Performance of Contract (Sections 38, 39, 40, 41)1

Sec 37 provide that ‘parties to a contract must either perform or offer to perform, their
respective promises unless such performance is dispensed with or excused under the provisions
of contract Act, or of any other law.’

Performance is of two types:

1. Actual performance - liability of such a party comes to an end.

According to Section 40, if the contract is based on personal confidence, or involves the
exercise of personal skills like painting, or dancing, it must be performed by the promisor
himself and nobody else. The contract does not involve personal skills, the promisor or his
representative may employ a competent person to perform the same.

Provisions relating to the performance of Joint Promises have been given in Section(s) 42-45.

Time and Place for Performance

If a time and place for the performance of the contract are agreed upon, then the promisor
should perform the promise accordingly. If not, then it should be performed at a reasonable
place and time. The Indian Contract Act, 1872, specifies some rules regarding the time and
place for the performance of a contract under sections 46 – 50.

According to Section 46, even though no time for performance is fixed by parties, the contract
is not rendered void for uncertainty.

Application by the Promisee required (Section 48); Let’s say that there is a contract where
the promisee necessarily needs to make an application for the performance of a contract, then
the promisee needs to ensure that the application is made at a proper place and time. In this
case, the phrase ‘proper place and time’ can have different meanings in different cases.

Example: Peter and John enter a contract where Peter promises to fix John’s car whenever he
asks him to. Peter also takes an advance payment for the same. When John asks Peter to fix his
car, he must ensure that he doesn’t ask Peter to go a lot out of his way. Also, he must preferably
ask for repairs during business hours.

No Application is to be made but the Place of Performance is not Specified (Section 49);
Imagine a contract where the promisee is not required to make an application for the

1
Please refer the bare Act and case material.
performance of the contract. Also, the place of performance is unspecified. In such a scenario,
it is the responsibility of the promisor to apply to the promisee asking him to appoint a
reasonable place for the performance of the promise.

2. Attempted performance or tender of performance [Section 38]– if the promisor tried to

perform the contract and the promisee refused to accept, the promisor is not responsible for
non-performance, nor the promisor thereby lose his rights under the contract and can sue the
promisee for breach of contract.
Discharge of Contract

Discharge of a contract means termination of the contractual relationship between the parties
to a contract. In other words, a contract is discharged when the rights and obligations created
by it are extinguished (i.e., comes to an end).

Discharge by mutual agreement

a) Novation [Sec 62] – Novation means the substitution of a new contract in the place of the
original contract new contract entered into in consideration of the discharge of the old contract.
The new contract may be.

a) Between the same parties (by a change in the terms and conditions)
b) Between different parties (the term and conditions remain the same or changed)

The following conditions are satisfied:

1) All the parties must consent to the novation

2) The novation must take place before the breach of the original contract.

3) The new contract must be valid and enforceable.

Example:

A owes B Rs.50,000. A agrees with B and gives B a mortgage of his estate for Rs.40,000 in
place of the debt of Rs.50,000. (Between same parties)
A owes money Rs.50,000 to B under a contract. It is agreed between A, B & C that B shall
henceforth accept C as his Debtor instead of A for the same amount. The old debt of A is
discharged, and a new debt from C to B is contracted. (Among different parties)

b) Rescission [62] - Rescission means cancellation of the contract by any party or all the parties
to a contract. X promises Y to sell and deliver 100 bales of cotton on 1 st Oct his go down and
Y promises to pay for goods on 1st Nov. X does not supply the goods. Y may rescind the
contract.

c) Alteration [62] - Alteration means a change in one or more of the terms of a contract with
mutual consent of parties the parties of new contracts remain the same.

For example, X Promises to sell and delivers 100 bales of cotton on 1st Oct. and Y promises
to pay for goods on 1st Nov. Afterwards X and Y mutually decide that the goods shall be
delivered in five equal instalments at is godown. Here original contract has been discharged
and a new contract has come into effect.

d) Remission [63] - Remission means accepting a lesser consideration than agreed in the
contract. No consideration is necessary for remission. Remission takes place when a Promisee-

i) dispense with (wholly or partly) the performance of a promise made to him.

ii) Extends the time for performance due by the promisors

iii) Accept a lesser sum instead of a sum due under the contract

iv) Accept any other consideration that agreed upon in the contract

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

e) Waiver - Intentional relinquishment of a night under the contract.

f) Merger - conversion of an inferior right into a superior right is called a merger (Inferior right
end).

Discharge by Lapse of time - Where a party fails to take action against the other party within
the time prescribed under the limitation Act, 1963. All his rights are to come an end. Recover
a debt – 3 Years; recover an immovable property – 12 years.
 Discharge by Impossibility performance
a) Initial Impossibility - at the time of making the contract

 Both parties know – put life into deed body – void.

 Both don’t know – void.
 One knows – compensate to the other party

b) Supervening Impossibility -

 Where an act becomes impossible after the contract is made – void

 Becomes unlawful, beyond the control of the promisor – void
 Promisor alone knows about the Impossibility – compensate the loss.
 When an agreement is discovered to be void or where a contract becomes void

The doctrine of Frustration under English Law is provided under section 56 (2) under Indian
Contract Act. It means the occurrence of intervening ever or change in circumstances entirely
beyond the contemplation of parties.

Essentials of Doctrine of Frustration

  The contract has become impossible to perform and cannot be performed and cannot
be performed by either of the parties in the harmony possible way, therefore it stands
as null and void.
 Dissolution occurs automatically and does not depend upon the choice of parties as in
rescission.
 Frustration should not be due to the act of the party to contract/ self-induced.

Frustration may be due to any of the following reasons:

1) Destruction of Subject matter

Taylor v. Goldwell (1863) – Music Hall agreed to let the plaintiff for four days for presenting
a series of four grand concerts, along with day and night fetes. Owing to the destruction of the
hall due to an accidental fire (neither party was at fault), led to the frustration of booking the
hall.

The court held that parties are said to be discharged if the performance involves a particular
music hall, which due to no fault of either of the parties is destroyed. This renders the
performance impossible.

2) Change of Circumstances

3) Non-occurrences of contemplated event

4) Death of incapacity of a party

5) Government or Legislative Intervention

In Boothlinga Agencies v. VTC Pariaswami (1969 – SC) – had a licence to import ‘chicory’
for manufacturing coffee powder. Before the arrival of the ship sale was banned. The contract
thus was held to have become void.

Satyabrata Ghose v. Mungeeram Bangur & Co. (1954 – SC)

The intervention of a temporary nature (requisition of land by the government for military
purposes) which doe not uproot the foundation of the contract, will not have a dissolving effect.
The case is related to the sale of land and the question before the court was about certain
supervening events which led to the performance difficult.

In 1941, someone for the appellant who was a nominee in the sale of land purchased land and
gave Rs. 101 as earnest money. But later on collective requestioned land. The company
cancelled the agreement or gave the option after Performance has not become impossible. SC
held that the doctrine of frustration is not applicable.

6) Intervention of war –

When a contract is frustrated, the party must restore benefit to the other, if he has received any
(section 65).

In the following cases, the doctrine of frustration may not apply:

i) Where a ship has to take a longer route because of the closure of normal routine (due to war)
causing inconvenience and loss to the shipper, held that there was no frustration.

ii) Similarly, Commercial hardships or difficulty – price rise, sudden depreciation of the
currency, it is not enough to frustrate the contract. Disappointed expectations do not lead to
frustration of the contract.

iii) Failure of one of the objects is also not the frustration of the contract.

iv) Completed transfers or executed contracts – Section 56 only covers executory contracts
(future contracts).

Krell v. Henry (1903)

Krell sued Henry for 50 pounds, the remaining balance of 75 pounds for which the defendant
rented a flat to watch the coronation of the King. Lower courts held in favour of the defendant
hence plaintiff appealed.

The contract did not have a reference to the coronation. The coronation did not take place as
King become ill. Therefore, the defendant refused payment. The defendant is excused for
performance as the object of the contract was frustrated. The purpose was understood by both
parties. Performance was not rendered impossible, since the defendant could remain in the flat.
But the defendant would not receive any benefit as the object was frustrated.