(a) What is a contract? (b) List and explain four ways by which a contract can be discharged.

(a) What is a contract?

A contract is a legally binding agreement between two or more persons which creates rights and obligations that can be enforced in a court of law. For an agreement to be a valid contract it must contain the essential elements of offer, acceptance, consideration, intention to create legal relations, capacity of the parties and genuine consent, and its purpose must be lawful.

(b) Four ways by which a contract can be discharged

1. Discharge by performance: A contract ends when both parties completely and exactly carry out the obligations they agreed to. Once each party has done what was promised, the contract is fulfilled and comes to an end.
2. Discharge by agreement: The parties may mutually agree to bring the contract to an end before performance, either by cancelling it, replacing it with a new contract (novation) or by waiver.
3. Discharge by breach: When one party fails to perform, refuses to perform or performs badly, the innocent party may treat the contract as discharged and sue for damages.
4. Discharge by frustration (impossibility of performance): A contract is discharged when, through no fault of either party, an unforeseen event such as destruction of the subject matter, death, or a change in the law makes performance impossible or illegal.

(Also acceptable: discharge by lapse of time or by operation of law.)