PERFORMANCE OF

CONTRACT
To be discussed
• Performance of contract
• Discharge of contracts
• Breach of contracts
• Remedies for breach of contract
OBLIGATIONS OF PARTIES TO
CONTRACTS – Sec 37
The 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 this Act, or of any other law.

Actual Performance
• Where a party to a contract has done what he had undertaken to do or either
of the parties have fulfilled their obligations under the contract within the time
and in the manner prescribed
• X borrows Rs 5,00,000 from Y with a promise to be paid after 1 month. X
repays the amount on the due date. This is actual performance

Offer to perform or attempted performance or tender of performance

• It may happen sometimes, when the performance becomes due, the promisor offers to
perform his obligation but the promisee refuses to accept the performance.
• 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
OBLIGATIONS OF PARTIES TO
CONTRACTS – Sec 37
Promises bind the representatives of the promisors
in case of the death of such promisors before
performance, unless a contrary intention appears
from the contract.
• (a) A promises to deliver goods to B on a certain day on
payment of Rs. 1,000. A dies before that day. A’s
representatives are bound to deliver the goods to B, and B is
bound to pay the Rs. 1,000 to A‟s representatives.
• (b) A promises to paint a picture for B by a certain day, at a
certain price. A dies before the day. The contract cannot be
enforced either by Ass representatives or by B.
By whom contracts must be performed
BY PROMISOR
• If it appears from the nature of the case that it was the intention of
the parties to any contract that any promise contained in it should be
performed by the promisor himself, such promise must be performed
by the promisor.
• A promises to pay B a sum of money. A may perform this promise,
either by personally paying the money to B, or by causing it to be paid
to B by another; and if A dies before the time appointed for payment,
his representatives must perform the promise, or employ some
proper person to do so

BY OTHERS
• In other cases, the promisor or his representatives may employ a
competent person to perform it. It can be an agent, legal
representative, third persons, joint promisors
• A promises to paint a picture for B and this must be performed by the
promisor himself
EFFECT OF REFUSAL TO
ACCEPT OFFER OF
PERFORMANCE
• Where a promisor has made an offer of performance to the promisee, and
the offer has not been accepted, then the promisor is not responsible for
non performance, nor does he thereby lose his rights under the contract
• Every such offer must fulfill certain conditions which are as follows,
namely:
• (i) it must be unconditional;
• (ii) it must be made at a proper time and place, and under such
circumstances that the person to whom it is made may have a reasonable
opportunity of ascertaining that the person by whom it is made is able and
willing there and then to do the whole of what he is bound by his promise
to do;
• (iii) if the offer is an offer to deliver anything to the promisee, then the
promisee must have a reasonable opportunity of seeing that the thing
offered is the thing which the promisor is bound by his promise to deliver.
EFFECT OF A REFUSAL OF
PARTY TO PERFORM
PROMISE
• When a party to a contract has refused to perform, or disabled
himself from performing, his promise in its entirety, the promisee
may put an end to the contract, unless he has signified, by words or
conduct, his acquiescence in its continuance.
• A, a singer, enters into a contract with B, the manager of a theatre,
to sing at his theatre two nights in every week during the next two
months, and B engages to pay her 100 rupees for each night’s
performance. On the sixth night A willfully absents herself from the
theatre. B is at liberty to put an end to the contract
• With the assent of B, A sings on the seventh night. B has signified his
acquiescence in the continuance of the contract, and cannot now
put an end to it, but is entitled to compensation for the damage
sustained by him through A’s failure to sing on the sixth night.
TIME AND PLACE FOR
PERFORMANCE OF THE
PROMISE
Where no application is to be made and no time is
specified
• the engagement must be performed within a reasonable time

Where time is specified and no application to be

made
• 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
• If the delivery of goods is offered say after sunset, the promisee
may refuse to accept delivery, for the usual business hours are
over
TIME AND PLACE FOR
PERFORMANCE OF THE
PROMISE
Where application is to be made and time is specified
• it is the duty of the promisee to apply for performance at a proper
place and within the usual hours of business

No place fixed for performance, no application

• 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
• A undertakes to deliver a thousand maunds of jute to B on a fixed
day. A must apply to B to appoint a reasonable place for the
purpose of receiving it, and must deliver it to him at such place
TIME AND PLACE FOR
PERFORMANCE OF THE
PROMISE
Performance in manner or at
time prescribed or
sanctioned by promisee
• The performance of any promise
may be made in any such manner, or
at any time which the promise
prescribes or sanctions.
Discharge of Contract

By performance or tender

By mutual consent

By subsequent impossibility

By operation of law

By breach
Discharge by performance
• It takes place when the parties to the contract fulfill
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.
• A contracts to sell his car to B on the agreed price.
As soon as the car is delivered to B and B pays the
agreed price for it, the contract comes to an end by
performance
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 rescind or remit or alter it, the
original contract need not be performed
• A owes B Rs. 1,00,000. A enters into an agreement
with B and mortgage his (A’s), estates for Rs. 50,000 in
place of the debt of Rs. 1,00,000. This is a new
contract and extinguishes the old.
• A owes B Rs. 5,00,000. A pays to B Rs. 3,00,000 who
accepts it in full satisfaction of the debt. The whole is
discharged.
NOVATION
• 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.
• A owes B Rs. 100,000. A, B and C agree that C will
pay B and he will accept Rs. 100,000 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.
RESCISSION
• 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.
ALTERATION
• Effect of alteration of contract: Where the parties to a
contract agree to alter it, the original contract is
rescinded, with the result that it need not be
performed.
• 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. The parties to the contract
remains the same in alteration, but in novation they
may change too.
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 non-occurrence of particular state of
things, which was naturally contemplated for performing the
contract, as a result of some personal incapacity like
dangerous malady;
• (d) the declaration of a war (Section 56).
Examples
• A agrees with B to discover a treasure by magic.
The agreement is void due to initial impossibility.
• A enters into a contract with B for doing a dance
performance. Before the time fixed for the
performance, A goes mad. The contract becomes
void.
• A contracts to act at a theatre for six months in
consideration of a sum paid in advance by B. On
several occasions A is too ill to act. The contract to
act on those occasions becomes void.
Discharge of contract
Discharge by operation of law:
• A contract may be discharged by operation of law which includes by
death of the promisor, by insolvency etc

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
Breach of Contract

Breach means failure of a party to

perform his or her obligation under a
contract

Breach of contract may arise in two ways:

• Anticipatory breach of contract
• Actual breach of contract
ANTICIPATORY BREACH OF
CONTRACT
An anticipatory breach of contract is a breach
of contract occurring before the time fixed for
performance has arrived.

Anticipatory breach of a contract may take

either of the following two ways:
• Expressly by words spoken or written, and
• Impliedly by the conduct of one of the parties
Examples
Expressed Breach of Contract
• Where A contracts with B on 15th July, 2016 to sale his
car for a specified sum on 14th August, 2016 and on 30th
July informs B, that he will not be able to sale the said car
on 14th August, 2016, there is an express breach of the
contract

Implied Breach of Contract

• Where A contracts with B on 15th July, 2016 to sale his
car for a specified sum on 14th August, 2016 and on 30th
July he has sold the car to C, there is an implied breach of
the contract
Consequences of Anticipatory
Breach
• The promisee is excused from performance or from further
performance
• He further gets two options
• To either treat the contract as “rescinded and sue the other party
for damages from breach of contract immediately without waiting
until the due date of performance;
• He may elect not to rescind but to treat the contract as still
operative, and wait for the time of performance and then hold the
other party responsible for the consequences of non-performance.
But in this case, he will keep the contract alive for the benefit of the
other party as well as his own, and the guilty party, if he so decides
on re-consideration, may still perform his part of the contract and
can also take advantage of any supervening impossibility which may
have the effect of discharging the contract.
Example

A breached the contract by not suppling the goods

to B. B did not accept the refusal, but continued the
demand for the goods. Thereafter, a war broke out
and performance became illegal. It was held, that
the contract was discharged and B could not sue for
damages

[Avery v Bowen (1856)]

ACTUAL BREACH OF
CONTRACT
Refusal to perform the promise on the scheduled
date

Actual breach of contract may be committed

• At the time when the performance of the contract is due
• Where A contracts with B on 15th July, 2016 to sale his car for
a specified sum on 14th August, 2016. On 14th August, A fails
to deliver the said car on 14th August, 2016.
• During the performance of the contract
• A was to supply 100 TVs to B over a period of 6 months. After
3 months, A stopped supplying the TVs.
REMEDIES FOR BREACH OF
CONTRACT
REMEDIES Rescission of Contract

Suit for Damages

Suit for specific performance

Suit for Injunction

Suit upon quantum meruit

Rescission of Contract
• When a contract is broken by one party, the other
party may treat the contract as rescinded.
• In such a case he is absolved of all his obligations
under the contract and is entitled to compensation
for any damages that he might have suffered.
• Where A contracts with B on 15th July, 2016 to sale his
car for a specified sum on 14th August, 2016. On 14 th
August, A fails to deliver the said car on 14th August,
2016, B is discharged of his obligations to pay to B.
• The party is entitled to compensation for any
damages that he might have sueffered.
Suit for Damages

Ordinary Damages

Special Damages

Vindictive, or Punitive, or Exemplary Damages; and

Nominal Damages
Ordinary Damages
• When a contract has been broken, the party who suffers
by such breach is entitled to receive, from the party who
has broken the contract, compensation for any loss or
damage cause to him thereby, which naturally arose in the
usual course of things from such breach, or which the
parties know, when they made the contract, to be likely to
result from the breach of it
• A agrees to sell to B bags of rice at Rs. 5,000 per bag,
delivery to be given after two months. On the date of
delivery, the price of rice goes up to Rs. 5,500 per bag. A
refuses to deliver the bags to B. B can claim from A Rs. 500
as ordinary damages arising directly from the breach.
Ordinary Damages
Such compensation is not to be given for any
remote and indirect loss or damage sustained by
reasons of the breach. (Section 73 of the
Contract Act and the rule in Hadley vs.
Baxendale).
HADLEY vs. BAXENDALE-
Facts
• The crankshaft of P’s four mill had broken. He gives it to D, a common
carrier who promised to deliver it to the foundry in 2 days where the new
shaft was to be made.
• The mill stopped working, D delayed the delivery of the crankshaft so the
mill remained idle for another 5 days.
• P received the repaired crankshaft 7 days later than he would have
otherwise received.
• Consequently, P sued D for damages not only for the delay in the
delivering the broken part but also for loss of profits suffered by the mill
for not having been worked.
• The court held that P was entitled only to ordinary damages and D was not
liable for the loss of profits because the only information given by P to D
was that the article to be carried was the broken shaft of a mill and it was
not made known to them that the delay would result in loss of profits.
Special damages
• Where a party to a contract receives a notice of special circumstances
affecting the contract, he will be liable not only for damages arising
naturally and directly from the breach but also for special d‘A’
delivered a machine to ‘B’, a common carrier, to be conveyed to ‘A’s
mill without delay.
• ‘A’ also informed ‘B’ that his mill was stopped for want of the
machine. ‘B’ unreasonably delayed the delivery of the machine, and
in consequence ‘A’ lost a profitable contract with the Government.
• In this case, ‘A’ is entitled to receive from ‘B’, by way of
compensation, the average amount of profit, which would have been
made by running the mill during the period of delay. But he cannot
recover the loss sustained due to the loss of the Government
contract, as ‘A’s contract with the Government was not brought to
the notice of ‘B’
Vindictive or Exemplary damages

These damages may be awarded only in

two cases -
• (a) for breach of promise to marry because it
causes injury to his or her feelings; and
• (b) for wrongful dishonor by a banker of his
customer’s cheque because in this case the injury
due to wrongful dishonour to the drawer of
cheque is so heavy that it causes loss of credit and
reputation to him.
Nominal damages

Nominal damages are awarded where the plaintiff

has proved that there has been a breach of
contract but he has not in fact suffered any real
damage.
It is awarded just to establish the right to decree for
the breach of contract.

The amount may be a rupee or even 10 paise

Suit for Specific Performance

Suit for specific performance:

• Where damages are not an adequate remedy in the case of breach of contract, the
court may in its discretion on a suit for specific performance direct party in breach,
to carry out his promise according to the terms of the contract.

Earlier, specific performance was given under tow circumstances

• Where monetary compensation was inadequate or
• The extend of damage caused could not be ascertained

The Specific Relief (Amendment) Act, 2018 has reduced the wide
discretion available to courts on granting specific performance
Specific Relief (Amendment) Act,
2018
Only 4 categories of contracts cannot be
specifically enforced
• Contract where a party has obtained ‘substituted
performance’
• Contract involving performance of a continuous duty
which cannot be supervised by courts
• Contract so dependent on the personal qualifications of
the parties that the court cannot enforce specific
performance on material terms; and
• Contract of a determinable nature
Suit for Injunction

Where a party to a contract is negating

the terms of a contract, the court may by
issuing an ‘injunction orders’, restrain
him from doing what he promised not to
do
• A, a trainer, agreed to train for a particular
organization for a year. But he enters into contract
with other organization too. A can be restrained by
an injunction
Quantum Meruit
Where one person has rendered service to another in circumstances
which indicate an understanding between them that it is to be paid for
although no particular remuneration has been fixed, the law will infer a
promise to pay.

For the application of this doctrine, two conditions must be fulfilled:

• (1) It is only available if the original contract has been discharged.

• (2) The claim must be brought by a party not in default

A agrees to deliver 100 bales of cottons to B at a price of Rs.1000 per

bale. The cotton bales were to be delivered in two installments of 50
each. A delivered the first installment but failed to supply the second. B
must pay for 50 bags