This article has been written by Samiran Das from S.K. Acharya Institute Of Law, University Of Kalyani

Table of Contents

Introduction

Performance of contract is the execution of the promise or carrying out the promise made by the parties to the contract. The parties to the contract must either perform or offer to perform their respective promises, unless such performance is dispensed with or excused.

When the promisor offers to perform his obligation under the contract at the proper time and place but the promisee does not accept the performance it is known as a tender.

Section 37 of the Indian Contract Act, 1872 lays down that the parties to a contract must either perform or offer to perform their respective promises, unless such performance is dispensed with or excused.

Offer to perform : (section 38)

Sometimes it so happens that the promisor offers to perform his obligation under the contract at the proper time and at the proper place but the promise does not accept the performance which we commonly call a tender.

Section 38 of the Indian Contract Act, lays down that when a promisor has made an offer but the promise has not accepted the offer, then the promisor is not responsible for the non-performance and also he would not lose his rights under the contract.

Example: A company named XYZ participates in a tender but another company named ABC who had also particiopated makes the lowest bid and it wins the tender, whereas XYZ company gets rejected. Here, the company XYZ’s rights and liabilities are not affected under the contract.

Effect of Refusal of a party to perform Promise Wholly: (section 39)

When a [party to a contract refuses to perform or disables himself or abstains from performing his promise in its entirety, then the promise withdraw from the contract. But if the promise has expressed his assent by his word or conduct to continue the contract then he cannot reject the contract. In such a scenario the promise will be entitled to compensation.

For example: A servant is employed in Mr. X’s house for a monthly wage of 6000/-. At the end of one month Mr. X refuses to pay the servant his wage, the servant leaves his job at Mr X’s house. But if the servant had expressed his assent to work for at least one year at his house then he cannot leave his job there.

By whom the contract must be performed :-

A contract must be performed by the-

Promisor himself- If it is expressly mentioned in the clauses of the contract that only the promisor himself has to perform the contract then it is his duty to do it.

For example, A hired a professional painter to paint his portrait. It is the duty of the painter himself to paint the portrait of A, he cannot delegate that to any of his subordinate or students.

Another example, where A and B enters into an agreement that A will marry B’s daughter, C for a consideration of 10000/-. A is bound to perform his promise himself.

Agent:- (section 40)

When the personal consideration is not the foundation of the contract then the promisor or his representative may employ a competent person to perform the promise.

Legal Representative :-

A contract which involves the use of personal skills or is founded on personal considerations, comes to an end when the promisor dies . A personal action dies with the person. The legal representatives of the deceased person are bound to perform the contract at the absence of thr original promisor.

Third person:-

When the promisee accepts the performance of the promise from the third party, he cannot enforce it against the promisor afterwards.

Devolution of joint liabilities:-

Devolution means passing over from one person to another (promisor to the legal representative).

Section 42 (para1) lays down that , when two or more persons have made a joint promise , then they are jointly bound to fulfill the promise. If any of them dies then that person’s legal representative will take his place and jointly perform the promise with the surviving promisor.
Section 42 ( para 2) says , if all of the joint promisors die then their legal representatives will jointly be bound to perform the promise on their behalf.

When the parties do not discharge their obligations at their discretion, section 43 comes into play.

Section 43 ( para1) says , when two or more persons make a joint promise, the promise may compel any one among them or all of them to perform the whole of the promise.

This means that the liability of the joint promisors is joint and several.

Section 43 (para2) tells us that, when a joint promisor has been compelled to perform the whole of the promise , he may compel the other promisors to take part in the performance of the promise equally.
According to Section 43 (para3), if any one of the joint promisor defaults or fails to perform his part of promise , then the remaining promisors have to bear such default and they will bear it equally.

Point to be noted here is that , in case of recovery of loan by a creditor , the same principle applies. When the debtor dies, his legal representatives becomes the joint promisors after the death of the single promisor.

Example : A,B and C have jointly promised D to pay 3000/-. But A has gone insolvent, so now B and C have to bear the share of payment that otherwise A would have made to D.

Release of joint promisor: (section 44)

If the promise releases the joint promisor from his liability, then in such a scenario the joint promisor is liable to the other joint promisors.

Also, the release of one promisor from the obligation to perform does not release other joint promisors from their to perform.

Example: A, B and C are jointly liable to pay a debt to D. D releases A from the liability. B and C bears the liability to pay the whole debt. Now, though A has been released from his liability by D, A would still be liable towards B and C , since all three of them are joint promisors.

Devolution of joint rights: – (section 45)

The joint promisees enjoy the right regarding the performance of the promise by the promisor. They are jointly entitled to enjoy the rights arising out of the contract. If the promisees are not present at the time of performance for being dead or any other reason, their legal representatives are the ones who would possess the right in their absence.

Time and place of performance :- (sections 46-50)

1.Where no application is to be made and no time is specified-[section 46]

A contract where the promisor has to perform his promise without any application by the promise and there is no time specified for the performance of the promise. In such a scenario, the promisor should perform his promise within the “reasonable time”, here reasonable time is a question of fact and it is under the discretion of the court to decide the reasonable time. If he the parties cannot decide the reasonable time because it is under the courts discretion.

2.No application to be made but the time is specified.[section 47]

When a promise is to be performed on a certain day, the promisor may undertake to perform it without any application from the promise.

The promise is to be performed within the “usual business hours” on such prescribed date and at the particular time.

3.Application for performance on a certain day and place.-[section 48]

When the promise is to be performed on a certain day, the promisor may perform the promise after the application by the promisee.

The promise has to ask for the performance of the promise within the usual business hours and at the proper place on the proper date.

4.Application by the promisor to appoint a place –[section 49]

When the promise is to be performed by the promisor without any kind of application from the promise and also the place of performance of the promise is not mentioned, then in this scenario, it is the duty of the promisor to give a notice to the promise to appoint the place for performance of the promise. If they promisor fails to give an intimation to the promise then the promise himself shall decide the place of performance.

5.Performance in manner on a time prescribed or sanctioned by the promise.-[section 50]

The performance of any promise may be made in any manner, or at any time which the promise prescribes or sanctions.

Reciprocal promises [section 2(f)]

Reciprocal promises are those promises which are performed simultaneously. For example, If a person visits a shop to buy some commodities, he has to pay the price of the commodities as consideration to receive the commodities from the shopkeeper. This exchange of the consideration and the commodities takes place simultaneously at the same place and time. The shopkeeper performs his promise to deliver me the commodities and the person performs his promise of giving the consideration.

There are three types of reciprocal promises :-

Mutual and independent- Where each party must perform their respective promises independently and their performances shall not be collateral or depend on each other. Each of the transactions shall be independent from each other.
Conditional and dependent- In this type of reciprocal promise there will be a condition for performance of the promise between the parties and the performance of the promises shall be dependent on each other if the prescribed condition is fulfilled.
Mutual and concurrent – In this case the promises of both the parties to the contract shall be performed simultaneously, that is why these types of reciprocal promises are called mutual and concurrent.

Rules regarding performance of reciprocal promises:

Promisor not bound to perform [section 51] – Promisor will not perform his promise unless and until the promise is ready and willing to perform his promise.
Order of performance [section 52] – Where the order and sequence in which the reciprocal promise is to be performed is expressly fixed in the terms of the contrat, then they must be performed in such prescribed manner as stated in the contract. If the order and sequence is not expressly stated then the reciprocal promise shall be performed in thr order which the nature of the transaction requires.
Effect of one party preventing another from performing the promise [section 53] – It may so happen, that one party prevents or restrains another party from performing his promise . in such a scenario, the party who is being prevented shall be entitled to compensation from the party who has prevented the performance.
Effect of default as to perform first [section 54] –This can be understood by he following example: – A hires B , an event manager to organize the wedding of A. B fails bring the orchestra that would have performed in the reception party. Now A will no pay B for what he promised to do but failed. Moreover B has to pay for the loss suffered by A for the arrangements made by him that are related to the orchestra.

Time as the essence of Contract [section 55]:

When time is of the essence- When time is essential in the contract then the promisor must perform the promise within the prescribed time and if he fails to do so the contract will be declared voidable.

Also, the promisee can demand compensation from the promisor if he fails to prform his promise.

The promise cannot claim for compensation from promisor when he accepts the promise after the expiry of the prescribed time in the contract. But he can claim compensation if he delivers to the promisor a notice regarding such intention at the time of accepting the promise after the expiry of prescribed time. [section 55 (para3)]

When time is not of the essence- When the time is not essential to the contract, then aat the failure of the promisor to perform his promise within the prescribed time, the contract shall not be voidable.

And the promise can claim for compensation from promisor if his failure brings him loss or sufferance. [section 55(para2)]

Contracts which need not to be performed :

When the performance becomes impossible. [section 56]
Novation: when the parties to the contract agrees to substitute or alter the contract with another.[section 62]
Remission : It means accepting a consideration of a lesser value or performance of a promise that does gives lesser favour to the promisee. For example, in case of insolvency of a debtor, a creditor gets a lesser sum compared to the actual sum of money he owed to the debtor.[section 63]

Relevant case laws relating to performance of contracts:

Shipton, Anderson & Co. v. Weil Bros and Co. [1912]

A Contract for 4,500 tons of wheat, 10% more or less (Effectively: 4050-4950 tons)was made .The seller delivered 55 lbs more than the upper limit of 4,950 tons. He did not claim payment for the extra 55 lbs.

The buyer rejected the whole cargo on the basis that it exceeded the contractual quantity.

The seller then made a distressed sale of the cargo at a loss and claimed the difference between that amount and what he would have sold it for had the buyer not wrongfully rejected. Held,The seller can recover the difference.

The principle of De minimis was applied. The excess quantity was deemed to be ‘trifling’ – it had no effect on the ‘substance of the contract’.

Since the seller did not claim payment for the excess, so it posed no burden on the buyer.

Startup v. Macdonald, [1843]

In this case the plaintiffs agreed to sell 10 tons of linseed oil to the defendant to be delivered “within the last fourteen days of March”. Delivery was tendered at 8:30 p.m. on March 31, a Saturday. The defendant refused to accept the goods owing to the lateness of the hour. Held, though the hour was unreasonable, the defendant could still take delivery before midnight.

Hitkari Motors v. Attar Singh, [1962]

In a contract for the purchase of a chassis for a diesel truck to be supplied within two months, time was held to be the essence of the contract.

Devendra v. Sonubai, [1971]

In this case the time fixed for the performance of a contract was extended twice and the object of the purchaser was also not a commercial undertaking. Held, time was not the essence of the contract.

Conclusion:

In conclusion, the performance of contracts under the Indian Contract Act, 1872, embodies the essence of legal commitments and mutual obligations. As we unfold the intricacies of the legal framework, it becomes evident that adherence to contractual terms, good faith dealings and timely fulfillment are pillars crucial to fostering trust and maintaining the integrity of business transactions. The Act serves not only as a regulatory guide but also serves as a safeguard for the parties involved, promoting fair dealings and ensuring smooth execution of contractual obligations.