DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY,AP,INDIA

PROJECT TITLE
ECONOMIC AND LEGAL ANALYSIS ON CAKES

SUBJECT
ECONOMICS

NAME OF THE FACULTY

PROF. ABHISHEK SINHA

NAME OF THE STUDENT

SAHAL SHAJAHAN

ROLL NO: 2017007

SEMESTER: II

SECTION: B

ACKNOWLEDGEMENT
I am highly indebted to my Hon’ble contracts Professor, Sunitha ma’am for giving
me a wonderful opportunity to work on the topic: “ PERFORMANCE OF
CONTRACTS”, and it is because of his excellent knowledge, experience and
guidance, this project is made with great interest and effort. I would also like to
thank my seniors who have guided my novice knowledge of doing research on
such significant topic. I would also take this as an opportunity to thank my parents
for their support at all times. I have no words to express my gratitude to each and
every person who have guided and suggested me while conducting my research
work.

INTRODUCTION:-
 A Contract puts a legitimate commitment upon the contracting gatherings to play out their shared
guarantees, and it carries on until the release or end of the Contract. The most regular and normal
method of releasing an agreement is to perform it. An individual who plays out a Contract as per its
terms is released from any further commitments. When in doubt, such Performance qualifies him for get
the other party's Performance.

Careful and complete Performance by both the gatherings puts a conclusion to the agreement. In
anticipating accurate execution, the courts imply that, execution must match legally binding
commitments. In requiring an agreement to be finished, the law is simply saying that any work
embraced must be done as far as possible of the commitments.

A Contract ought to be performed at the time determined and at the spot settled upon. At the point
when this has been cultivated, the gatherings are released naturally and the agreement is released
inevitably. There are, be that as it may, numerous different manners by which a release might be
realized. For instance, it might result from a reason for non-execution. In specific cases endeavored
execution may likewise work as a substitute for real Performance, and can result in total Discharge of
the Contract.

The term 'Execution of Contract' implies that both, the Promisor, and the Promisee have satisfied their
particular commitments, which the agreement set upon them. For example, A visits a stationery shop to
purchase an adding machine. The retailer conveys the number cruncher and A pays the cost. The
Contract is said to have been released by Mutual Performance.

Promises tie the agents of the promisor in the event of the passing of the last before execution, except if
an opposite aim shows up in the agreement.

In this manner, it is the essential obligation of each contracting gathering to either perform or offer to
play out its guarantee. For execution to be viable, the courts anticipate that it should be accurate and
complete, i.e., the equivalent must match the legally binding commitments. Be that as it may, where
under the arrangements of the Contract Act or some other law, the execution can be abstained from or
pardoned, a gathering is acquitted from such an obligation.

Essential Elements of Valid Contract:

⦁ Performance of contract should be unconditional

⦁ It should be performed by the promisor or by his/her representative

⦁ It should be performed at a proper time specific in the agreement or within reasonable time

⦁ It should be performed at a place specified in the agreement

⦁ The promisor must have reasonable opportunity to ascertain (a) the thing offered (b)whether the
performance of the whole or of a part
PERFORMANCE OF A CONTRACT:-
Performance, in law, demonstration of doing what is required by an agreement. The impact of fruitful
execution is to release the individual bound to do the demonstration from any future legally binding
obligation.

Each gathering to the agreement will undoubtedly perform guarantees as per the stipulated terms. In
the event of any debate with regards to the importance of a guarantee, the courts have typically chosen
that an individual must perform it as the other party sensibly comprehended it to be. In this manner, an
inclination for the privileges of the person who is to get the advantage of the guarantee is built up.

Endeavors to set up rigid standards about sensible elucidations of guarantees are currently debilitated.
In spite of the fact that at one time an individual would be held to the strict significance of the
agreement arrangements expressing a guarantee, the necessity presently is to play out the genuine
importance and plan of the agreement, which may not compare with the fine print.

An agreement being an understanding enforceable by law, makes a lawful commitment, which subsists
until release. Execution of the guarantee or guarantees staying to be performed is the chief and most
normal method of release. This clarifies who must play out his commitments , what ought to be the
method of execution , and what will be the results of non execution. The gatherings to an agreement
should either perform, or offer to play out, their individual guarantees except if such execution is
abstained from or pardoned under the arrangements of the Contract Act or of some other law.
Guarantees tie the delegates of the promisor in the event of death of such promisor before execution,
except if an opposite goal shows up from the agreement (Section 37).Thus, you should take note of that
it is particularly essential for a gathering who needs to uphold the guarantee made to him, to play out
his guarantee for himself or offer to play out his guarantee. Simply after that he can request that the
other party do his guarantee. This is the standard which is cherished in Section 37. In this way, it is the
essential obligation of each gathering to an agreement to either perform or offer to play out his
guarantee. He is pardoned from such an obligation just when under an arrangement of law or a
demonstration of the other party to the agreement, the execution can be abstained from or pardoned.

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.
1. Promisor himself : If there is something in the contract to show that it was the intention of the parties
that the promise should be performed by the promisor himself, such promise must be performed by the
promisor. This means 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.

2. Agent : Where personal consideration is not the foundation of a contract, the promisor or his
representative may employ a competent person to perform it.

3. Representatives : A contract which involves the use of personal skill or is founded on personal
consideration comes to an end on the death of the 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. (Section 37, para 2). But their liability under a contract is limited to the value of the
property they inherit from the deceased.

4. Third persons : 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, accepted by the
promisee, produces the result of discharging the promisor, although the latter has neither authorised
not ratified the act of the third party.

Example : A received certain goods from B promising to pay Rs. 10,000/-. Later on, A expressed his
inability to make payment. C, who is known to A, pays Rs, 6,000/- to B on behalf of A. However, A was
not aware of the payment. Now B is intending to sue A for the amount of Rs. 10,000/- whether he can
do so? Advice. As per Section 41 of the Indian Contract Act, 1872, 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, accepted by the promisee, produces the result of discharging the
promisor, although the latter has neither authorised nor ratified the act of the third party. Therefore, in
the present instance, B can sue only for the balance amount i.e., Rs. 4,000/- and not for the whole
amount.

5. Joint promisors : When two or more persons have made a joint promise, then unless a contrary
intention appears from the contract, all such persons must jointly fulfill the promise. If any of them dies,
his legal representatives must, jointly with the surviving promisors, fulfill the promise. If all of them die,
the legal representatives of all of them must fulfil the promise jointly. (Sec 42)

Examples : 1. A promises to B to pay Rs. 1,000 on delivery of certain goods. A may perform this promise
either himself or causing someone else to pay the money to B. If A dies before the time appointed for
payment, his representative must pay the money or employ some other person to pay the money. If B
dies before the time appointed for the delivery of goods, B’s representative shall be bound to deliver the
goods to A and A is bound to pay Rs. 1,000 to B’s representative.

TIME AND PLACE FOR PERFORMANCE OF THE PROMISE

The law on the subject is contained in Section 46 to 50 provisions whereof are summarised below :
(i) If no time is specified in a contract for the performance of the promise, the promise must be
performed within a reasonable time. The expression reasonable time is to be interpreted having regard
to the facts and circumstances of a particular case.

(ii) If a promise is to be performed on a specified date but the hour is not mentioned, the promisor may
perform it at any time during the usual hours of business, on such day. For example, if the delivery of
goods is offered say after sunset, the promisee may refuse to accept delivery, for the usual business
hours are, between 10 a.m. and 5 p.m. Moreover, the delivery must be made at the usual place of
business.

(iii) When no place is fixed for the performance of a promise, it is the duty of the promisor to ask the
promisee to fix a reasonable place for the performance of the promise. The foregoing rules regarding
the time and place for the performance of promise apply, only when the promisor undertakes to
perform the promise without an application being made by the promisee.

(iv) Where the promisor has not undertaken to perform the promise without an application by the
promisee, and the promise is to be performed on a certain day it is the duty of the promisee to apply for
performance at a proper place and within the usual hours of business.

The Standard of Performance

The general rule is that the performance obligation is strict so that the contractual obligation is precisely
and completely performed. Some examples of strict obligations are the obligations as to description,
fitness for purpose, satisfactory quality etc. The only exception to this is the de minimis rule i.e. only
microscopic deviations. A legal term meaning very small to be meaningful or taken into consideration
i.e. immaterial. As a matter of policy, the law does not encourage parties to bring legal actions for
technical breaches of rules or agreements where the impact of the breach is negligible.

The term de minimis is taken from a longer Latin phrase which translates into “the law does not concern
itself with trifles.” De minimis exceptions are commonly included in contracts to limit the application of
covenants or other restrictions so that they do not apply in circumstances where the failure to observe
the restriction has negligible impact. If the rule of de minimis is not applicable in a particular situation
then it constitutes a breach. Courts have applied the rule of de minimis often to ignore the minor
transgressions of the law. As to what is a case deserving this benefit of the aforesaid rule is a question of
fact to be decided in each case for which no rigid and exhaustive law can be laid down. The court ignores
the shortfall and extends the benefit.

The maxim de minimis non curat lex means that the law does not govern trifles; law ignores insignificant
details. Where trifling irregularities or even infractions of the strict letter of the law are brought under
the notice of the court, this maxim is of frequent use. The law permits the qualification implied in the
maxim, where there are irregularities of very slight consequence, the court does not intend that the
imposition of penalties should be inflexibly severe. If the deviation were a minor trifle, which if,
continued in practice, would weigh little or nothing on the public interest, it might properly be
overlooked.
Specific performance of a contract
Specific performance is equitable relief, given by the court to enforce against a defendant, the duty of
doing what he agreed by contract to do. Thus, the remedy of specific performance is in contrast with the
remedy by way of damages for breach of contract, which gives pecuniary compensation for failure to
carry out the terms of the contract. Damages and specific performance are both, remedies available
upon breach of obligations by a party to the contract; the former is a ‘substitutional’ remedy, and the
latter a ‘specific’ remedy. The remedy of specific performance is granted by way of exception. The
plaintiff seeking this remedy must first satisfy the court that the normal remedy of damages is
inadequate.

TYPES OF CONTRACTS:-
There are various types of contract, one such type are contacts based on their performance. The basis
for this type is whether the contract is performed or still to be performed. Accordingly, the two types
are known as executed contracts and executory contracts.

Contracts which need not be performed

⦁ If the parties to a contract agree to substitute a new contract for it or to rescind or alter it, the
original contract need not be performed. The process to substitute an existing contract by a new
contract is known as Novation.

⦁ If a voidable contract is rescinded, the other party need not perform his part.

⦁ If the promisee neglects or refuses to afford the promisor reasonable facilities for the performance of
his promise, the promisor is excused by such neglect or refusal as to any non- performance caused
thereby.

⦁ Further, where the consideration and object of a contract are unlawful and where the performance is
unlawful or illegal, the contract need not be performed.

⦁ Under this heading, we shall discuss the principles of Novation, Rescission and Alteration and
Remission. The law is contained in Section 62 to 67 of the Contract Act. Section 62 is reproduced below :
“If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original
contract need not be performed”.

⦁ (a) Effect of novation : The parties to a contract may substitute a new contract for the old. If they do
so, it will be a case of novation. On novation, the old contract is discharged and consequently it need not
be performed. Thus it is a case where there being a contract in existence some new contract is
substituted for it either between the same parties or between different parties the consideration
mutually being the discharge of old contract. Novation can take place only by mutual agreement
between the parties. For example, A owes B Rs. 100. A, B and C agree that C will pay B and he will accept
Rs. 100 from C in lieu of the sum due from A. A’s liability thereby shall come to an end, and the old
contract between A and B will be substituted by the new contract between B and C.
(b) Effect of rescission : A contract is also discharged by rescission. When the parties to a contract agree
to rescind it, the contract need not be performed. In the case of rescission, only the old contract is
cancelled and no new contract comes to exist in its place. It is needless to point out that novation also
involves rescission. Both in novation and in rescission, the contract is discharged by mutual agreement.

(c) Effect of alteration of contract : As in the case of novation and rescission so also in a case where the
parties to a contract agree to alter it, the original contract is rescinded, with the result that it need not
be performed. In other words, a contract is also discharged by alteration. The terms of contract may be
so altered by mutual agreement that the alteration may have the effect of substituting a new contract
for the old one. In other words, the distinction between novation and alteration is very slender.
Novation and alteration : The law pertaining to novation and alteration is contained in Section 62 to 67
of the Indian Contract Act. In both these cases the original contract need not be performed. Still there is
a difference between these two.

⦁ 1. Novation means substitution of an existing contract with a new one. Novation may be made by
changing in the terms of the contract or there may be a change in the contracting parties. But in case of
alteration the terms of the contract may be altered by mutual agreement by the contracting parties but
the parties to the contract will remain the same.

⦁ 2. In case of novation there is altogether a substitution of new contract in place of the old contract.
But in case of alteration it is not essential to substitute a new contract in place of the old contract. In
alteration may be a change in some of the terms and conditions of the original agreement.

(d) Promisee may waive or remit performance of promise : The law on the subject is contained in
Section 63 reproduced below : “Every promisee may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may extend the time for such performance or may accept
instead of its any satisfaction which he thinks fit”. In other words, a contract may be discharged by
remission. Thus where A, a party to a contract, has done all that he was required to do under the
contract and the time for the other party, X, to perform his promise has not yet arrived, a bare waiver of
his claim by A would be an effectual discharge to X. It should be noted that novation, rescission or
alteration cannot take place without consideration. But in the case of partial or complete remission, no
consideration is required. The promisee can dispense with performance without consideration and
without a new agreement. The promisee under the Act can also extend the time for the performance of
the promise. Time can be extended only for the benefit of the promisor and not for the benefit of the
promisee. Similarly, a promisee can accept instead of the stipulated performance, any satisfaction which
he thinks fit. For instance, A sells his horse to B who promises to pay Rs. 500 for the horse. A may accept,
instead of Rs. 500 a necklace as the price of the horse.

EFFECT OF FAILURE TO PERFORM AT A TIME FIXED IN A CONTRACT IN

WHICH TIME IS ESSENTIAL: -
The law on the subject is contained in Section 55 which is reproduced below : When a party to a
contract promises to do certain thing at or before the specified time, or certain things 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 promisee, if the intention of the
parties was that time should be of essence of the contract. 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. But ordinarily, from an examination of a
contract, it is difficult to ascertain whether time is intended to be of essence by the parties at the time of
its formation. In every case, the intention is to be gathered from the terms of the contract. In a
mercantile contract, the general rule in this regard is that stipulations as to time, except as to time for
payment of money, are essential conditions, since punctuality is of the utmost importance in the
business world. Thus, on a sale of goods that are notoriously subject to rapid fluctuation of market price,
e.g. gold, silver, shares having a ready market the time of delivery is of the essence of the contract. But
in mortgage bond, the time fixed for the repayment of the mortgage money can by no means be
regarded as an essential condition; consequently, the mortgaged property can be regained even after
the due date. Similarly, in a contract to sell land any clause limiting the time of completion is not strictly
enforced. But even in a contract for the sale of land, time can be made the essence of the contract by
express words. Contract cannot be avoided where time is not essential : Where time is not essential, the
contract cannot be avoided on the ground that the time for performance has expired: the promisee is
only entitled to compensation from the promisor for any loss caused by the delay. But it must be
remembered that even where time is not essential it must be performed within a reasonable time;
otherwise it becomes voidable at the option of the promisee. Effect of acceptance of performance out
of time : Even where time is essential the promisee may waive his right to repudiate the contract, when
the promisor fails to perform the promise within the stipulated time. In that case, he may accept
performance at any time other than that agreed. In such an event, he cannot claim compensation for
any loss occasioned by the nonperformance of the promise at the time agreed, unless at the time of
acceptance of the performance he has given a notice to the promisor of his intention to claim
compensation.

IMPOSSIBILITY OF PERFORMANCE
Section 56 contemplates various circumstances under which agreement may be void, since it is
impossible to carry it out. The Section is reproduced below : “An agreement to do an act impossible in
itself is void. 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.” (1) Impossibility existing at the time of contract : When the parties
agree upon doing of something which is obviously impossible in itself the agreement would be void.
Impossible in itself means impossible in the nature of things. The fact of impossibility may be and may
not be known to the parties. (i) If known to the parties : It would be observed that an agreement
constituted, quite unkno wn to the parties, may be impossible of being performed and hence void. For
example, B promises to pay a sum of Rs. 5,000 if he is able to swim across the Indian Ocean from
Bombay to Aden within a week. In this case, there is no real agreement, since both the parties are quite
certain in their mind that the act is impossible of achievement. Therefore, the agreement, being
impossible in itself, is void. (ii) If unknown to the parties : Where both the promisor and the promisee
are ignorant of the impossibility of performance, the contract is void. (iii) If known to the promisor only :
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.
(2) Supervening impossibility: When performance of promise become impossible or illegal by occurrence
of an unexpected event or a change of circumstances beyond the contemplation of parties, the contract
becomes void e.g. change in law etc.

DISCHARGE OF A CONTRACT
A contract may be discharged either by an Act of the parties or by an operation of law in the different
base set out below :

(i) Discharge by performance : It takes place when the parties to the contract fulfil their obligations
arising under the contract within the time and in the manner prescribed. Discharge by performance may
be (1) actual performance or (2) attempted performance. Actual performance is said to have taken
place, when each of the parties has done what he had agreed to do under the agreement. When the
promisor offers to perform his obligation, but the promisee refuses to accept the performance, it
amounts to attempted performance or tender.

(ii) Discharge by mutual agreement : Section 62 of the Indian Contract Act provides if the parties to a
contract agree to substitute a new contract for it, or to refund or remit or alter it, the original contract
need not be performed.

(iii) Discharge by impossibility of performance : The impossibility may exist from the very start. In that
case, it would be impossibility ab initio. Alternatively, it may supervene. Supervening impossibility may
take place owing to : (a) an unforeseen change in law, (b) the destruction of the subject-matter essential
to that performance; (c) the non-existence or nonoccurrence of particular state of things, which was
naturally contemplated for performing the contract, as a result of some personal incapacity like
dangerous malady; (e) the declaration of a war (Section 56).

(iv) Discharge by lapse of time : A contract should be performed within a specified period as prescribed
by the Limitation Act, 1963. If it is not peformed and if no action is taken by the promising within the
specified period of limitation, he is deprived of remedy at law. For example, if a creditor does not file a
suit against the buyer for recovery of the price within three years, the debt becomes time–barred and
hence irrecoverable.

(v) Discharge by operation of law : A contract may be discharged by operation of law which includes by
death of the promisor, by insolvency etc.

(vi) Discharge by breach of contract : Breach of contract may be actual breach of contract or anticipatory
breach of contract. If one party defaults in performing his part of the contract on the due date, he is said
to have committed breach thereof. When on the other hand, a person repudiates a contract before the
stipulated time for its performance has arrived, he is deemed to have committed anticipatory breach. If
one of the parties to a contract breaks the promise the party injured thereby, has not only a right of
action for damages but he is also discharged from performing his part of the contract (Section 64)
(vii) A promise may dispense with or remit the performance of the promise made to him or may accept
any satisfaction he thinks fit. In the first case, the contract will be discharged by remission and in the
second by accord and satisfaction (Section 63).

(viii) When a promise neglects or refuses to afford the promisor reasonable facilities for the
performance of the promise, the promisor is excused by such neglect or refusal (Section 67).

Performance of a contract is one of the methods of discharge of a contract. The performance may be of
two types: (a) actual performance and (b) attempted performance.

An actual performance of a contract means performing all the promises and fulfilling all the liabilities by
all the parties. The actual performance discharges the contract and also discharges the parties. It is
known as the natural method of discharge of the contract.

An attempted performance means the promisor has made an offer to perform a promise to the
promisee but it has not been accepted. The attempted performance is known as tenders. If there is a
valid tender, it discharges the party who is not at fault. Let us understand in detail, when a tender is said
to be a valid tender.

ESSENTIALS OF A VALID TENDER

An attempt to perform a promise by a promisor is regarded as a valid tender, when it fulfills all of the
following conditions.

It Must Be Unconditional
An unconditional means without condition. It means the promisor shall perform the promise as per the
terms of contract as decided between the parties of contract. If the promise is not performed as per the
condition, it is known as the conditional tender.

Example

A owes B 5000 and has fallen due. A offers to pay in five installment and tenders the first installment.
This is a conditional tender.

It Must Be at Proper Place

The tender must be made at a proper place as specified in the contract. If no place is specified in the
contract, the tender must be made at a place fixed by the promisee. Once a valid tender of goods is
made at the specified or fixed place, the promisor is under no further responsibility of the performance
even if the tender is not accepted.

Example

A contracts to deliver cotton to B at his warehouse. A must bring the cotton to B's warehouse only and
tender the performance.

For Whole Obligation

It must be for the whole obligation and not in part. However, a minor deviation from the terms do not
make a tender invalid.

Example

A agreed with B to sell 10,000 kg of rice but A delivered 22 kg less than that. Held, the buyer could not
refuse to take delivery because the deficiency is negligible.

In Legal Tender Money

In case of a tender of money, the tender must be in legal tender money. Legal tender money means
current currency notes or coins. The tender of money in the form of foreign currency is not a valid
tender, unless it is agreed between the parties. A payment by a cheque is the valid tender, if the person
to whom it is made is ready and willing to accept it.

It must Be Made at Proper Time and to a Proper Person

The tender must be at a proper time i.e. at a stipulated time or during business hours. The tender of
performance must be made to a proper person. The promisee or his authorized agent is considered as a
proper person.

Reasonable Opportunity to Promisee

The tender must give a reasonable opportunity to the promisee to verify or examine the goods. The
promisee has a right to examine, verify and check the goods or money tendered.

EFFECTS OF A VALID TENDER

On making a valid tender of performance by the promisor, it becomes the duty of the promisee to
accept the performance. If the promisee does not accept the valid tender, the promisor is not required
to perform his promise again. The promisor is discharged from his obligation. At the same time, the
promisor is not responsible for the non-performance because the promisee has not accepted the valid
performance. However, the promisor does not lose his right under the contract.

Example

A agreed to deliver goods, at a specified place of B, for consideration of 5000. As per the agreement, A
takes goods and delivered to B at the specified place but B rejects the deliver of goods. Here, A can
recover his money or damage he has sustained.
TYPES OF TENDERS
There are two types of tenders (a) tender of goods and services and (b) tender of money. The rules for
both the tenders are given here under:

Tender of Goods and Services

When a promisor offers the delivery of goods or services to the promisee it is said to be the tender of
goods or services. If the promisee does not accept a valid tender, it will have the following effects:

⦁ The promisor is not responsible for the non-performance of the contract.

⦁ The promisor is discharged from his obligation under the contract. Therefore, he need not to offer
again.

⦁ The promisor does not lose his right under the contract. Therefore, he can sue the promisee.

Tender of Money
The tender of money is an offer to make a payment. In case a valid tender of money is not accepted, it
will have the following effects:

⦁ The offeror is not discharged from his obligation to pay the amount.

⦁ The offeror is discharged from his liability for the payment of interest from the date of the tender of
money.

Case Study

A entered into a contract with B to deliver certain goods to B. A offered the goods to B at a proper time
and place but B refused to accept the goods. In this case, what are the rights available to both the
parties as per Contract Act, 1872?

CONTRACTS WHICH NEED NOT TO PERFORM

The purpose of a contract is its performance. However, the following contracts are not required to be
performed:

Performance Becomes Impossible

When the performance of the contract becomes impossible, it is not required to perform. In the same
manner, if the subject matter for which the contract or promise is made is destroyed, the promisor gets
discharged from the performance.

Example
A agrees to dance in B's theatre for a month. A falls ill and becomes too weak to dance. The contract is
void for impossibility and performance is excused by the law.

New Contract in Place of Old Contract

When the parties to contract agree to change, rescind or enter into a new contract, the old contract is
not required to be performed. The promise under the old contract is not required to be performed.

Waiver by Promisee
When the promisee waives the promisor from the performance of the promise, the promisor is not
required to perform his promise. Here, waiver means a sacrifice of right to get performance.

Example

A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform
the promise.

Promise Becomes Illegal

When the performance of the promise becomes illegal, the promise is not required to be performed. An
illegal thing or an object is not required to be pursued.

Rejection of Valid Tender

When a promisee rejects the valid tender of performance, the promisor is not liable to perform it again.

Example

A sold 100 tons of sugar to B. A tenders the delivery on Monday but B refused to accept. A is free from
the obligation of performance of contract.

No Reasonable Facility
When a promisee does not provide a reasonable facility to a promisor to perform the promise, he gets a
discharge from the performance.

Example

A contracts with B to repair B's house. B does not point out to A, the places in the house require to be
repaired. A is excused for the non-performance of the contract.

KINDS OF RECIPROCAL PROMISE

The promise exchange for a promise is known as a reciprocal promise. In the case of a reciprocal
promise, each party to contract is the promisor as well as the promisee. Lord Mansfied in the case of
Jones vs. Barkley classified reciprocal promises as under:

Mutual and Independent

When the promises are to be performed by each party independently without waiting for the other
party to perform his promise, it is called as it mutual and independent reciprocal promises.

Example

A agrees to deliver goods to B. B agrees to pay 1000 for goods. Here, both parties can perform their
respective promises anytime.

Mutual and Dependent

When the performance of one party depends on the prior performance of the other party, it is known as
the mutual and dependent reciprocal promises.

Example

A agrees to deliver goods to B on advance payment of 1000. Here, A's performance of promise is
depend upon the performance of promise by B.

Mutual and Concurrent

When the promises are to be performed by both the parties simultaneously, it is the mutual and
concurrent reciprocal promises.

Example

A agrees to deliver goods to B against cash payment of 1000 by B.

RULES REGARDING PERFORMANCE OF RECIPROCAL PROMISES

The rules regarding the performance of reciprocal promises are as follows:

Simultaneous Performance of Reciprocal Promise—Section 51

When a contract requires simultaneous performance of the reciprocal promise, the promisor need not
perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

Example

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.

Order of Reciprocal Promise Is Fixed—Section 52

Where the order of performance of the reciprocal promise is fixed in the contract, the promise should
be performed according to the order specified under the contract. If no order of performance of the
promise is fixed, then it should be performed according to the nature of transaction.

Examples

⦁ 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.
⦁ A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promises to give
security for the payment of the money. A's promise need not be performed until the security is given for
the nature of the transaction requires that A should have security before he delivers up his stock.

Effect of Preventing Performance—Section 53

When one party to contract prevents the other from performing his promise, the contract becomes
voidable at the option of the party so prevented and the compensation can be claimed.

Example

A and B contract that B shall execute certain work for A for 1000. 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 a compensation, from A, for any loss which he has incurred
by its non-performance.

Effect of Default As to Promise to Be Performed First Under Contract—Section 54

If a party, who is liable to perform first, fails, he cannot demand performance from the other party and
compensation. The person, who is at fault, cannot demand the performance against the other party. The
defaulting party can be held liable for the payment damage, if the other party has suffered loss as a
result of his failure to perform.

Examples

⦁ A contacts 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 and 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.

⦁ A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which
cannot arrive for a month, and B engages to pay for the merchandise within a week from the date of the
contract. B does not pay within the week. A's promise to deliver need not be performed, and B must
make compensation.

⦁ A promises B, to sell him 100 bales of merchandise, to be delivered next day, and B promises A to pay
for them within a month. A does not deliver according to his promise. B's promise to pay need not be
performed and A must make compensation.

Effect of Promise to Do Legal and Illegal Things—Section 57

If one contract contains two promises, out of which one is legal and the other is illegal, the first part is
the contract while the second part is the void agreement if the legal promise and the illegal promise are
separable from each other. But if both the promises cannot be separated from each other, the entire
agreement is void.

Example

A and B agree that A shall sell a house to B for 10,000 but if B uses it as a gambling house, he shall pay
A 50,000 for it. The first set of reciprocal promises, namely, to sell the house and to pay 10,000 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.

Case Study

A hires B's ship to take in and convey from Calcutta to Mauritius, a cargo to be provided by A, B receiving
a certain freight for its conveyance. A does not provide any cargo for the ship. Advise on parties’ right to
claim damage.

TIME IS THE ESSENCE OF A CONTRACT

When a party to the contract promises to do a certain thing at or before a specified time or certain
things at or before specified times, 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.

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 the performance of such a 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 a notice to the promisor of
his intention to do so.

ASSIGNMENT AND SUCCESSION OF A CONTRACT

The assignment of contracts means voluntary transfer of rights, title, interest or benefit under the
contract to the third party. While succession to the contract is the process where one person succeeds
in another person's right, interest, benefit and obligation in the contract by the process of law. Only
contracts which are impersonal in nature can be assigned or succeeded. The contract which is based
upon the use of personal skill is a personal contract which cannot be assigned or succeeded.

The succession of the contract takes place in the following two situations:

⦁ In the case of death of the party to contract his legal heir succeeds to the rights and liabilities under
the contract. However, he is liable for non-personal contract and liable to the extent of property
inherited by him.

⦁ In the case of insolvency of the party to contract, his rights and liabilities under the contract are
acquired by the official liquidator.

LIST OF LANDMARK JUDGEMENTS

⦁ Kirti Chunder vs. Strathers (1878)

Where two or more persons have made the joint promise, a release of one of such joint promisor by the
promisee does not discharge the other joint promisors.

⦁ Taylor vs. Caldwell (1863)

If the subject matter of the contract is destroyed after the formation of the contract, without the fault of
either party, the contract becomes void.

⦁ K. S. Vidyanandan vs. Vairavan (1997)

When time is not the essence of a contract, the promisor must perform his part of the contract within a
reasonable time, and a reasonable time should be determined by looking at all surrounding
circumstances, including the express terms of the contract and the nature of property.

⦁ Rulia Devi vs. Raghunath Prasad (1979)

Unless there is a contract to the contrary, the payment should be first appropriated towards the
interest, and after the interest is fully paid off, to the principal.

⦁ Suresh Kumar Rajendra Kumar vs. K. Assan Koya and Sons (1990)

The tender must be for the performance of the whole obligation. But where the quantity is large, the
buyer could not refuse to take the delivery of goods because the deficiency is negligible.

⦁ New India Motors (P) Ltd vs. Smt. S. P. Duggal (1982)

The liabilities of the legal representative under the contract is limited to the extent of the value of
property inherited by them from the deceased.

⦁ Harikrishan Das vs. Nariman (1927)

Where there is only one debt, although payable in installments, the debtor has no right to appropriate
payment to a particular installment.

⦁ Hind Construction Contractors vs. State of Maharashtra (1979)

If the contract includes clauses for the extension of time in certain contingencies or for the payment of
fine or penalty for delay, such clauses indicate that time is not the essence of the contract.

⦁ Kapurchand Godha vs. Nawabhimyat Ali (1963)

The performance by the third person is also effective, if the promisee accepts for the same. Once the
promisee accepts the performance from the third person, he cannot compel the promisor to perform
the contract again.

⦁ Shirten Anderson and Co. vs. Weil Bros and Co. (1972)

The valid tender of performance must be of the whole obligation.

⦁ Municipal Corporation of Delhi vs. Jagan Nath Ashok Kumar (1987)

Whether time is the essence of the contract or not can be gathered from the intention of the parties and
from the terms of the contract.

⦁ Gomathninayatam Pilla vs. Palaniswani Nadan (1967)

In the contract for sale of land or immovable property, time is not considered to be the essence of the
contract.