Law of contract

UNIT 4
PERFORMANCE AND
DISCHARGE OF CONTRACT
 Performance of contract
 Who must perform?
 Mode of performance
 Consequence of non-performance
 What is Performance?
The performance of a contract is the carrying
out of promises made by the parties. It can be
done in several ways, including through action
or inaction. For a contract to be valid, both
parties must perform their obligations as laid
out in the contract as agreed. If one party fails
to do so, it can lead to disputes and litigation.
• Types of Performance
• Three types of performance could occur in your
contract: actual, substantial, Breach of contract.
 Time and Place for Performance
• SEC. 46 – 50
• Sec 46 :Time for performance of promise where 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. Explanation – The question "what
is a reasonable time" is, in each particular case, a
question of fact.
• Sec 47 :Time and place for performance of promise where
time is specified and no application to be made
• When 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.
Illustration
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.
• Sec 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.
• Explanation – The question "what is a proper time
and place" is, in each particular case, a question of
fact.
• Sec 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.
• Illustration
• 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.
• Sec 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.
• For Example – the promisee may be willing to
accept goods instead of money. In such case,
the delivery of the goods is a proper
performance.
 Performance of reciprocal promise
sec 51 -55

• It means when some promises have to be performed simultaneously,

a Promisor is not bound to perform unless the reciprocal promisee is
ready and willing to perform.
• According to the Indian contract act 1872 when the proposal is
acknowledged through the parties is known as a promise. The
expression of ‘reciprocal promise’ is in Section 2(f) of this Act.
• Sec 2(f) = Promises which form the consideration or part of the
consideration for each other, are called reciprocal promises.
• When the parties to a harmony create common promises to do, these
come in the reciprocal promises. So, there is accountability on each
party to perform his promise.
• Example: P and Q promised to marry each other. These are
reciprocal promises
 Types of reciprocal promise-

• Mutual and Independent: It is a reciprocal promise, when

the promises which are exist; it performed by each party
autonomously, without waiting for the other party to
perform his promise.
• Conditional and Dependent (Sec. 54): conditional
reciprocal promise is a type of promise, when the
performance of single party depends on the preceding
performance of the party.
• Mutual and concurrent(Sec 51): mutual and concurrent
reciprocal promise is a sort of promise in which the
promises are to be performed concomitantly.
• Section 51:– Promisors are not bound to perform unless
the reciprocal promisee is ready and willing to perform.
• When a contract consists of reciprocal promises to be
simultaneously performed, a promisor need not perform
his promise if not the promisee is prepared and willing to
perform his reciprocal promise according to the contract.
• Promises have to be performed simultaneously
• Promisor is not bound unless the reciprocal promisee is
ready and willing to perform.
• Section 51 deals with two promises that are to be
performed at the same time, they are known as a mutual
and concurrent reciprocal promise.
• ILLUSTRATION:
• (a) A and B contract that A shall deliver goods to B to
be paid for by B on delivery.
• A need not deliver the goods, unless B is ready and
willing to pay for the goods on delivery.
• B need not pay for the goods, unless A is ready and
willing to deliver them on payment.
• Section 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;
• where the order is not expressly fixed by the contract, they
shall be performed in that order which the nature of the
transaction requires.
• Illustrations:
• A and B contract that A shall paint a picture of B at a fixed
price but firstly B has to made a payment of some amount .
So , the order of performance is expressly fixed in the contract.
• A and B contract that A shall build a house for B at a fixed
price. A’s promise to build the house must be performed
before B’s promise to pay for it.
• Section 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 viodable at the option of
the party so prevented: and
• he is entitled to compensation
• from the other party for any loss which he may
sustain in consequence of the non-
performance of the contract.
• Illustration:
• A and B contract that B shall execute certain work for
A for a thousand rupees.
• B is ready and willing to execute the work
accordingly,
• but A prevents him from doing so.
• The contract is voidable at the option of B; and,
• if he elects to rescind it, he is entitled to recover from
A compensation for any loss which he has incurred
by its non-performance.
• Section 54. Effect of default as to that promise which
should be performed, in contract consisting of reciprocal
promises.—
• When a contract consists of reciprocal promises,
• such that one of them cannot be performed, or
• that its performance cannot be claimed till the other has
been performed, and
• the promisor of the promise last mentioned fails to perform
it,
• Effect – A) such promisor cannot claim the performance of
the reciprocal promise, and
• B) must make compensation to the other party to the
contract for any loss which such other party may sustain by
the non-performance of the contract.
• Illustrations:
• A contracts with B to execute certain builder’s work for a
fixed price, B supplying the scaffolding and timber
necessary for the work. B refuses to furnish any scaffolding
or timber, and the work cannot be executed. A need not
execute the work, and B is bound to make compensation to
A for any loss caused to him by the non-performance of the
contract.
• Aaryan is a carpenter and Sara provides wood. They have a
contract that Sara will provide wood to Aaryan and then he
will make a table for her. If Sara refuses to provide the
wood, then she can not expect Aaryan to make the table. If
Aaryan faces any loss due to the fact Sara failed to provide
wood, then he can ask for compensation.
• Section 55. Effect of failure to perform at fixed time, in
contract in which time is essential.-
• When a party to a contract promises to do a certain thing at or
before a 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 promisee, if the
intention of the parties was that time should be of the essence
of the contract.
• Effect of such failure when time is not essential.--If it was
not the intention of the parties that time should be of the
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.
 Contd…
• Effect of acceptance of performance at time other than
that agreed upon.—
• If, in case of a contract voidable on account of the
promisor's failure to perform his promise at the time agreed,
• the promisee accepts performance of such promise at any
time other than that 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 such acceptance, he gives notice to the
promisor of his intention to do so.
• Illustration:
• If a tailor master promises her client that he will stitch
the dress for her wedding ceremony and there is no
date specified in the contract but it is understood that
the dress will be made before the wedding ceremony.
Here time becomes an essence in the contract and if
not followed it might lead to loss to the client.
Sec 56 Agreement to do impossible act
• 1. An agreement to do an act impossible in itself is void.
2. Contract to do an act afterwards becoming impossible or
unlawful.—A contract to do an act which, after the contract is
made, becomes impossible, or, by reason of some event which the
promisor could not prevent, unlawful, becomes void when the act
becomes impossible or unlawful.
• 3. Compensation for loss through non-performance of act known
to be impossible or unlawful.—Where one person has promised to
do something which he knew, or, with reasonable diligence, might
have known, and which the promisee did not know, to be
impossible or unlawful, such promisor must make compensation to
such promisee for any loss which such promisee sustains through
the nonperformance of the promise.
• There are 3 Ingredients of section 56:
• It states that an agreement to do an act that is unlikely in
itself is void.
• It renders a contract to perform an act invalid under the
following circumstances: When the act becomes impossible
to perform after the contract is made, or when the act
becomes unconstitutional due to incidents that the
promisor could not avoid.
• Where a person has agreed to do something that he knew,
or should have known with due diligence, was impossible or
unlawful, and which the promisee did not know was
impossible or unlawful, the promisor would be held liable to
compensate the other party for any damages incurred as a
result of the promise’s non-performance.
 Difference between initial and subsequent impossibility

• A contract to do an act which is impossible or becomes impossible is void

as per section 56 of Indian Contract Act, 1872.
• Initial impossibility
• The term “initial impossibility” refers to situations in which the contract
was impossible to fulfil from the start. As per first paragraph of Section 56
the impossibility must be pre-existing in fact or in law.
• For example, if a man who is already married enters into a contract with a
woman and promises to marry her, knowing that he cannot have two
wives at the same time, then that contract would be void.
• Subsequent impossibility
When a contract is made between the parties, it is often very possible to
carry it out. However, something comes afterwards that makes it difficult
or illegal to carry out the task. In this case, the contract is considered void.
This case is called Post-contractual or Subsequent Impossibility.
• Some examples of such impossibility are: When one of the parties
to a marriage arrangement becomes insane, or when a contract is
made for the import of merchandise and the import is then
prohibited by the government, or when a musician contracts to
sing and becomes too ill to do so, the contract becomes void in
any case.
Doctrine of Frustration
When the circumstances are out of the control of the parties and
when they render the contract to be impossible to fulfill, such a
contract is said to be frustrated. Frustration is an umbrella term
which covers all the possible circumstances which might lead to
fulfillment of the contractual obligation to be impossible or
impractical.
It is explicitly incorporated in Indian law under Section 56 of The
Indian Contract Act, 1872.
The first instance of doctrine of frustration can be traced back to
• The first instance of doctrine of frustration can be
traced back to 1863 in the case of Taylor vs. Cardwell.
• An opera house was destroyed due to an accidental
fire and consequently was not able to hold the
performance of the opera, the plaintiff (a buyer of the
ticket for the opera) sued the defendant for breach of
contract. However, it was held that the defendant is
not liable to pay the damages as the very object on
which the entire fulfillment of the contract was based
was destroyed by no fault of either party hence it was
held that the parties were discharged of their
contractual obligations.
• Sushila Devi v. Hari Singh
• This case is another case which established that impossibility
under Section 56 does not mean just literal impossibility but
practical impossibility as well. The facts of the case are as
follows: The appellants were owners of a village and they
leased a property in the village to the respondent for a
period of three years starting from Jan, 1947 but as the India
and Pakistan partition was going on the village became a part
of Pakistan and it was not possible for the respondent to use
the land due to communal reasons. The appellants argue
that it was self-imposed frustration but it was held that if the
fulfillment of the contract becomes practically impossible it
would be deemed to be frustrated under section 56 of the
Indian Contract Act.
 Illustrations
• (a) A agrees with B to discover treasure by magic. The
agreement is void:
(b) A and B contract to marry each other. Before the time fixed
for the marriage,. A goes mad. The contract becomes void.
• (c) A contracts to take in cargo for B at a foreign port. A's
Government afterwards declares war against the country in
which the port is situated. The contract becomes void when
war is declared.
(d) A contracts to act at a theatre for six months in
consideration of a sum paid in advance by B. On several
occasions A is too ill to act. The contract to act on those
occasions becomes void.
Sec 57 Reciprocal promise to do things legal, and also other things illegal

• Where persons reciprocally promise, firstly, to do certain things

which are legal, and, secondly, under specified circumstances, to
do certain other things which are illegal, the first set of promises
is a contract, but the second is a void agreement.
Illustration
A and B agree that A shall sell B a house for 10,000 rupees, but
that, if B uses it as a gambling house, he shall pay A 50,000
rupees for it.
The first set of reciprocal promises, namely, to sell the house and
to pay 10,000 rupees for it, is a contract.
The second set is for an unlawful object, namely, that B may use
the house as a gambling house, and is a void agreement.