complete the contract as agreed.

Ideally, a contract has a lifespan as defined by its terms. If a landscaper and homeowner enter into a contract, the ideal discharge will occur after the landscaper performs the agreed services to the satisfaction of the homeowner, while the homeowner pays the landscaper the agreed amount for his or her services. If all terms are completed as stated in the contract, the agreement may be considered discharged, ending all future responsibility of both parties.

Unfortunately, discharge of a contract does not always run so smoothly. Willfully or accidentally, it sometimes becomes impossible or undesirable for at least one signatory to complete his or her responsibilities as dictated by the contract. In these cases, the manner by which discharge of a contract is carried out will depend on individual circumstances.

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Other than satisfaction of the terms, the easiest way to achieve discharge of a contract is often by a process known as accord. This occurs when the parties involved amend the terms of the contract to create a new agreement. If a person signs a contract for a 15 year loan, for instance, and then decides the payments are too high, the contract might be amended to alter the payment plan to 20 years. If a contractor does not build a house addition to specifications, he may reach an accord with the homeowner by accepting a reduced payment.

In some cases, where satisfaction or accord cannot be reached, discharge of a contract may require legal intervention. In some cases, court-ordered discharge is required if the contract is made impossible through the death of one party. Bankruptcy is another reason why a court may choose to get involved in the discharge of a contract. A contract may also be discharged if an object at stake, such as a famous painting involved in a contract, is destroyed and cannot be transferred.

Courts often get involved in the discharge of a contract when at least one party is believed to be in breach of the terms. If a homeowner, having signed a contract, decides that he or she doesn't like a contractor and refuses to pay him or her after a job is completed, the contractor may sue for breach of contract. In these matters, the purview of the court is to determine if the contract is valid and lawful, and discharge responsibility through court order.

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