Indian Contract Act Unit 4 Performance of Contract Day 1 2

20/12/2021
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BOARD OF STUDIES(A), ICAI
CA FOUNDATION
TOPIC NAME - INDIAN CONTRACT ACT, 1872,
UNIT 4- PERFORMANCE OF CONTRACT
PAPER 2: SEC-A BUSINESS LAWS
Faculty Name: CA Sudeep Kumar Jain
Let’s Revise
Consent “Two or more persons are said to consent when they agree upon the same thing in the
same sense.” (Consensus-ad-idem)
When there is no consent, there is no contract.
Free Consent is said to be free when it is not caused by—
Consent (1) Coercion, (2) Undue influence, (3) Fraud, (4) Misrepresentation, (5) Mistake
(Sec.14)
(i) Committing or threatening to commit any act forbidden by IPC
(ii) Unlawful detaining or threatening to detain any property
Consequences (i) Voidable at the option of party whose consent was so caused.
Coercion (ii) Person to whom money is paid or thing delivered under coercion
(Sec. 15) must repay or return it.
Burden of Proof Lies on the aggrieved party
Note: Threat to commit suicide is coercion
20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 2
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Let’s Revise
One party is in the position to dominate the will of other and it takes unfair advantages of relation.
Consequences (i) Voidable at the option of party whose consent was so caused.
Undue
(ii) Such contract may be set aside either absolutely or if the party who is
Influence
entitled to avoid it has received any benefit thereunder, upon such terms and
(Sec. 16) conditions as to the court may seem just and equitable.
Burden of Proof Lies on the aggrieved party
(i) Knowingly make a false suggestion. (ii) Active concealment of a fact.
(iii) Promise without any intention of performance. (iv) Any other act fitted to deceive.
(v) Act or omission declared by law as fraud.
Fraud
Essentials 1. The representation must be false.
(Sec. 17)
2. Misrepresentation must be made willfully.
3. Misrepresentation must be made with intention to deceive the other party.
4. The other party is actually deceived.
5. The other party has suffered a loss.
Let’s Revise
Note: Silence amounts to fraud where; (i) There is a duty to speak, (ii) His silence is speech.
Consequences 1. Party can rescind the contract.
Fraud
2. Party can insist for the genuine performance of the contract.
(Sec. 17)
3. Party can sue for damages.
Note: If party takes any benefit , contract is not voidable.
1. Party makes a representation, 2.Representation must be false, 3. Misrepresentation must
Misrepresentation
be made innocently, 4. Misrepresentation was not made with intention to deceive the other
(Sec. 18)
party, 5. The other party has actually acted.

Consequences 1. Party can rescind the contract.
2. Party can insist for the genuine performance of the contract.
Mistake Mistake of Law (i) Mistake of law of the country- Contract is not voidable.
(Sec. 20 to (ii) Mistake of law of a foreign country- Contract is void.
Sec.22) Mistake of Fact (i) Bilateral Mistake- Both parties are under mistake - Contract is void.
(ii) Unilateral Mistake- One Party under mistake - Contract is neither void nor voidable.
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Let’s Revise
Unlawful 1. Agreements to do something forbidden by law; 2. Agreements which defeats the
Object & provisions of any law; 3. Agreements is fraudulent; 4. Agreements involves or implies injury
Considerati to the person or property of another; 5. If the Court regards agreement as immoral; 6.
on (Sec.23) Where the courts regards agreement as opposed to public policy;
Agreement 1. Agreements of trading with enemy; 2. Agreement of stifling prosecution; 3. Maintenance
as opposed & champerty; 4. Interference with the course of justice; 5. Marriage brokerage; 6. Interest
to public against obligation; 7. Agreement for the sale public office; 8. Agreements tending to create
policy monopolies;
Agreements :
A. by incompetent parties (Sec. 11). B. made under a mutual mistake of fact (Sec. 20).
Void C. the consideration or object of which is unlawful (Sec.23). D. the consideration or object of
Agreements which is unlawful in part (Sec.24). E. made without consideration (Sec. 25). F. in restraint of
marriage (Sec. 26). G. is restraint of trade (Sec. 27). H. in restraint of legal proceedings (Sec.
28). I. the meaning of which is uncertain (Sec. 29). J. by way of wager (Sec. 30). K. contingent
on impossible events (Sec. 36). L. to do impossible act. (Sec. 56).
Unit -2
PERFORMANCE
OF CONTRACT
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Performance of Contract
Meaning Performance of a Contract means carrying out the obligations.
Actual (Sec. 37): When all the parties fulfilled their obligation under the contract.
Example 1: X agrees to sell his watch to Y for Rs.50000. X delivers the watch and Y makes
the payment.
Tender Performance (Sec. 38): Promisor offers to perform his
Types
obligation under the contract at the proper time and place but
the promisee refuses to accept the performance.
Example 2: P promises to deliver certain goods to R. P takes the goods
to the appointed place during business hours but R refuses to take the
delivery of goods. This is an attempted performance as P, the
promisor, has done what he was required to do under the contract.
Condition To Be Satisfied For A Valid Performance

1. Must be unconditional
Example 3: X offers to Y the principal amount of the loan. This is not a valid tender
since the whole amount of principal and interest is not offered.
2. It must be made at proper time and place
Example 4: If the promisor wants to deliver the goods at 1a.m., this
is not a valid tender unless if was so agreed.
3. Reasonable opportunity to examine goods
Example 5: A contract’s to deliver B at his warehouse, on 1st March 2021, 1000 bales
of cotton of a particulars quality. A must bring the cotton to B’s warehouse on the
appointed day, under such circumstances that B may have reasonable opportunity of
satisfying himself that the thing offered is cotton of the quality contracted for, and
that there are 1000 bales.
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Condition To Be Satisfied For A Valid Performance
4. It must be for whole obligation

Example 6: A promises to deliver 100 bags of rice on a certain day. If on the agreed
day and place ‘A’ offers to deliver 80 bags only. This is not a valid tender.
5. It must be made to the promisee or his duly authorized agent, However a tender
may be made to any one of the joint promisee.
6. Tender must be of exact amount and must be in legal tender: It should not be in
any other form such as cheque or foreign currency, except the person to whom it is
made is ready and willing to accept it.
By Whom Contract May Be Performed ?
1. Promisor himself: Where the contract involve personal

skills/consideration
Example 7: A promises to paint a picture for B. A must perform
this promise personally.
2. Agent: Where the contract does not involve personal skill/

consideration, the promisor may employ a competent person to
perform it.
Example 8: A promises to deliver 100 kgs of rice to B. A may

personally deliver it or he may employ some person to deliver
the same.
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3. Legal Representative: In case of death of the promisor, the Legal representative
must perform the promise unless a contrary intention appears from the contract.
However, a contract which involves personal skill or personal consideration, comes to
an end with the death of the promisor.
Example 9: A promises to paint a picture for B by a certain day, A dies before that day.
The contract cannot be enforced either by A’s representatives or by B.
4. Third persons (Sec.41): When a promisee accepts performance of the promise

from a third person, be cannot afterward enforce it against the promisor.
Example 10: A owes B Rs.5,000. C pays to B Rs. 1,000 and B accepts them, in
satisfaction of his claim on A. This payment is discharge of the whole claim.

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 fulfill the promise jointly (Section 42).
Examples 12: 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.
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Performance of Joint Promises
(i) Devolution of joint liabilities (Obligations to perform joint promises):

Devolution means passing over from one person to another.
When two or more persons have made a joint promise, they are known as joint
promisors. Unless a contrary intention appears from the contract, all joint promisors
must jointly fulfill the promise. If any of them dies, his legal representative must,
jointly with the surviving promisors, fulfill the promise. If all of them die, the legal
representative of all of them must fulfill the promise jointly.
The rules regarding performance of joint promises are

(a) Anyone of the joint promisors may be compelled to perform
Example 13: A, B, and C jointly promise to pay D Rs. 3,000. D may, compel either A or B
or C or any two of them to pay him Rs. 3,000.
(b) Right of contribution
Example 14: A, B and C are under a joint promise to pay Rs. 3,000. A is compelled to
pay the whole. A can recover Rs. 1,000 each from B and C.
Note: If any one of the joint promisors make default in such contribution, the remaining
joint promisors must bear the loss arising from such defaulting in equal share.
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The rules regarding performance of joint promises are

(c) Release of joint promisor: Where two or more person have made a joint promise,
a release of one such joint promisors by the promisee does not discharging the other
joint promisor or promisors from liability. The released joint promisor is responsible to
the other joint promisor or promisors.
Example 15: ‘A’, ‘B’ and ‘C’ jointly promised to pay Rs.9,00,000 to ‘D’. ‘D’ released ‘A’
from liability. In this case, the release of ‘A’ does not discharge ‘B’ and ‘C’ from their
liability. They remain liable to pay the entire amount of Rs.9,00,000 to ‘D’. And though
‘A’ is not liable to pay to ‘D’, but he remains liable to pay to ‘B’ and ‘C’ i.e. he is liable
to make the contribution to the other joint promisors.

(ii) Devolution of joint rights: When a person has made a promise to two or more
persons jointly these persons are known as joint promisees.
Unless a contrary intention appears from the contract, the right to claim performance
rests with all the joint promises. When one of the joint promisee dies, the right to
claim performance rests with his legal representatives jointly with the surviving joint
promisees. When all the joint promises die, the right to claim performance rest with
their legal representative jointly.
Example 16: A, in consideration of Rs. 5,000 lent to him by B and C, promises B and C
jointly repay the sum with interest on a specified day but B dies. In such a case right to
demand payment shall rest with B’s legal representatives, jointly with C during C’s life-
time, and after the death of C, with the legal representatives of B and C jointly.
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Super
Over
1
Super Over 1
1. In case of death of promisor before

performance, the representative of promisor
are not bound when ______
a) It involves personal skill of promisor
b) There is no such provision in the contract
c) Either a or b
d) None of the above
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Super Over 1
2. A teacher enters into contract with a

student to teach for the exam, but he dies
before teaching. Now ____
a) Legal representative are bound to perform
b) Becomes enforceable
c) Voidable
d) Contract comes to end
Super Over 1
3. The right of joint promisees to demand

performance is ________
a) Joint
b) Several
c) Joint or several
d) Joint and several
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Super Over 1
4. In case of default by joint promisors, the

promisee can sue any one of them for the
entire promise ________
a) True
b) Partly True
c) False
d) None of the above
Super Over 1
5. If any one of the joint promisors makes a

default in making contribution. How will it be
settle down by other promisors?
a) Representative of promisor will be liable to contribution
b) Contribution will be dismissed automatically
c) Representative of a promisor will be liable along with
other joint promisors
d) The remaining joint promisors will be liable to
contribute
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Super Over 1
6. The performance of contract can

take place by ________
a)Performance
b)Tender Performance
c)Any of these
d)None
Time, Place & Manner Of Performance
1. Time for performance of promise, where no application is to be made

and no time is specified- Section 46
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 to Section 46 - The expression reasonable
time is to be interpreted having regard to the facts and
circumstances of a particular case.
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2. Time and place for performance of promise, where time is specified

and no application to be made –Section 47
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 the place
at which the promise ought to be performed.
Example 17: A promise to deliver goods to B at his warehouse on 15th April. But goods
could not be received since A offered after 8.30 pm, the promisee may refuse to
accept delivery, for the usual business hours are over.
3. Application for performance on certain day to be at proper time and

place– Section 48
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.
Note: “what is a proper time and place” depends on the facts of each case.
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4. Place for the performance of promise, where no application to be

made and no place fixed for performance- Section 49
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 a place.
Example 18: A undertakes to deliver a thousand kgs 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.
5. Performance in manner or at time prescribed or sanctioned by

promise - Section 50
Where the promisee has prescribed or sanctioned any manner or time of
performance, it must be performed only in such manner and such time.
Example 19: B owes A Rs. 2,000. A desires B to pay the
amount to A’s account with C, a banker. B who also banks
with C, orders the amounts to be transferred from his
account to A’s credit and this is done by C. Afterwards
and before A knows of the transfer, C the banker
fails. There has been a good payment by B.
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Performance of Reciprocal Promises
Meaning
Reciprocal promise means a promise in return for a
promise.
Thus, where a contract consists of promise by on
party (to do or not to do something in future) in
consideration of a similar promise by other party, it will
be called a case of reciprocal promises.

Types & Rules
1. Mutual and Dependent: In such a case, the performance of one party depends
upon the prior performance of the other party. Thus, if the promisor who must
perform, fails to perform it, he cannot claim the performance of the reciprocal
promise. On the other hand, he 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.
Example 20: A contracts with B to execute certain builder’s work for a fixed price. B
supplying the necessary timber for the work. B refuses to furnish any timber and the
work cannot be executed. A need not executed the work and B is bound to make
compensation to A for any loss caused to him by the non-performance of the contract.
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Types & Rules
2. Mutual and Independent: In such cases, each
party must perform his promise without waiting for
the performance or readiness to perform on the part
of the other.
Example 21: X promises Y to deliver him goods on
10th July and Y in turn promises to pay the price on
6th July. Y’s paying the price is independent of X’s
delivering the goods and even if Y does not pay the
price on 6th July, X must deliver the good, on 10th July.
He can of course, sue Y for compensation.

Types & Rules
3. Mutual and Concurrent: In such cases the promises have to be
simultaneously performed. 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.
Example 22: Sale of goods for cash.
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Types & Rules
Reciprocal promises to do things legal and also other things illegal (Sec. 57): Where
persons reciprocally promise, firstly, to do certain thing which are legal and secondly,
under specified circumstances, to do certain things which are illegal, the first set of
promises is a contract but second is a void agreement.
Example 23: A and B agree that A shall sell B a house for
Rs. 10,000 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,
to sell the house and pay 10,000 rupees for it is a contract. The
second set is for unlawful object and is a void agreement.
Appropriation Of Payment (Sec. 59 To 61)
Meaning When a debtor owes several debts to the same creditor and makes
payment, which is not sufficient to discharge all the debts. In such
cases, the payment is appropriated (i.e. adjusted against the debts) as
per Section 59 to 61of the Indian Contract Act.
Rules #1: Appropriation by Debtor: Where a debtor owing several distinct debts to
one person, makes a payment to him with express intimation that the payment is to
be applied to the discharges of some particulars debt, the payment, if accepted,
must be applied to that debt.
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Example 23: X sold goods to Y on different dates:

10.03.2015 Rs.10000 (Time Barred)
01.01.2021 Rs.15000
03.01.2021 Rs.8000
05.01.2021 Rs.10000
Y made a payment of Rs.30000 on 08.01.2021.
From which bill payment will be adjusted?
Rule #2: Appropriation by Creditor: Where the debtor does not intimate and
there are no circumstances indicating to which debt the payment is to be applied,
the creditor may apply it at his discretion to any lawful debt actually due and
payable to him from the debtor, including a time-barred debt. However, it cannot
be applied to a disputed debt.
Rules #3: Where neither party appropriates: Where neither party makes any
appropriation the payment is to be applied in discharge of the debts in order of
time, including time-barred debts. If the debts are equal the payment is to be
applied proportionately.
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Super
Over
2
Super Over 2
1. If no time is specified for performance of a

contract, it must be performed with in a
reasonable time. ‘Reasonable Time’ means
_______
a) Which seems reasonable to the promisor
b) Which seems reasonable to the promisee
c) Which is determined as reasonable by a third party
d) Which is reasonable under the facts and
circumstances of the case
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Super Over 2
2. If time is the essence of the contract and

the promisor fails to perform the contract by
the specified time, the contract _______
a) Becomes void
b) Remains Valid
c) Becomes voidable at the instance of the promisee
d) Becomes unenforceable
Super Over 2
3. In case of reciprocal promises, which is not

applicable ______
a) They can perform simultaneously
b) They cannot perform simultaneously
c) They can be fixed by the parties to the contract
d) As depending upon the nature of the contract
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Super Over 2
4. A and B contract that B shall build a house

for A for Rs.9,00,000. B is ready and willing to
construct the house, but A prevents him from
doing so. In this case _____
a) B can opt to rescind the contract
b) B is entitled to recover compensation for any loss
suffered by him
c) Either a or b
d) Both a & b
Super Over 2
5. Reciprocal promises are _______________.

a) Promises made by both parties to the contract
b) Promise made by promisor only
c) Promise made by promisee only
d) None of these.
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Super Over 2
6. Offer to perform a contract is called as

________
a) Attempted performance
b) Caveat emptor
c) Just in rem
d) Just in personam
Distinction Between Succession And Assignment
Succession: When the benefits of a contract are succeeded to by process of law, then
both burden and benefits attaching to the contract, may sometimes devolve on the
legal heir.
Example: A son succeeds to the estate of his father after his death, he will be liable to
pay the debts and liabilities of his father owed during his life-time. 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 son will be limited to the extent of the property
inherited by him; thus far and no further.
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Distinction Between Succession And Assignment
In the matter of assignment, however the benefit of a contract can only be assigned by
not the liabilities thereunder.
Why this is so? This is because when liability is assigned, a third party gets involved
therein. 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 but where the benefit is coupled with a
liability or when a personal consideration has entered into the making of the contract
then the benefit cannot be assigned.
Impossibility of Performance
(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. 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
unknown to the parties, may be impossible of being performed and hence void.
Example 24: 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.
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(ii) If unknown to the parties: Where both the promisor and the promisee are ignorant
of the impossibility of performance, the contract is void.
Example 25: A contracted B to sell his brown horse for Rs.50,000 both unaware that the
horse was dead a day before the agreement
(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.
Example 26: ‘A’ and ‘B’ contracted to marry each other. Before the time fixed for the
marriage, ‘A’ became mad. In this case, the contract becomes void due to subsequent
impossibility, and thus discharged.
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Contracts Which Need Not Be Performed
To be discussed later…..
Discharge of Contracts
Discharge of contract means termination of the contractual relationship between the

parties. In other words, a contract is said to be discharged when either of the parties in
no more liable to contract.
By Performance (a) Actual, (b) Tender
Modes of Discharge of
By Mutual Consent or Agreement (a) Novation, (b) Rescission, (c) Alteration, (d) Remission, (e)
Waiver, (f) Merger
By Impossibility of Performance (a) Destruction of subject-matter, (b) Death or disablement for
Contract
personal service, (c) Subsequent Illegality, (d) Declaration of war,

(e) Non-existence of state of things
By Operation of Law (a) By death, (b) Insolvency, (c) Merger, (d) Unauthorized
alternation of terms of a written document
By Breach of Contract (a) Anticipatory, (b) Actual
By Lapse of Time
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Modes of Discharge of Contracts

1. By Performance
Where the parties have done whatever was contemplated under the contract.
(a) Actual Performance; (b) Tender Performance;
2. By Mutual Consent or Agreement
a) Novation. Substitution of a new contract for the original one. The new contract may
be substituted either between the same parties or between different parties. But
Novation should take place before the expiry of the time of the performance of the
original contract.
Example 27: X borrowed Rs.1000 from Y. X, Y and Z agreed that the debt will be
discharged by Z. Now, a new contract between Y and Z is formed and old contract
between X and Y comes to end.

b) Rescission. Cancellation of all or some of the terms of the contract by mutual
understanding of parties.
Example 28: A contracted with B for supply of 100 kgs of rice. Later on, they agree that
no rice need be supplied. The contracted is rescinded by mutual agreement.
c) Alternation. If the parties mutually agree to change certain terms of the contract, it
has the effect of terminating the original contract. There is, however, no change in the
parties.
Example 29: A agrees to supply cotton of grade 1 to B. Before delivery, A and B agree
that in place of Grade 1, the cotton of Grade 2 will be supplied. There is an alteration in
contract.
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d) Remission. Acceptance of a lesser sum than what was contracted for or a lesser
fulfillment of the promise made.
Example 30: A has borrowed Rs.1000 from B at interest of Rs.100. B agrees not to
demand the amount of interest from A. This is remission.
e) Waiver. Relinquishment or abandonment of a right. Where a party waives his rights

under the contract, the other party it released of his obligations.
Example 31: In the above example if B agrees not to demand the whole amount of
loan. This is waiver.

f) Merger. A contract is said to have been discharged by way of ‘merger’ where an
inferior right possessed by a person merges with a superior right of the same person.
Example 32: A holds a property under a lease. He later buys the property. His rights as a
lessee merges into his right as an owner.
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3. By Impossibility
Impossibility in a contract may either be inherent in the transaction or it may be
introduced later by the change of certain circumstances material to the contract.
Inherent impossibility: Known to the parties.

Example 33: A agrees with B to discover treasure by magic.
Subsequent impossibility: A contract is deemed to have become impossible of

performance and thus void under the following circumstances:

3. By Impossibility
a) Destruction of subject matter of the contract
Example 34: A music hall was agreed to be let out on certain dates, but
before dates it was destroyed by fire. Held that the owner was absolved
from liability to let the building as promised.
b) By death or disablement of the parties (where the performance must be executed

personally)
c) Subsequent Illegality
d) Declaration of war subsequent to the making of contract

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3. By Impossibility
e) Non- existence of state of things
When certain things necessary for performance ceases to exist, the contract become void
on the ground of impossibility.
Example 35: X and Y contract to marry each other. Before the time fixed for marriage, X
goes mad. The contract becomes void.
Exceptions to Impossibility
Difficulty of possibility does not amount to impossibility.
Commercial impossibility does not render a contract void.
Strikes, lock-outs and civil disturbances.
Non-performance by the third party does not absolve the promisor from his liability.

3. By Impossibility
e) Non- existence of state of things
When certain things necessary for performance ceases to exist, the contract become void
on the ground of impossibility.
Example 35: X and Y contract to marry each other. Before the time fixed for marriage, X
goes mad. The contract becomes void.
Exceptions to Impossibility
Difficulty of possibility does not amount to impossibility.
Commercial impossibility does not render a contract void.
Strikes, lock-outs and civil disturbances.
Non-performance by the third party does not absolve the promisor from his liability.
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4. By Operation of Law
a) By death of promisor. Death of the promisor results in termination of the contract in
cases involving personal skill or ability.
b) By Insolvency. Where an order of discharge is passed by an Insolvency Court, the

insolvent stands discharged of liabilities of all debts incurred prior to his adjudication.
c) By merger (refer discussed before in this chapter)
d) By the unauthorized alteration of terms of a written document

5. By Breach of Contract
a) Anticipatory breach of contract: When a party repudiates it before the time fixed for
performance.
Example 36: A contracts to marry B. Before the agreed date of marriage he marries C. B is
entitled to sue A for breach for promise.
Consequences of Anticipatory Breach: The promisee may either:

a) rescind the contract and treat contract as at an end, and at once sue for damages, or
b) he may elect not to rescind but to treat contract operative and wait for the time of
performance and then hold the party liable for the consequences for non –performance.
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Example 37: X agrees to sell to Y a certain quantity of wheat at Rs. 100/- per quintal to be
delivered on the 3rd March. On the 2nd February, X gives notice expressing his
unwillingness to sell wheat; and the price of wheat on the date is Rs. 110/- per quintal. If Y
repudiates the contract forthwith (which he is entitled to do at his option), he would be
able to recover damages @ Rs.10/- per quintal. If instead of taking the action forthwith, he
keeps the contract alive till the 3rd March and in the mean time, the price increases tò
125/- per quintal on the date. Y would be able or recover damages @ Rs. 25/- per quintal.
If, on the other hand, during the intervening period between 2nd February and 3rd March,
private sale of wheat is prohibited by the Government, the contract would become void,
and Y would not be able to recover any damages whatever.

b) Actual breach of contract. It may take place
at the time when performance is due or
during the performance of contract.
Example 38: A agrees to deliver 100 bags of sugar to B on 1st Feb, 2012. On the said day,
he failed to supply 100 bags of sugar to B. This is actual breach of contract. The breach has
been committed by A at the time when the performance becomes due.
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6. By Lapse of Time
A contract should be performed within a specified period
as prescribed by the Limitation Act, 1963. If it is not
performed and if not action is taken by the promisee
within the specified period of limitation, he is deprived of
remedy at law.
Example 39: 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.

1. If the parties mutually agree to substitute the original contract by a new one or to
rescind or alter it.
2. If the promisee dispenses with or remits, wholly or in part the performance of the
promise made to or extends the time for such performance or accepts any satisfaction
for it.
3. If the person, at whose option the contract is voidable, rescinds it.
4. If the promisee neglects or refuses to afford the promisor reasonable facilities for
the performance of his promise.
5. If it is illegal.
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1. If the parties mutually agree to substitute the original contract by a new one or to
rescind or alter it.
2. If the promisee dispenses with or remits, wholly or in part the performance of the
promise made to or extends the time for such performance or accepts any satisfaction
for it.
3. If the person, at whose option the contract is voidable, rescinds it.
4. If the promisee neglects or refuses to afford the promisor reasonable facilities for
the performance of his promise.
5. If it is illegal.
Super
Over
3
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Super Over 3
1. A contract containing an undertaking to do

an impossible act is______
a) void
b) voidable
c) valid
d) illegal
Super Over 3
2. A holds a house on lease. After that he buys

the house and became owner. The contract is
discharged by _____
a) Rescission
b) Merger
c) Waiver
d) Remission
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Super Over 3
3. The original contract need not be

performed if there is ___
a) Rescission
b) Novation
c) Alteration
d) All of the above
Super Over 3
4. A voidable contract becomes void in case of

_____
a) Rescission
b) Novation
c) Alteration
d) Merger
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Super Over 3
5. Change in some of the terms of the contract

_____
a) Rescission
b) Novation
c) Alteration
d) Merger
Super Over 3
6. Ram owes Shyam Rs.10,000. Shayam says

that he will accept Rs.8,000 towards final
settlement. This is a _____ contract.
a) Voidable
b) Valid
c) Illegal
d) Unenforceable
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Let’s Revise
Performance of a Condition for a Valid By Whom – Performance of Joint
Contract’ means Performance 1. Promisor himself Promises
carrying out the 1. Must be unconditional. 1. All joint promisors
2. Agent (Where the contract
obligations. 2. At proper time and are liable jointly and
does not involve personal skills)
Types place. severally. However
1. Actual (Sec. 37) 3. Reasonable opportunity 3. Legal Representative (In
Contract may provide
2. Tender to examine goods. case of death of the promisor.
otherwise.
Performance 4. For whole obligation. However, if contract involves
personal skill, it comes to an 2. One has right of
(Sec. 38): Promisor 5. To the promisee or his
end with the death of the contribution from
offers to perform his duly authorized agent.
promisor) others.
obligation under the However a tender may be
contract at the proper made to any one of the 4. Third persons (When a 3. If one of the joint
time and place but joint promisee. promisee accepts performance promisors is released,
the promisee refuses 6. Tender must be of exact of the promise from a third he is responsible to the
to accept the amount and must be in person, be cannot afterward other joint promisor or
performance. legal tender. enforce it against the promisor) promisors.
Let’s Revise
Time place and manner: As decided otherwise during business hours at business place or residence of promisee.
Performance of Reciprocal Promises: Reciprocal Appropriation Of Payment

Promise means a promise in return for a promise. (Adjustment of Payment Against Debt)
1. Mutual and Dependent- If the promisor, who must Rules 1: Appropriation by Debtor : if accepted, must be
perform, fails to perform it, he cannot claim the applied to that debt.
performance of the reciprocal promise. Rule 2: Appropriation by Creditor: debtor does not
2. Mutual and Independent- Each party must perform intimate, the creditor may apply it at his discretion to
his promise without waiting for the performance or any lawful debt including a time-barred debt. (But not
readiness to perform on the part of the other. to a disputed debt)
3. Mutual and Concurrent- Promises have to be Rules 3: Where neither party appropriates: neither
simultaneously performed. party makes any appropriation the payment is to be
Note: Reciprocal promises to do things legal and also applied in discharge of the debts in order of time,
other things illegal (Sec. 57)- the first set of promises including time-barred debts. If the debts are equal the
is a contract but second is a void agreement. payment is to be applied proportionately.
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Let’s Revise
Discharge of contract means termination of the contractual relationship Contracts which need not be
between the parties. In other words, a contract is said to be discharged when performed
either of the parties in no more liable to contract. 1. If the parties mutually agree to
substitute the original contract by a
By Performance (a) Actual, (b) Tender new one or to rescind or alter it.
By Mutual Consent (a) Novation, (b) Rescission, (c) Alteration, (d) Remission,
2. If the promisee dispenses with or
or Agreement (e) Waiver, (f) Merger remits, wholly or in part the
By Impossibility of (a) Destruction of subject-matter, (b) Death or disablement performance of the promise made to
Performance for personal service, (c) Subsequent Illegality, (d) or extends the time for such
Declaration of war, (e) Non-existence of state of things performance or accepts any
By Operation of (a) By death, (b) Insolvency, (c) Merger, (d) Unauthorized satisfaction for it.
Law alternation of terms of a written document 3. If the person, at whose option the
By Breach of (a) Anticipatory, (b) Actual contract is voidable, rescinds it.
Contract 4. If the promisee neglects or refuses.
By Lapse of Time 5. If it is illegal.
THANK YOU
38

Indian Contract Act Unit 4 Performance of Contract Day 1 2

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Indian Contract Act Unit 4 Performance of Contract Day 1 2

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20/12/2021

LIVE COACHING CLASSES

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 2

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party, 5. The other party has actually acted.

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Condition To Be Satisfied For A Valid Performance

Condition To Be Satisfied For A Valid Performance

4. It must be for whole obligation

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By Whom Contract May Be Performed ?

1. Promisor himself: Where the contract involve personal

2. Agent: Where the contract does not involve personal skill/

Example 8: A promises to deliver 100 kgs of rice to B. A may

By Whom Contract May Be Performed ?

4. Third persons (Sec.41): When a promisee accepts performance of the promise

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 11

By Whom Contract May Be Performed ?

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 12

Performance of Joint Promises

(i) Devolution of joint liabilities (Obligations to perform joint promises):

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Performance of Joint Promises

The rules regarding performance of joint promises are

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 14

Performance of Joint Promises

The rules regarding performance of joint promises are

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 15

Performance of Joint Promises

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 16

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 17

1. In case of death of promisor before

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2. A teacher enters into contract with a

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3. The right of joint promisees to demand

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4. In case of default by joint promisors, the

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 21

5. If any one of the joint promisors makes a

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6. The performance of contract can

20 December 2021 © THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA 23

Time, Place & Manner Of Performance

1. Time for performance of promise, where no application is to be made

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Time, Place & Manner Of Performance

2. Time and place for performance of promise, where time is specified

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Time, Place & Manner Of Performance

3. Application for performance on certain day to be at proper time and

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Time, Place & Manner Of Performance

4. Place for the performance of promise, where no application to be

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Time, Place & Manner Of Performance

5. Performance in manner or at time prescribed or sanctioned by

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Performance of Reciprocal Promises

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Performance of Reciprocal Promises

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