Professional Documents
Culture Documents
Day 8
Day 8
Common-sense approach
• A contract gives rights and duties
• Contract may have two or more parties
• Perform or offer to perform or refuse or agree to terminate
• Who can perform – joint promises, joint performance, joint rights
• Time and place of performance
• Not possible to perform, force majeure or unlawful
• Breach of contract
Discharge or Termination of Contracts
A contract is said to be discharged or terminated when the rights and
obligations arising out of a contract are extinguished.
• Contracts may be discharged or terminated by any of the following
modes:
• Performance, i.e. by fulfilment of the duties undertaken by parties or by tender.
• Mutual consent or agreement.
• Lapse of time;
• Operation of law;
• Impossibility/illegality of performance; and
• Breach of contract.
Discharge by Performance
• When both the parties perform all the primary obligations both
express and implied which are set out under the contract.
• The obligation is considered performed only if the performance
complies with the standard of performance required.
• A failure to do so constitutes a breach.
• Standard of Performance requires precise and complete performance
of the obligation - description, fitness for purpose, satisfactory quality
etc. Exception could be the de minimis rule i.e. only microscopic
deviations.
• Actual performance or Attempted performance
Perform or Offer to Perform
• Sec. 37 states that 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 this Act, or of any other law.
• Promises bind the representatives of the promisors in case of the death of
such promisors before performance, unless a contrary intention appears from
the contract.
• Courts have held that the proviso to S.37 maintains that the promise binds
the representatives. In the case of Basanti Bai v. Prafulla Kumar Routral,
Cuttack High Court held that
• “if the contract is legal, and enforceable, then even if one of the parties to the contract
dies leaving no legal heir, the persons, who acquire interest over the subject- matter of
the contract through that deceased party would be bound by the contract and specific
performance can be enforced against such persons.”
Offer of performance (S.38)
• If the promisor ‘offers’ to perform his obligation under the contract to the
promisee, this offer is then termed ‘tender of performance’.
• This then, has to be accepted by the promisee, if the promisee doesn’t accept
the offer, then the promisor will not be responsible for any non-performance.
• It entitles him to sue the promisee for breach of contract.
• It can be said that a tender of performance is equivalent to performance. A
tender can be of two types:
• Tender of goods and services - discharge is completed when the goods are tendered
for acceptance in accordance with the terms of contact. If not accepted they are to be
taken back by the offeror and he is discharged from his liability.
• Tender of money - debtor tenders the money but it is refused, the debtor is not
discharged from the lability to pay back the money. Therefore, a tender of money can
never result in the discharge of debt
Essential conditions for a tender
• The offer should be unconditional; (38-1)
• If tender does not follow the original terms, it becomes conditional
• Offer to be made at a proper time and place; allow the party to have a
reasonable time for ascertaining that the person making the offer to him is
competent to enter into a contract; (38-2)
• Tender should mandatorily be made at the time/place stipulated under the
contract.
• Provide reasonable time to offeree, so that he can ascertain that the goods
offered are the same which bound the offeror under the contract. (38-3)
• Tender must be made to the proper person
• Tender made to one of several joint promisees has the same effect as a
tender to all of them:
Who can demand performance?
• Generally speaking, a stranger to contract cannot sue and the person
who can demand performance is the party to whom the promise is
made. But an assignee of the rights and benefits under a contract may
demand performance by the promiser
Effect of refusal of party to perform wholly
• Section 39 provides that 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 had
signified by words or conduct his acquiescence in its continuance.
By whom contracts must be performed
• 40. Person by whom promise is to be performed.—If it appears from the
nature of the case that it was the intention of the parties to any contract that
any promise contained in it should be performed by the promisor himself,
such promise must be performed by the promisor. In other cases, the
promisor or his representatives may employ a competent person to perform
it.
• A promises to pay B a sum of money. A may perform this promise, either by personally
paying the money to B or by causing it to be paid to B by another ; and, if A dies
before the time appointed for payment, his representatives must perform the
promise, or employ some proper person to do so.
• A promises to paint a picture for B. A must perform this promise personally.
• 41. Effect of accepting performance from third person.—When a promisee
accepts performance of the promise from a third person, he cannot
afterwards enforce it against the promisor.
Substituted performance
• Also known as ‘vicarious performance’. The promisor in the absence of
waiver cannot substitute for the agreed performance anything different,
even though the substituted performance might appear to be better than,
or at least equivalent to, the agreed performance.
• Sec. 40 and Sec. 41 deal with this aspect. If a personal performance was
intended then the contract has to be performed by the promisor himself.
It cannot be delegated to any other person.
• This is generally in cases where in the personal skill of the promisor is
required. The nature of promise is an indication whether the promisor has
to perform it personally or not.
• When a promisee accepts performance of the promise from a third
person, he cannot afterwards enforce it against the promisor. (41)
Joint Promises and their Performance
• Joint promisors must fulfil the promise. If any one of them dies, then the legal heirs of the
deceased person along with the other surviving promisors have to perform. (42)
• When two or more persons have made a joint promise, then, unless a contrary intention appears by the
contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly
with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must
fulfil the promise.
• When two or more persons make a joint promise, the promisee may, in the absence of express
agreement to the contrary, compel any one or more of such joint promisors to perform the whole
of the promise. (43)
• It allows action to be brought against any one of the joint promisors without impleading others as
defendants. If creditor sues one joint promisor, he is allowed to sue the others at a later point.
• Mukund Das Raja Bhagwan Das v. State Bank of Hyderabad - held that when a joint promise is made and there
is no express agreement to the contrary, the promisee may compel any one or more of the joint promisors to
perform the whole of the promise.
• Where two or more persons have 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 promisors so released from responsibility to the other joint promisor or joint promisors.
(44)
Devolution of Joint Rights
• A promise may be made to two or more persons. The promisees are called
joint promisees.
• 45. Devolution of joint rights.—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,
with 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 representatives
of all jointly
• X may give a promise to repay Rs. 1,000 given by Y and Z jointly. In such case, In the
absence of a contrary intention, the right to claim, performance rests with Y and Z.
If Y dies, V's representative jointly with Z may, demand performance. If Z also dies
the representatives of Y and Z may demand jointly performance from X
Time and place for performance
46. Time for performance of promise, when no application is to be made and no time is specified.—
Where, by the contract, a promisor is to perform his promise without application by the promisee,
and no time for performance is specified, the engagement must be performed within a reasonable
time.
The question “what is a reasonable time” is, in each particular case, a question of fact.
47. Time and place for performance of promise, where time is specified and no application to be
made.—When a promise is to be performed on a certain day, and the promisor has undertaken to
perform it without application by the promisee, the promisor may perform it at any time during the
usual hours of business on such day and at the place at which the promise ought to be performed.
A promises to deliver goods at B‟s warehouse on the first January. On that day A brings the goods to B‟s
warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise.
48. Application for performance on certain day to be at proper time and place.—When a promise is
to be performed on a certain day, and the promisor has not undertaken to perform it without
application by the promisee, it is the duty of the, promisee to apply for performance at a proper
place and within the usual hours of business.
The question “what is a proper time and place” is, in each particular case, a question of fact.
Time and place for performance
• 49. Place for performance of promise, where no application to be
made and no place fixed for performance.—When a promise is to be
performed without application by the promisee, and no place is fixed
for the performance of it, it is the duty of the promisor to apply to the
promisee to appoint a reasonable place for the performance of the
promise, and to perform it at such place.
• A undertakes to deliver a thousand maunds of jute to B on a fixed day. A must
apply to B to appoint a reasonable place for the purpose of receiving it, and
must deliver it to him at such place.
• 50. Performance in manner or at time prescribed or sanctioned by
promisee.—The performance of any promise may be made in any
manner, or at any time which the promisee prescribes or sanctions.
Tender to be made at a proper time and place
• When no time for performance is specified in the contract, it must be done within a
reasonable time. What is a reasonable time is in each particular case, a question of fact.
• If the date of performance is fixed, it must be performed during the usual business
hours of the day and at the place where such a performance ought to be performed.
• When a promise has to be performed within a certain time, it must be performed on
any day before the lapse of that time.
• If the promisor brings the goods after the business hours and they are not received, it
cannot be said that the promise has been performed.
• When a promise is to be performed and no place is fixed, it is the duty of the promisor
to apply to the promisee to appoint a reasonable place for the performance of the
promise, and to perform it at such a place.
• Where in a promissory note executed at Bangalore stated that it would be payable at
Bangalore or at any place in India. The payee settled in New Delhi and demanded
payment there.
Performance of reciprocal promises
• 51. Promisor not bound to perform, unless reciprocal promisee ready and willing to
perform.—When a contract consists of reciprocal promises to be simultaneously
performed, no promisor need perform his promise unless the promisee is ready and
willing to perform his reciprocal promise.
• 52. Order of performance of reciprocal promises.—Where the order in which
reciprocal promises are to be performed is expressly fixed by the contract, they shall
be performed in that order; and where the order is not expressly fixed by the contract,
they shall be performed in that order which the nature of the transaction requires.
• 53. Liability of party preventing event on which the contract is to take effect.—When
a contract contains 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 entitled to compensation 1from the other party for
any loss which he may sustain in consequence of the non-performance of the contract.
Which promise to be performed first (54)
• Effect of default as to that promise which should be first performed,
in contract consisting of reciprocal promises.
23. What considerations and objects are lawful, and what not.
Void agreements
24. Agreement void, if considerations and objects unlawful in part.
25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate
for something done, or is a promise to pay a debt barred by limitation law.
26. Agreement in restraint of marriage, void.
27. Agreement in restraint of trade, void.
Saving of agreement not to carry on business of which good-will is sold.
28. Agreements in restraint of legal proceeding void.
Saving of contract to refer to arbitration dispute that may arise.
Saving of contract to refer questions that have already arisen.
Saving of a guarantee agreement of a bank or a financial institution.
29. Agreements void for uncertainty.
30. Agreements by way of wager, void.
Exception in favour of certain prizes for horse-racing.
Section 294A of the Indian Penal Code not affected
CHAPTER III OF CONTINGENT CONTRACTS
Appropriation of payments
59. Application of payment where debt to be discharged is indicated.
60. Application of payment where debt to be discharged is not indicated.
61. Application of payment where neither party appropriates.
Contracts which need not be performed
62. Effect of novation, rescission, and alteration of contract.
63. Promise may dispense with or remit performance of promise.
64. Consequences of rescission of voidable contract.
65. Obligation of person who has received advantage under void agreement, or
contract that becomes void.
66. Mode of communicating or revoking rescission of voidable contract.
67. Effect of neglect of promisee to afford promisor reasonable facilities for
performance.
CHAPTER V OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT