Performance of Contract

Fulfillment of legal obligation created by a contract. Chapter IV

Performance by whom?
By the parties Promisor- Sec.40 Representatives- A promises to deliver goods to B on a certain day on payment of Rs 1,000. A dies before that day. As representaives are bound to deliver the goods to B, and B is bound to pay Rs.1,000 to As representaive. The agent Third person

Cont.
Performance of contracts involving personal service

Actual and attempted performance

Actual performance Attempted Performance or tender

Essentials of a valid Tender

Unconditional At proper time At proper place Provide a reasonable opportunity to promisee. For entire obligation Made to the proper person

Discharge of Contracts
When the rights and the obligations created by a contract come to an end, the contract is said to be discharged or terminated. Termination of the contractual relationship b/w the parties.

Modes of discharge
By performance- actual and attempted By impossibility of performance By agreement. By breach of contract By operation of law- death, merger,insolvency By lapse of time.

 A thing may be destroyed in the same manner in which it is constituted.

By agreement.
Novation- Substituting a new contract for the existing one.-Sec.42 Alteration- terms are altered by mutual consent Rescission- when all or some of the terms of contract are cancelled. Remission- acceptance of a lesser performance than that required for the discharge of the contract Accord and satisfaction Waiver-mutual abandonment of rights. Merger- inferior right merged with superior right.

Accord and satisfaction English Law-Promise to accept less than what is due under an existing contract, is unenforceable because it is not supported by consideration. But where a lesser sum is actually paid, then what is due under the existing contract, the new contract is called accord and actual payment is called satisfaction

Discharge by breach of contract

Breaking the obligation which a contract imposes Parties to a contract are expected to perform their respective promises. If a party refuses to perform without lawful excuse

Cont.
When performance is actually due or While performing the contract, or Prior to the date of performance, called anticipatory breach

Cont.
A agrees to deliver to B, 5 bags of wheat on 1st January. A fails to deliver on 1st January. There is a breach of contract. A promises to marry B on Ist January, A marries C.- anticipatory breach by impossible. Hochter v De La Tour (1853) Avery v Bowden

By operation of law Death Merger Insolvency Unauthorized alteration of terms of contract Rights and liabilities vesting in the same person

Discharge by impossibility of performance

Initial impossibility Subsequent (supervening) Impossibility

Initial Impossibility
At the time of formation of contract May or may not known to the parties A agrees to pay B Rs. 1,000/ and promises to discover treasure by magic. The agreement is void on account of impossibility known to the parties at the time formation of the contract. A agrees to sell his house to B for Rs.50,000. Unknown to the parties, the house had been burnt before the formation of the contract

Subsequent Impossibility
When contract entered into it was capable of being performed, but some subsequent event renders the performance impossible. In such a case also, the contract becomes void. A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void.

Doctrine of supervening impossibility

Destruction of the subject matter of the contract Failure of ultimate purpose Death or personal incapacity Change of law Declaration of war Non-existence or non-occurrence of particular state of things frustration

 Destruction of the subject matter of the contract Taylor v Caldwell- one party agreed to allow other the use of their hall for holding music concerts (performance). Before the first day of concerts, the hall was destroyed by fire without the fault of either party. Held contract had become void

 Failure of ultimate purpose Krell v Henery

Krell v Henry 1903

The plaintiff had agreed to let a room to the defendant for viewing the coronation procession of King Edward VII. The procession was cancelled owing to the Kings illness. The plaintiff brought an action against the defendant for the recovery of rent. The court held that the cancellation of the procession discharged the parties as the existence of the procession was the basis of the contract.

James Scott.&Sons v.Deisel 1922

A tiger had escaped from a travelling (exhibition van) menagerie. Out of fear one milk girl failed to deliver the milk.

Destruction of subject-matter of contract

C let a music hall to T for a series of concerts for certain days. The hall was accidently brunt down before the date of first concert. (contract was void) Taylor v Caldwell 1863

Cases not covered by supervening impossibility

As a rule, impossibility of performance is no excuse from performance. Unless its performance has become absolutely impossible due to circumstances beyond his control.

Not an excuse
Difficulty in performance Commercial impossibility Failure of a third person relied upon by the promisor Strikes, lock outs, riots, civil disturbances Partial Impossibility-failure of one of the objects

Satyabrata Ghose v Mugneeram Bangur & Co. 1953

In 1940 a development scheme of an extensive area of land started by the defendant. Entered into contract for the sale of plot of land The transfer was to be completed soon after the construction of roads. Area is acquired by the Government fro military purpose in 1941

Decision and reason

No The events which have happened here cannot be said to have made the performance of the contract impossible and the contract has not been frustrated at all.

Case Study
A contracts to marry B in two years time. Shortly afterwards he breaks off the engagement without Bs consent. B writes repeatedly begging him to adhere to the contract. Just before the expiry of two years, a change in law makes it illegal for A to marry B. on the expiry of two years, B sues for the breach of the contract. Will she succeed?

Decision & reason

Decision- No B will not succeed because when she files the suit for breach, the contract has already been discharged by subsequent illegality and A is entitled to advantage of that.

Abdul Aziz vs. Masum Ali, (1914).

The secretary of a Mosque Committee filed a suit to enforce a promise which the promisor had made to subscribe Rs. 500 to the rebuilding of a mosque.

Decision and reason

Held: the promise was not enforceable because there was no consideration in the sense of benefit, as the person who made the promise gained nothing in return for the promise made, and the secretary of the Committee to whom the promise was made, suffered no detriment as nothing had been done to carry out the repairs. Hence the suit was dismissed.

Kedar Nath vs. Gauri Mohamed, (1886)

The facts of this case were almost similar to those of the above case, but the secretary in this case incurred a liability on the strength of the promise.

Decision and Reason

Held: The amount could be recovered, as the promise resulted in a sufficient detriment to the secretary. The promise could, however, be enforced only to the extent of the liability (detriment) incurred by the secretary. In this case, the promise, even though it was gratuitous, became enforceable because on the faith of the promise secretary had incurred a detriment.

Durga Prasad vs. Baldeo, (1880)

B spent some money on the improvement of a market at the desire of the Collector of the district. In consideration of this D who was using the market promised to pay some money to B. Held: The agreement was void being without consideration as it had not moved at the desire of D.

4.Chinnaya vs. Ramayya, (1882)

An old lady, by a deed of gift, made over certain property to her daughter D, under the direction that she should pay her aunt, P (sister of the old lady), a certain sum of money annually. The same day D entered into an agreement with P to pay her the agreed amount. Later, D refused to pay the amount on the plea that no consideration had moved from P to D.

Decision and reason

Held: P was entitled to maintain suit as consideration had moved from the old lady, sister of P, to the daughter, D.

Debi Radha Rani vs. Ram Dass, (1941)

D is ready to sue her husband for maintenance allowance. On husbands agreeing to pay her a monthly allowance by way of maintenance, she forbears to sue. Held: The wifes forbearance to sue amount to consideration for the husbands agreement for payment of maintenance allowance.

Ramchandra Chintaman vs. Kalu Raju, (1877)

There was a promise to pay to the Vakil an additional sum if the suit was successful.

Decision and reason

The promise was void for want of consideration. The Vakil was under a preexisting contractual obligation to render the best of his services under the original contract.

Dunlop Pneumatic Tyres Co. Ltd. Vs. Selfridge & Co. Ltd., (1915)
S bought tyres from the Dunlop Rubber Co. & sold them to D, a sub-dealer, who agreed with S not to sell these tyres below Dunlops list price D sold two tyres at less than the list price and thereupon the Dunlop Co. Sued him for the breach. Held: The Dunlop Co. Could not maintain the suit as it was stranger to the contract.

Capacity to Contract
Mohiri Bibi vs. Dharmodas Ghose, (1903) In this case, a minor mortgaged his house in favour of a money-lender to secure a loan of Rs. 20,000 out of which the mortgagee (the money-lender) paid the minor a sum of Rs. 8,000. Subsequently the minor sued for setting aside the mortgage, stating that he was underage when he executed the mortgage.

Decision and reason

Held: The mortgage was void and, therefore, it was cancelled. Further the money-lenders request for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted.

Mistake of Law
Solle vs. Butcher, (1950) Ignorantia juris non excusat, i.e., ignorance of law is no excuse, is a well settled rule of law. A party cannot be allowed to get any relief on the ground that it had done a particular act in ignorance of law. A mistake of law is, therefore, no excuse, and the contract cannot be avoided.

Mistake as to the Subject-Matter

Couturier vs. Hastie, (1856) A agreed to sell a cargo of corn supposed at the time of contract to be in transit from Salonica to the United Kingdom. Unknown to the parties, the corn had become fermented and had already been sold by the master of the ship at Tunis. Held: The agreement was void and the buyer was not liable for the price.

Mistake as to the Identity of the Subject-Matter

Raffles vs. Wichelhaus, (1864) W agreed to buy from R a cargo of cotton to arrive ex-peerless from Bombay. There were two ships of that name sailing from Bombay, one sailing in October and the other in December. W meant the former ship but R meant the latter contract.

Case
A manufacturer of pens distributing his pens free to all the visitors to an exhibition. The pens were defective and leaking. The pens spoiled the clothes of many visitors. Sweta is one of the person whose clothes were spoilt due to one of the defective pens. Is she is a consumer? Where she can file the case? Give reasons.

Frustration
Common object of a contract can no longer be carried out, the court may declare the contract to be at an end. Lex no cogit ad-impossibilla -law does not compel the impossible.

Cont.
An event occurs which the parties could not contemplate (think) when they made out the contract The event is one for which neither party is responsible.- act of God The contract if performed, would be something entirely different from the bargain made by the parties.

Remedies for Breach of Contract

When a party breaks the contract by refusing to perform his promise- breach of contract takes place. Several courses of action which the injured or aggrieved party may pursue The party who is not in breach

Cont.
Suit for Damages- monetary compensation awarded to the injured party for the loss occasioned to him. Suit for Rescission- (rescind- cancel, repeal)

Types of Damages
Ordinary, General or Compensatory Special DamagesVindictive, Exemplary or Punitive Damages Nominal damages

Vindictive, Exemplary or Punitive Damages

Not given by way of compensation for loss suffered, but are given by way of punishment for wrong inflicted. Breach of promise to marry On bankers refusal to honors the cheque

Nominal Damages
These damages are of small amount and are awarded simply to recognize the right of the injured party to claim damages

Simpson v. London & North Railway Company 1876

S, was in the habit of exhibiting samples of his equipment at agricultural exhibitions. He delivered his samples to the railway company for carriage to a show. On the delivery he wrote must reach on Monday. Due to the negligence on the part of the railway company, the samples reached only after the exhibition was over.

Cont.
S, claimed damages for his loss of profits at the exhibition. Held company was liable as it had the knowledge of the special circumstances, that the equipment were to be exhibited at the exhibition, and must have contemplated that a delay in delivery might result in such loss.

Hadley v. Baxendale, (1854).

A shaft in Hadleys (P) mill broke rendering the mill inoperable. Hadley hired Baxendale (D) to transport the broken mill shaft to an engineer. Hadley told Baxendale that the shaft must be sent immediately and Baxendale promised to deliver it the next day. Baxendale did not know that the mill would be inoperable until the new shaft arrived. Baxendale was negligent and did not transport the shaft as promised, causing the mill to remain shut down for an additional five days.

Cont.
The plaintiff filled a suit against the defendant claiming damages for loss of profits because of mill due to nonavailability of the crank shaft.

Issue
What is the amount of damages to which an injured party is entitled for breach of contract?

Decision
An injured party may recover those damages reasonably considered to arise naturally from a breach of contract, or those damages within the reasonable contemplation of the parties at the time of contracting.

Cont.
The court held that if there were special circumstances under which the contract had been made, and these circumstances were known to both parties at the time they made the contract, then any breach of the contract would result in damages that would naturally flow from those special circumstances.

Cont.
Damages for special circumstances are assessed against a party only when they were reasonably within the contemplation of both parties as a probable consequence of a breach. Baxendale did not know that the mill was shut down and would remain closed until the new shaft arrived.