Performance of Contract

Prepared by: Shrota Baral

Roll.no. 89
BALLB Fourth Semester
 Contents
• Introduction

• Importance

• Types of Performance of Contract

• Rules regarding performance of Contract

• Nepalese legal provisions

 Introduction
• An agreement must be made in respect of something which can be performed or capable of being
performed is an essential element for forming a valid contract.
• Performance of contract plays a significant role in the context of contract.

• This is the most usual mode of termination or discharge of contract.

• This mode provides the fulfillment to the respective parties to the contract either perform or offer to
perform their respective promises.
• The term ‘performance’ means to fulfill or execute something.

• The performance of contract implies fulfillment of the terms of the contract by the respective parties to
it.
• Section 521 of Muluki Civil code 2074, “Each party to a contract shall fulfill his or her obligation under
the contract.”
• A contract places a legal obligation upon the contracting parties to perform their mutual promises, and it carries on until the
discharge or termination of the contract.
• Performance of a contract refers to compliance of obligations created through a contract.

• “The parties to a contract must perform or offer to perform their respective promises, unless such performance is dispensed
with or excused by law.” Indian Contract Act
• The term ‘Performance of contract‘ means that both, the promisor, and the promisee have fulfilled their respective
obligations, which the contract placed upon them.
• For example, A visits a electric shop to buy a fan. The shopkeeper delivers the fan and A pays the price. The contract is said to
have been discharged by mutual performance.
• Supreme Court in Bhairav Prasad v. Chitwan Irrigation Project, NLJ 2046, p. 344. “The contract is automatically discharged,
when the specified purpose of the contract fulfilled by the parties.”
• Performance of contract must be exact and complete.

Re Moore & Landauer [1921] 2 KB 519 Court of Appeal

A contract for the sale of 3,100 tins of peaches described the tins as being packed in cases of 30. When they arrived the tins were
packed in cases of 24 although the agreed overall number of tins was supplied.

Held that the purchaser was entitled to reject the goods as they were not as described.
 Importance
• Discharge the contract in happy mode

• Encourage further contracts

• Creates greater profit and lesser loss to the parties

• Decreases unnecessary disputes

• Creates an opportunity for continuing good relationship

• Fulfills the objectives of contract

• Respects self created laws

 Types of Performance of Contract
• Actual performance

When a promisor to a contract has fulfilled his obligation in accordance with the terms of the
contract, the promise is said to have been actually performed.

Actual performance gives a discharge to the contract and the liability of the promisor ceases to
exist.

It is exact and complete in nature.

For example, A agrees to deliver 10 bags of cement at B’s factory and B promises to pay the
price on delivery. A delivers the cement on the due date and B makes the payment. This is actual
performance.
➢ Substantial Performance:

• This is where the work agreed upon is almost finished.

• The court then orders that the money must be paid, but deducts the amount needed to correct minor existing
defect.
• Substantial performance is applicable only if the contract is not an entire contract and is severable.

• The rationale behind creating the doctrine of substantial performance is to avoid the possibility of one party
evading his liabilities by claiming that the contract has not been completely performed.
• Hoenig v. Issacs(1952) CA

➢ Partial Performance:

• This is where one of the parties has performed the contract, but not completely, and the other side has shown
willingness to accept the part performed.

For example: If half of the work has been completed, half of the negotiated money would be payable. In case of
substantial performance, the party that has performed can recover the amount appropriate to what has been
done under the contract, provided that the contract is not an entire contract.
• Attempted performance/ Tender

The promisor must offer to perform his obligation under the contract to the promise.

This offer is called “tender of performance”.

It is then for the promisee to accept the promise.

It he doesn’t accept, the promisor is not responsible for non-performance, nor does he thereby
loses his right under the contract.

Example: ‘A’ enters into a contract to bring 10tons of wheat to ‘B’ at his Godown on 10th June.
‘A’ brings to the prescribed place and on the prescribed day during the business hours, but ‘B’
refuses to take the delivery of goods.

This is an attempted performance or tender.

 Types of Tender
1.Tender of Goods/services
If the promiser offers to deliver goods and services, but the promisee does not accept such delivery then it is
called tender of goods/services. 
In a contract of sale of goods, when the seller satisfies all requirements of a valid delivery and the buyer refuses
to accept the goods, the seller is discharged by such tender or performance. 
Therefore, the tender of goods or services has the following consequences:
• They need not be offered again.
• The promisor becomes entitled to sue the promisee for breach and
• The promiser gets rid of his liability.
2.Tender of money
If the promisor offers to pay money but the promisee does not accept, then it is said to be tender of money. It has
the following circumstances:
• The promisor does not get rid of his liability to pay money and
• The promisor will not responsible for the interest from the date of a valid tender.
 Requisites of a Valid Tender
1. Tender must be unconditional

2. Tender must be made in proper time and place

3. Reasonable opportunity must be given

4. Whole obligation must be tendered

5. Tender must be made to the proper person

6. Tender can be made to any one among joint promisees

7. Tender must be made in a proper form

8. Readiness and willingness of tenderer must be revealed

 Rules regarding Performance of Contract
• Types of performance of contract

• Who can demand performance of contract?

• Who has to perform contract?

• What to be performed?

• Mode of performance of contract

• Contract need not to be performed

 Who can demand performance of contract?

1. Promisee

It is only the promisee who can demand the performance of promise under a contract for a general rule is that ‘a
person cannot acquire rights under a contract to which he is not a party’ : TG. Venkataraman vs. State of Madras

Section 530: Only the parties to contract can demand its performance

2. Heirs

After death or loss of senses, heirs and legal representative can demand for performance except for contract of a
personal nature. section 528

3. Third Party

Where a contract is made for the benefit of third person, he can demand performance.

4. Joint Promisees

A contract may contain more than one promisee. In such case, they can demand joint performance of contract,
except when and otherwise provided for in contract.
 Who has to perform?

1. Promisor himself (Section 529)

2. Promisor’s Agent

3. Heirs

4. Third Person (Section 529(3))

5. Joint Promisors (Section 529(4))

 Terms and conditions to transfer of Rights and obligations

Section 529(2)

The following terms and conditions shall be fulfilled in order to transfer rights and obligations under a contract:

(a) Unless the contract otherwise provides for, the transfer shall be in written form,

(b) The transfer shall be unconditional,

(c) The transfer of rights or obligations is not prohibited by law or the contract,

(d) In the case of the transfer of rights and obligations, a notice along with its time limit shall be given to the
other party.
 What to be performed?

The promisor is bound to perform his promise by doing the same thing which he has promised to
do at the time of contract.

He is not entitled to fulfill his obligation by doing other thing than that promised.

When he does or attempts to do different things, the contract is not said to have been performed.

In case thing is done contrary to the promise, right of the promisee arises.

Example: ‘A’ promises to sell his house to ‘B’ for 15,00,000. Here, ‘A’ must fulfill his promise by
selling his house and not his tent.
 Modes of performance of Contract
1. Time and Manner of Performance
Time(When) : Ashmore and So v. Cox and Co.,(1899 QB 436)
Manner(How): CIT v. Ogale Glass Co.,(1955)
Within fixed time and manner.
Within and according to particular time and manner.
Within a reasonable time by a reasonable manner.
Section 523 and 525 of Multi Civil Code, 2074
2. Place of Performance
Section 524 of Muluki Civil Code, 2074
Where?
At fixed place
At the place of store of goods
At a particular place
At a reasonable place.
 Contract need not to be performed

527. Circumstances where a contract needs not be performed: In any of the following
circumstances, it is not necessary to perform any act under, or perform, a contract:
• (a)  If either party to a contract waives the other party from fulfilling the obligation under the
contract,

• (b)  If a voidable contract is voided by the party entitled to do so,

• (c)  If the contract cannot be performed for the reason of its breach by the other party,

• (d)  If it is not necessary to perform the act under the contract by operation of any provision of
this Part,

• (e)  If a contract which is unenforceable according to Section 531.

531. Discharge of contracts in the event of fundamental changes in circumstances:
(1) If it becomes impossible to perform a contract as a result of fundamental change in the circumstance existed at the time of conclusion of
the contract, the act according to the contract need not be performed.
(2) Without prejudice to the generality of sub-section (1), emergence of any of the following circumstances shall be deemed to constitute a
fundamental change in the circumstance existed at the time of conclusion of a contract:

(a)  If the contract becomes illegal and thereby it cannot be performed,
(b)  If it becomes impossible to perform the contract due to emergence of situations beyond human control such as war, flood, landslide,
fire, earthquake and volcanic eruption,
(c)  If the subject matter essential for the performance of the contract is destroyed or damaged, or exists no longer, or such a subject matter
could not be obtained,
(d)  If the contract is so concluded that its performance depends on the personal ability, skill or talent of a person, and the performance of
the contract becomes impossible by the reason that such a person dies or becomes insane or is incapable of performing the contract because
of physical or mental disability.

(3) Notwithstanding anything contained in sub-section (2), none of the following circumstances shall be deemed to constitute a fundamental
change in the circumstance existed at the time of conclusion of a contract:
(a)  If the performance of the contract has become difficult,
(b)  If the performance of the contract results in less profit or in loss,
(c)  If any party to the contract is dependent upon any third party who is not a party to the contract for its performance, and the third party
makes a default or becomes incompetent,
(d)  In the event of a strike or lockout,
(e)  If additional tax, fee or other revenue is required to be paid,
(f)  If a contract is concluded with more than one object and some of the objects cannot be fulfilled.
(4) In the case of emergence of any of the circumstances referred to in sub-section (3), the parties may, except
as otherwise provided for in the contract, negotiate to review or alter the terms and conditions of the contract.

(5) If the performance of a contract becomes impossible by the reason of a fundamental change in the
circumstance as referred to in sub-section (2), the following matters shall be governed as follows:

(a) A party who has received any amount paid by the other party in consideration of the contract, prior to the
occurrence of such a change in the circumstance, shall refund it to the other party,
(b)  Payment to be made or due from one party to the other party in consideration of the contract shall not be
payable after such a change in the circumstance.
(c)  The amount payable to each other shall be determined in consideration the act or amount already
performed or paid, if any, by one party to the other party before such a change in the circumstance, and one
party shall be entitled to recover reasonable expenses incurred by that party in consideration of the contract
from the other party.

(6) Notwithstanding anything contained elsewhere in this Section, the contracting parties may agree to fulfill
their respective obligations by continuing the performance of the contract after the end of the circumstance
under clause (b) of sub-section (2).
 Nepalese Legal Provision
Muluki Civil Code 2074, Section 521-534
521. Obligation under contract to be fulfilled
522. Reciprocal performance of contract: (1) If a contract is so concluded that the parties to the contract shall fulfill
their respective obligations simultaneously and one party demonstrates such conduct or intention that he or she is
not willing to fulfill his or her obligation materially, the other party need not perform his or her promise.
(2) If the contract fixes the order of priority for the fulfillment of any promise, the promise shall be fulfilled in that
order, and failing the fixation of such an order, the party who is liable to perform the promise first according to the
nature of the contract shall perform it first.
(3) If, in the case of a contract containing reciprocal promises, and performance of one promise depends on the
performance of the other promise, one party cannot perform the contract because of the failure of the other party to
perform his or her promise may recover the loss or damage caused by the failure of the other party to perform the
contract.
(4) If a contract concluded for reciprocal promises to be simultaneously performed pursuant to sub-section (1) and
one party prevents the other party from performing such a contract, the other party so prevented is entitled to
rescind the contract and also to recover the loss or damage, if any, caused to him or her in consequence of such
termination of the contract.
523. Time and manner for performance of contract

524. Place for performance of contract

525. Performance of contract deemed to be delayed

526. Time to be considered as essence of contract

527. Circumstances where a contract needs not be performed: In any of the following circumstances, it is not necessary to perform any act under, or perform, a
contract:
• (a)  If either party to a contract waives the other party from fulfilling the obligation under the contract,

• (b)  If a voidable contract is voided by the party entitled to do so,

• (c)  If the contract cannot be performed for the reason of its breach by the other party,

• (d)  If it is not necessary to perform the act under the contract by operation of any provision of this Part,

• (e)  If a contract which is unenforceable according to Section 531.

528. Assignment of rights and liabilities under a contract

530. Only the parties to contract can demand its performance

531. Discharge of contracts in the event of fundamental changes in circumstances

532. Facilities to be provided

533. Contract may be suspended or altered

534. Statute of limitation

 Incomplete performance will give no right to payment in a lump sum contract

• Cutter v. Powell(1795) CKB

Defendant promised to pay Cutter 30 guineas provided that he completes the work. Cutter
fulfills his duty. Since, Cutter dies before the fulfillment of his duty completely. Court held that the
defendant was not liable to pay the sum.
• Sumpter v. Hedges(1898) CA

Plaintiff contracted to build two houses for a lump sum. He doesn’t complete the contract and
the defendant completes the work by himself. Court held that plaintiff couldn’t recover anything
for incomplete work.
• Supreme Court has established in the case of Tirtharaj Kumari Rana- “except when it is
contrary to the respective obligations, no one can be escaped from contractual liability.”
• Supreme Court in a case held- “The contract is automatically discharged, when the specified
purpose of the contract fulfilled by the parties.” The party is said to have performed its
obligations when nothing is left for it to do.
• Thus, total performance of a contract must be exact and complete:

a. ‘Exact’, must match contractual obligations and

b. ‘Complete’, must be carried out to the end.

 References:
• Law of contract, Prof Dr. Shambhu Prasad Khanal

• Briefcase on Contract Law, Simon Salzedo & Peter Brunner

• Law of Contract, Sujan Dhakal

• The National Civil (Code) Act, 2074

• Law of Contract, Prof. Bibek Kumar Paudel

• https://accountlearning.com/performance-of-contract-meaning-types-of-performance/

• https://knoweco11.blogspot.com/2020/05/Types-of-Performance-of-Contract.html