Performance of Contract
By Mansi Jain
When one party offers and the other party accepts, this makes each party bound to perform the promise made by them. And as it is said that every contract consists of reciprocal promises. But, if we take a situation like, A offers to perform his part of the promise, but the other party, B, does not want to perform his part of promise, then what will A do? And how will the performance of the contract will be complete? Or when does the performance of the contract starts does it start when one party offers, or does it start when the other party accepts the offer?
So, to answer these questions, we need to understand the provisions of the Indian Contract Act, 1872 which deals with the Performance of Contract.
Performance of Contract
Performance of contract starts when promisor offers like A, offers to sell his watch to B for Rs. 2,000 and promisee accepts that offer like B accepts to buy A’s watch for Rs. 2,000. When both the parties i.e., promisor and promisee have performed their respective duties, according to the conditions of the contract then their liability under the contract comes to end and the contract is said to be discharged by performance which means the performance of contract will be complete, but the performance should match with the terms of the contract.
According to section 37 of the Indian Contract Act,1872:
The parties to the contract have a duty to
1. Perform, or
2. Offer to perform
As per section 38 of the Indian Contract Act, 1872; if one party A offers to perform his part but the other party, B, does not perform his part then, then A cannot be blamed for non-performance of promise as he would be discharged from its duty under the contract. For example, A promises to sing a song in B’ cafe, but B does not allow him to do so. A will be discharged from its promise. And just like actual performance, an offer of performance by the promisor discharges a promisor from his obligation under a contract.
Offer of Performance
When the promisor is willing to perform the contract and he offers to perform the same, then the promisee has a duty to accept the performance of the contract. If the offer of performance is not accepted by the promisee, the promisor cannot be blamed for the non-performance of the contract and will not lose his right under the contract.
Essentials needed to be fulfilled for such offer of performance:
1. Offer of performance must be unconditional.
2. It must be made at exact place and time, and that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing then and there to do the whole of what he is bound by his promise to do.
Like in the case, Demby Hamilton and co. vs Burden(1949),
There was a contract of supply of 30 tons of apple juice. The juice was tendered but refused to take delivery of some of the installments. At the time of tender, the juice was fresh but subsequently, it became putrid. It was held that the buyer was at fault in not taking the delivery of goods when tendered, therefore, he was liable for the loss caused by the juice becoming putrid.
3. If there is an offer of delivery of anything to the promisee, then the promisee must be a given reasonable opportunity for checking the thing offered as is it the same thing which the promisor promised to deliver.
4. If there are a number of joint promisees, an offer of performance may be in favor of one of them.
Who can perform the contract?(Promisor or his Agent)
If the contract is one which is based on personal confidence or involves the exercise of personal skills like painting, dancing, singing, marrying, or writing a book, etc., it must be performed by the promisor himself and nobody else. Like if, A promises to sing a song in b’s cafe, A must perform this promise himself. But if the contract does not involve personal skills, the promisor or his representative may employ a competent person to perform the same. For example, A promises B that he will pay the money in December. A can perform this promise either himself by paying the money to B or can ask his agent to pay for him to B, if A dies before the time appointed for payment, his agent must perform the promise after his death.
Non-performance of the contract in time and its effect
When time is mentioned in the contract, and when the contract is not performed in time then it will end the purpose of the parties, and, therefore, if in such a case, there is a delay in performance by one party, the other party has the right to avoid the contract given under section 55 of Indian Contract Act. The time of performance of the contract may also be extended by a mutual agreement between the parties.
When time is not mentioned in the contract, it must be performed within a reasonable time. The delay in the performance of such a contract does not make the contract voidable, the remedy available to the aggrieved party in such a case is to claim compensation. Whether time is important in a contract or not depends on the intention of the parties.
Like in the case, C.C. of India Ltd. Vs S.S. Corporation, (1970)
There was a contract to supply goods “within 10 days or earlier” i.e., before 10thMay 1964. The buyer extended the time and accepted the deliveries up to November 1964. He then gave a notice to the seller that no further extension will be given, and the contract must be performed by the end of 1964. It was held that on the seller’s failure to supply the goods by 31st December 1964 the buyer had a right to terminate the contract.
Promises bind representatives
A promiser is bound to fulfil his promise .In case of a promiser's death before performance the representative becomes bound, unless a contrary intention appears from the contract.
Case law to understand this is – Kunwar Singh Rawat vs State of Uttaranchal,AIR-2007. The government contracts for construction of class rooms. , the construction was completed, before the payment of the balance amount the building got damaged. The required enquiry was done and, in that enquiry, it was found out that it was not the mistake of the contractor as the building was made of good material and the damage was caused due to rains and landslides. And thus, the contractor was allowed to recover the amount.
The renewal clause of a contract-
There are a few contracts which have a renewal clause I.e., the contract can be renewed as per the conditions provided and so it’s very important to read the contract and about this clause.
This can be understood through a case Hardesh Ores (p) ltd. Vs hade & co, (2007). a contract contained a clause for renewal, so the party having the right to renewal under the contract did so. The other party refused to accept the renewal. Then the supreme court said that the best course for the party was to get its right of renewal declared and enforced by a court of law.
Effect of accepting performance from Third person
We can understand this through the case of in Hirachand Punamchand v Temple 2 KB 330,a debt was held to be discharged when creditor accepted a smaller sun from debtor’s father in full settlement. Performance done by fatherin this case discharged the contract. Discharge of the contract by the performance of third parties can take place only if it is done in order to do so. The situation in which the organization made an ex-gratia payment to an individual who had been defrauded by its secretary demonstrates these conditions. The victim was entitled to recover all the damages incurred because the company's reimbursement was not made on behalf of the secretary.
Devolution of joint liabilities
When there is a promise between two or more persons,then the right to claim performance rests with all of them during their joint lives,and if anyone dies out of them, then the right can be enforced by the representative of that deceased person jointly with the others left, and after the death of the last one, then the representative of all jointly, can enforce the right.
Place for performance of promise, under the condition (where no application to be made and no place fixed for performance)
If a pledge is to be fulfilled by the promisee without application, and no place for the execution of it is set, it is the responsibility of the promisor to order the promisee to assign a suitable place for the performance of the promise and to execute it at that place.
Performance under Contract law, means, an act of doing something according to the contract. And when the promises are successfully performed by both the parties then the contract is said to be discharge by performance. But it is important that that performance should match the conditions of contract. The contract can be performed by either promisor himself or by his agent as well if the promise doesn’t depend on personal skills to be fulfilled.
1. Dr. R.K. Bangia, Indian Contract Act (Allahabad law agency, fifteenth edition, 2016)
2. Srishti, on Performance of Contract , available at Legal Bites.