PERFORMANCE OF CONTRACT

PERFORMANCE OF CONTRACT: INTRODUCTION

Performance of the contract is one of the various modes of discharge of the contract. A contract is said to have been performed when the parties to a contract either perform or offer to perform their respective promises. Section 37 of the Indian Contract Act lays down the obligation of the parties regarding performance.

Section 37: The parties to a contract must either perform or offer to perform, their respective promises unless such performance is dispensed with or excused under the provisions of Contract Act, or of any other law.[1]

TYPES OF PERFORMANCE

1. Actual performance:
   • When a promisor has made an offer of performance to the promisee and the offer has been accepted by the promisee, it is called an actual promisee. The contractual obligations are actually performed whereby the liability of a party under the contract comes to an end.[2]
2. Attempted performance or tender of performance:
   • Where the promisor has made an offer of performance to the promisee, and the offer has not been accepted by the promisee, it is called an attempted performance [Sec.38]. Such refusal to accept offer of performance by promisee discharges the party from its liability and from its performance.[3]

TENDER OR OFFER OF PERFORMANCE OF CONTRACT TO BE VALID MUST SATISFY THE FOLLOWING CONDITIONS

• It must be unconditional
• It must be made at a proper time and place i.e. must be made in stipulated time that too during the business hours and also at the stipulated place i.e. promisee’s business place or at promisee’s residence if there is no business place.
• Reasonable opportunity to the promisee to examine and ascertain that the goods offeredare the same as the promisor is bound to deliver.
• It must be for the whole obligation and not for a part of it.
• It must be made to the promisee or his duly authorized agent.
• In case of payment of money, tender must be of the exact amount due, and it must be a legal tender.

EFFECT OF REFUSAL OF PARTY TO PERFORM PROMISE WHOLLY:

When a party to a contract has refused to perform or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.[4]

1. Promisee– Stranger can’t demand performance of the contract.
2. Legal Representative– In case of death of the promisee, the legal representative can demand performance unless a contrary intention appears from the contract, or the contract is of personal nature.
3. Third party– A third party can also demand performance of the contract in some exceptional cases like beneficiary in case of trust, the person for whose benefir the provision is made in a family arrangement. This is an exception to the doctrine that a stranger to a contract cannot enforce a contract.
4. Joint Promisees- In case of several promisees, unless a contrary intention appears from the contract, the following persons must perform the promise-
5. In case all the promisees are alive- All the promisees jointly can demand performance.
6. In case of death of any of the joint promisees- Representatives of deceased promisee jointly with the surviving promisee(s) can demand performance of promise.
7. In case of death of all joint promisees- Representatives of all of them jointly can demand performance of the promise.

BY WHOM PROMISE IS TO BE PERFORMED / WHO WILL PERFORM THE CONTRACT (SEC 40)

1. Promisor himself– If it appears from nature of the case that it was the intention of the parties to a contract that any promise contained in it should be performed by the promisor himself, such as the ones which includes personal skill, volition or art, such promise must be performed by the promisor himself. Example– A promises to paint a picture for B as this promise involves personal skill of A. It must be performed by A.
2. Promisor or agent– If it was not the intention of the parties to a contract that the promise should be performed by the promisor himself, as does not involve personal skill of the promisor, such contracts can be performed by the promisor himself or any competent person employed by him.
3. Legal Representative– In case of death of the promisor, his legal representatives can perform the contract unless a contrary intention appears, or the contract does not involve personal skill.
4. Third person [Sec.41]-[5] A contract can be performed by a third party if the promisee accepts arrangement i.e. performance by a third party. According to Sec.41, when a promisee accepts the performance by a third party, he cannot afterwards enforce the performance against the promisor although the promisor might not have authorized or ratified the act of the third party. In other meaning once the promisee accepts the performance from a third person, he cannot compel the promisor to perform the contract again.
5. Joint Promisors– In case of several promisors, unless a contrary intention appears from the contract, the following persons must perform the promise-
   1. In case all the promisors are alive– All the promisors jointly must perform
   2. In case of death of any of the joint promisors– Representatives of deceased promisor jointly with the surviving promisor(s) must perform the promises.
   3. In case of death of all joint promisors– Representatives of all of them jointly must perform the promises.

Also Read: What are the Essentials of the Valid Contract in India

DEVOLUTION OF JOINT LIABILITIES AND JOINT RIGHTS

“Devolution” means passing over from one person to another.

Sec.42[1] provides for the devolution of joint liabilities: The liabilities of joint promisors pass to their legal representatives (in case of death).

RULES REGARDING THE PERFORMANCE OF JOINT PROMISE [SEC. 43 & 44]:

1. Joint and several liability of joint promisors: When two or more persons make a joint promise, the promisee may, in the express contract to the contrary, compel anyone or more of such joint promisors to perform the whole of the promise.
2. Right to claim contribution: Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.
3. Sharing of loss by default in contribution: If anyone of two or more joint promisors makes a default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.
4. Effect of release of one joint promisor: Where two or more persons made a joint promise, a release of one of such joint promisors by the promisee, does not discharge the other joint promisor or joint promisors; neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors. (Sec 44)

NOTE: In English law if one joint promisor is discharge then all the joint promisors get discharged.

MEANING OF DEVOLUTION OF JOINT RIGHTS [SECTION 45]

When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them during their joint lives, and, after the death of any of them, with the representative of such deceased person jointly, with the survivor or survivors and after the death of the last survivor, with the representative of all jointly.[2]

RULES REGARDING THE TIME AND PLACE OF PERFORMANCE OF CONTRACT (SECTION 46 TO 50)[3]

• Where no time is specified for performance [Sec. 46]
• Time of performance is not specified + promisor agreed to perform without a demand by the promisee, the contract must be performed within a reasonable time.
• What is reasonable time is a question of fact and will depend on facts of the case.
• Where time is specified but hour not mentioned [Sec.47].
• Time of performance specified + promisor agreed to perform without application by the promisee then contract must be performed on the day fixed in the contract during the usual business hours and at the place at which the promise ought to be performed.
• Where time is fixed and promisor has not undertaken to perform without an application by the promisee [Sec. 48]
• The promisee must apply for performance at a proper place and within the usual hour   of business.
• Where no place for performance is specified and no application is to be made by the promisee [Sec. 49]
•  It is the duty of the promisor to apply to the promisee to appoint a reasonable place forthe performance and perform it at such appointed place.
• Where the promisee prescribes the manner or time for performance [Sec. 50]
• The promise must be performed in the manner and at the time prescribed by the promisee.

TIME AS THE ESSENCE OF THE CONTRACT (SEC.55)

“Time is essence of a contract” means that it is essential for the parties to a contract to perform their respective promises within the specified time. Where time is essence, the concerned parties must perform and are under actual obligation to fulfil their respective promises within the specified time.[4]

Time is pleaded as a fact that is to say that if time is specified for the performance of the contract, this is not by itself sufficient to prove that time is essence of the contract. Intention of the parties has to be observed in order to ascertain whether the parties had the intention to treat time as an essential fact in that particular contract.[5]

Cases where time is considered to be essence of contract:

• Where the parties have expressly agreed to treat as the essence of the contract.
• Where the non-performance at the specified time or delay operates as an injury to the party.
• Where the nature and necessity of the contract requires it to be performed within the specified time.

In commercial or mercantile contracts, the time fixed for the delivery of goods is considered to be the essence of a contract but the time fixed for the payment of the price is not considered to be the essence of a contract.

In non-commercial and non-mercantile contracts, usually the presumption is that time is not the essence of such contracts.

CONSEQUENCES OF NON- PERFORMANCE OF CONTRACT WITHIN SPECIFIED TIME (SEC. 55)

The consequence of non-performance of a contract within the specified time depends upon whether the time is essence of the contract or not:

• When time is essence of a contract-
• The contract becomes voidable at the option of the promisee.
• If performance beyond the specific time is accepted, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the agreed time unless at the time of such acceptance, he gives notice to the promisor of his intention to do so.
• When time is not the essence of the contract-
• The contract does not become voidable at the option of the promisee.
• The promisee is entitled to claim compensation for any loss occasioned by the non- performance of the promise at the agreed time.

PERFORMANCE OF RECIPROCAL PROMISE

Meaning of Reciprocal Promise: As per Sec. 2 (f), “Promises which form the consideration or part of consideration for each other as called reciprocal promises.”

TYPES OF RECIPROCAL PROMISES:

1. Mutual and Independent- Such promises all to be performed by each party independently without waiting for the other party to perform his promise and therefore he can’t excuse himself on the ground of non-performance by the default party.
2. Mutual and Dependent- Where the performance of promise by one party depend on the prior performance of the promise by other party. The party at fault becomes liable to pay compensation to the other party may sustain by the non performance of the contract [Sec. 54]
3. Mutual and concurrent- When the promises are to be performed simultaneously a promisor need not perform his part unless the promisee is ready and willing to perform his reciprocal promise. [Sec. 51]

Order of performance of reciprocal promises [Sec. 52]:

Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they must be performed in that order. And if the order is not expressly fixed by the contract, then it must be performed in the order in which the nature of the transaction requires.[6]

Effects of preventing the performance [Sec. 53]:

When the contracts contain reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is not entitles to compensation from the other party for any loss which ma sustain in consequence of the non-performance of the contract.

Submitted By : Sanjay Rawat

[1] Supra1

[2] Devolution of Joint Rights, available at: https://advocatespedia.com/Devolution_of_Joint_Rights (visited on November 20, 2021)

[3] THE INDIAN CONTRACT ACT, 1872

[4] Time is the essance of the Contract, available at: http://www.legalservicesindia.com/article/1396/Time-is-the-essance-of-the-Contract.html (visited on November 20, 2021)

[5] Ibid

[6] Reciprocal Promise, available at: https://www.complybook.com/blog/reciprocal-promise (visited on November 20, 2021).

[1] THE INDIAN CONTRACT ACT, 1872

[2] Performance of Contract | Meaning | Types of Performance, available at: https://accountlearning.com/performance-of-contract-meaning-types-of-performance/ (visited on November 20, 2021)

[3] Ibid

[4] Performance of a Contract – Indian Contract Act, 1872, available at: https://www.legalbites.in/performance-of-contract-3/ (visited on November 20, 2021).

[5] THE INDIAN CONTRACT ACT, 1872