CLASSES BY CA RUCHIKA AGRAWAL

BUSINESS LAW :: INDIAN CONTRACT ACT, 1872 :: UNIT 4 :: PERFORMANCE OF A CONTRACT

Performance of a Contract:

• “Performance of Contract” means fulfilment of obligations to the contract. According to Section 37 of the Act, the parties to a
contract must either perform, or offer to perform, their respective promises unless such performance is dispensed with or exc used
under the provisions of the Contract Act or of any other law.
• As per Section 37, performance may be actual or attempted.
• The following conditions must be satisfied for a valid tender / offer of performance or attempted performance:
(a) It must be unconditional.
(b) It must be made at proper time and place.
(c) There must be reasonable opportunity to examine goods.
(d) It must be for whole obligation.

Who can Perform a Contract:

• Sections 40, 41 and 42 of the Act contain provisions regarding who can perform a contract. The promise under a contract may be
performed, as the circumstances may permit, by the promisor himself, or by his agent or his legal representative.
• Contracts which involve the exercise of personal skill or diligence, or which are founded on personal confidence between the
parties must be performed by the promisor himself.
• Where personal consideration is not the foundation of a contract, the promisor or his representative may employ a competent
person to perform it.
• A contract which involves the use of personal skill or is founded on personal consideration comes to an end on the death of t he
promisor. As regards any other contract the legal representatives of the deceased promisor are bound to perform it unless a
contrary intention appears from the contract. But their liability under a contract is limited to the value of the property they inherit
from the deceased. (Para 2 of Section 37)
• When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.
That is, performance by a stranger, if accepted by the promisee, this results in discharging the promisor, although the latter has
neither authorised not ratified the act of the third party. (Section 41)
• When two or more persons have made a joint promise, then unless a contrary intention appears by the contract, all such persons
must jointly fulfil the promise. If any of them dies, his legal representatives must, jointly with the surviving promisors, fulfil the
promise. If all of them die, the legal representatives of all of them must fulfil the promise jointly. (Section 42 pertaining to joint
promisors)

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Succession vs. Assignment

• Succession and assignment are two different concepts. When the benefits of a contract are succeeded to by process of law, then
both burden and benefits attaching to the contract, devolve on the legal heir. But if the debts owed by his father exceed the value
of the estate inherited by the son then he would not be called upon to pay the excess. In other words, the liability of the s on will be
limited to the extent of the property inherited by him.
• In the matter of assignment, however the benefit of a contract can only be assigned but not the liabilities thereunder. Thus, a
debtor cannot relieve himself of his liability to creditor by assigning to someone else his obligation to repay the debt. On the other
hand, if a creditor assigns the benefit of a promise, he thereby entitles the assignee to realise the debt from the debtor

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Liability of Joint Promisor and Promisee

• Devolution of Joint Liability (Section 42): If two or more persons have made a joint promise, ordinarily all of them during their
life- time must jointly fulfil the promise. After death of any one of them, his legal representative jointly with the survivor or

Classes by CA Ruchika Agrawal I HNo 1212, Sector 6, Jhajjar I Contact 92157-56300

 survivors should do so. After the death of the last survivor the legal representatives of all the original co-promisors 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, compe l
any one or more of such joint promisors to perform the whole of the promise. (Section 43) In such a case, i.e., if one of the joint
promisors is made to perform the whole contract, he can call for a contribution from others.
• If any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the los s
arising from such default in equal shares.
• A surety can recover from his principal, payments made by the surety on behalf of the principal. (Explanation to Section 43)
• The effect of Section 43 is to make the liability in case of a joint contract, both joint & several.
• 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 responsibili ty to the
other joint promisor or promisors (Section 44).
• Section 45 deals with rights of joint promisees. 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 s urvivor or
survivors, and after the death of the last survivor, with the representatives of all jointly

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Time and Place of Performance (Sections 46 to 50)

Time of Performance:

It is duty of promisee to tell

Application by promisee is Contract to be performed as
date and time of
required per application
performance

Both Date and Time is Performance as mentioned

Time of Performance
specified in the contract in the contract

Date is specified but Time Performance at any time

Application by promisee is
is not specified in the during usula hours of
not required
contract business

Both Date and Time are not

Within reasonable time
specified in the contract

Place of Performance:

Application by promisee is It is duty of promisee to tell Contract to be performed as

required the place of performance per application

Place of Performance
Place is specified in the Performance as mentioned
contract in the contract
Application by promisee is
not required
It is the duty of the promisor
Place is not specified in the
to apply for appointment of
contract
reasonable place

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Classes by CA Ruchika Agrawal I HNo 1212, Sector 6, Jhajjar I Contact 92157-56300

 Performance of Reciprocal Promise (Sections 51 to 58)

• When a contract consists of reciprocal promises to be simultaneously performed, the promisor need not perform his promise
unless the promisee is ready and willing to perform his reciprocal promise. (Section 51)
• When the order of performance of the reciprocal promises 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 tra nsaction
requires. (Section 52)
• When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, t he
contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any
loss he may sustain in consequence of the non- performance of the contract. (Section 53)
• When the promises are reciprocal and dependent. If the promisor who has to perform his promise before the performance of the
other’s promise fails to perform it, he cannot claim performance of the other’s promise, and is also liable for compensation for his
non- performance. (Section 54)
• When a party to a contract promises to do certain thing at or before the specified time, and fails to do any such thing at or before
the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promise e, if the
intention of the parties was that time should be of essence of the contract. (Section 55)
• If it was not the intention of the parties that time should be of essence of the contract, the contract does not become voidable by the
failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss
occasioned to him by such failure.
• If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promis ee
accepts performance of such promise at any time other than agreed, the promisee cannot claim compensation for any loss
occasioned by the non-performance of the promise at the time agreed, unless, at the time of acceptance, he gives notice to the
promisor of his intention to do so.

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Agreement to do impossible things (Section 56)

• Agreement to do impossible things (Section 56): The impossibility of performance may be of the two types, namely (a) initial
impossibility, and (b) subsequent impossibility.
• When the parties agree upon doing of something which is obviously impossible in itself the agreement would be void.
• If the impossibility is known to the parties, it would be an agreement impossible of being performed and hence void.
• If the impossibility is unknown to the parties and are ignorant of the impossibility of performance, the contract is void.
• Where at the time of entering into a contract, the promisor alone knows about the impossibility of performance, or even if he does
not know though he should have known it with reasonable diligence, the promisee is entitled to claim compensation for any loss
he suffered on account of non-performance.
• Sometimes, the performance of a contract is quite possible when it is made. But subsequently, some event happens which renders
the performance impossible or unlawful. Such impossibility is called the subsequent or supervening. It is also called the post-
contractual impossibility. The effect of such impossibility is that it makes the contract void, and the parties are discharged f rom
further performance of the contract.
• Where persons reciprocally promise, first to do certain things which are legal and secondly, under specified circumstances, t o do
certain other things which are illegal, the first set of promises is a valid contract, but the second is a void agreement. (Section 57)
• In the case of the alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enf orced.
(Section 58)

Classes by CA Ruchika Agrawal I HNo 1212, Sector 6, Jhajjar I Contact 92157-56300