Q50748 What are the rules regarding Performance of Contract?

Question based AU MBA BL Assignment Solution and other course

Answer:

A. Effect of Refusal of Party to Perform Promise Wholly (Sec 39).

Where a party to a contract has refused to perform the promise he has made or had disabled himself from performing his promise in its entirely, the promise may put an end to the contract, unless his acquiescence in the continuance of the contract has been conveyed either by words or by deeds ( Sec 39). Thus from the above it could be seen that the following two rights accrue to the aggrieved party- (i) to terminate the contract and (ii) to indicate by words or conduct that he is interested in its continuance.

Ex:- 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.

If A, after his absence on sixth night, comes on the seventh night and starts singing with B’s acquiescence,

i.e. tacit assent. B cannot now put an end to it, but B is entitled to compensation for the damage sustained by him through A’s failure to sing on the sixth night.

Who Can Demand Performance?

1. Promisee – stranger can’t demand performance of the contract.
2. Legal Representative – legal representative can demand Exception performance.
   • contrary intention appears from the contract
     • Contract is of a personal nature.
3.  Third Party – Exception to “Stranger to a Contract”

• Person by whom promise is to be performed Sec 40.

Any of the following parties may be liable for the performance of the contract:

1. Promisor: 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( Sec 40). This means contracts which involve the exercise of personal skill and diligence or which are founded on personal confidence between the parties must be performed by the promisor himself.

Illustration: Hari is a reputed goldsmith. He makes contract to make a golden necklace for Soha , in return of Rs 1,20,000. Here, the intention of the parties is that the promisor himself should fulfill the promise.

2.   Legal Representative- [does not involve personal skill and taste]

3. Third Party [Sec 41]:- Acceptance of promise from the third party:-

If the promisor accepts performance of a contract by a third party, he can’t after wards enforce the performance against the promisor although the promisor had neither authorized not ratified the act of the third party.

[In other meaning once the promise accepts the performe from a third person, he cannot compel the promisor the perform the contract again]

• Agent – In case of those contracts, which do not require personal confidence and skill, the promisor or his representative may employ a competent person to perform the contract.
• Performance in Case of 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 with surviving promisors, fulfill the promise.

·    Performed by All the Joint Promisor [42]

• All the joint promisor – liable
• Thus in India the liability of joint promisors is joint as well as several.
• In England, however the liability of the joint promisors is only joint and not several and accordingly all the joint promisors must be sued jointly.

·    Liability of Joint Promisor [43]

• Liability – joint as well as several [unless express A + B + C 900 D. D may compel either A, B or C or any of two of them or all of them.
• Where a joint promisor has been compelled to perform the whole promise, be may compel every other joint promisor to contribute equally with himself to the performance of the promise (unless a contrary intention appears from the contract).

6. If any one of the joint promisors make default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.

·      Sec 43 Lays Down Three Rules as Regards Performance of Joint Promises:

1. When two or more persons make a joint promise and there is no express agreement to the contrary, the promise may compel any one or more of the joint promisors to perform the whole of the promise. This means the liability of joint promisors is joint and several.

Eg: A, B, C jointly promises to pay D Rs 3000. D may compel either A or B or C to pay him Rs 3000.

2. When a joint promisor has been compelled to perform the whole of the promise, he may compel the other joint promisors to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract. (Sec 43).

Eg: A,B and C are under a joint promise to pay D Rs 600, A is compelled to pay the whole amount

D. He may recover Rs 200 each from B and C.

3. If any one of the joint promisors makes default in the contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. The same principle applies to the case of recovery of a loan by a creditor from the heirs who by operation of law become joint promisors after the death of the single promisor.

Eg: Ram, Shyam and Sohan are under a joint promise to pay Sita Rs 30,000. Sohan is unable to pay anything and Ram is c compelled to pay the whole. Ram is entitled to receive Rs 15000 from Shyam

• Release of One Joint Promisor (Sec 44): A release by the promise of any one of the joint promisors does not discharge the other joint promisors from liability. The released joint promisor also continues to be liable to the other joint promisors. In other words, where one of the joint promisors is released other joint promisors shall continue to be liable.

[In English law if one joint promisor – discharge then all the joint promisors discharge]

• Rights to Claim Performance of Joint [Devolution of Joint Rights] Sec 45: When a person has made a promise to several persons, then unless a contrary intention appears from the contract, the right to claim performance rests, with all of them. When one of the promise dies, it rests with his legal representatives jointly with the surviving promises. When all the promises die, it rests with their legal representatives jointly.
  • During their joint lives – all the joint promisors .
  • After the death of any of them – The representative of such deceased promise jointly with the surging promise .With the representatives of all jointly.

Ex:- ‘A’ in consideration of Rs 50,000 lent to him by ‘B’ and ‘ C’ promises ‘B’ and ‘C’ jointly to replace them that sum with interest on a day specifies.

‘B’ dies. The right to claim performance rests with ‘B’ representatives jointly with ‘c’ during ‘C’ life.

And after ‘C’s death with the representatives of ‘B’ and ‘C’ jointly.

·    Time Place and Manner of Performance [46–50]

The parties are free to decide the time, place and manner of performance of a promise made under a contract. Usually, the contract is performed, within the usual business hours and proper place. In general, the place and date of the performance will be the same, as has been specified in the contract. However, rules governing the decision as to time, place and manner of performance of promise are given in Section 46-50 of this Act.

They are as under:

1. No Time is Specified for Performance [Sec 46]: Where, by the contract, a promisor is to perform his promise without application by the promise, and no time for performance is specified, the engagement , must be perfomed within a reasonable time.

Time of performance is not specified + promisor agreed to perform without, a demand from the promise the performance must be made within a reasonable time. Reasonable time – in each particulars case – a question of fact.

2. Time Specified But Hour Not Mentioned [47]: Time of performance specified + promisor agreed to perform without application by the promisee

Performance must perform on the day fixed during the usual business hours and at the place at which the promise ought to be performed.

Illustration: Anta promises to deliver goods at Banta’s warehouse on the first January. On that day Anta brings the goods to Banta’s warehouse but after the usual hour for closing it and they are not received. Anta has not performed his promise.

3. Where Time is Fixed and Application to Be Made [48] Proper place and within the usual hour of business Promisee to apply for performance

Illustration: A makes promise to supply 500 tons of groundnut oil to B, on 10 December usual hours of business are 10 A.M to 8 P.M. Demand by B to make the delivery of the oil tins at 12 in the night is not proper. Hence, A can refuse for supply of oil tins.

4. Performance of Promise Where no place is Specified and No Application is to be Made by the Promise [49]: When a promise is to be performed without application by the promise, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promise to appoint a reasonable place for the performance of the promise, and to perform it at such place.

Illustration: A undertakes to deliver 1,000 quintals 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 [50]: The performance of any promise may be made in any manner, or at any time which the promise prescribes or sanctions

Ex: ‘A’ desires ‘B’ who owes him Rs 10,000 to send him a promissory note for Rs 10,000 by Post. The debt is discharged as soon as ‘B’ puts into the post a letter containing the promissory note duly addressed to ‘A’.

·  Performance of reciprocal promises (Section 51-58):

Reciprocal Promise: “Promises which form the consideration or part of consideration for each other as called reciprocal promises” (Sec 2(f)). They are also known as mutual promises in which promises are exchanged for promises by the parties.

Contract may be unilateral or bilateral. In unilateral contract, when a party fulfills its promise, only another party is required to fulfill its promises. However, in bilateral contracts, both the parties are left with the responsibility to fulfill their respective promises. This is called, reciprocal promises.

Illustration: Ram promises Mohan to pay a monthly salary of Rs. 5000 in return for his promise to work as a salesman in his shop. Here, Ram and Mohan are making reciprocal promises, Mohan is promising to work as salesman in consideration of a promise to pay a salary of Rs 5,000.

Lord Mansfield in Jones V Barkley, [(1781) Dough 659] classified reciprocal promises into three categories:

1. Mutual and Independent:- Such promises all to be performed by each party independently without waiting for the other party to perform his promise can’t excuse himself on the ground of non- performance by the default party.

2. Mutual and Dependent: – Sue damage. The performance of promise by one party depended on the prior performance of the promise by other party.

[The party at fault becomes liable to pay compensation to the other party may sustain by the non performance of the contract – [54]

Illustration: X agrees with Y to sell certain goods for cash. Here, both X and Y are required to perform their promises simultaneously.

3. Mutual and concurrent: – when reciprocal promises are to be performed simultaneously a promisor need not perform his part unless the promise is ready and willing to perform [51]

Rules as to Performance of Reciprocal Promises: These are contained in Sections 51 to 54 and 57&58.

1. Simultaneous Performance of Reciprocal Promises (Sec 51): When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promise is ready and willing to perform his reciprocal promise.

Illustration: X and Y contract that X shall deliver car to Y at a price to be paid by installments, the first installment to be paid on delivery. X need not deliver, unless Y is ready and willing to pay the first installment on delivery and similarly. Y need not pay the first installment, unless X is ready and willing to deliver the goods on payment of the first installment.

2. Order of Performance of Reciprocal Promises (Sec 52): Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they must be performed in that order; and where the order is not expressly fixed by the contract, they must be performed in that order which the nature of the transaction requires.

Illustration: 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.

3. Effect of One Party Preventing Another From Performing Promise (Sec 53): When a contract contains reciprocal promises, it may happen that one party to the contract prevents the other from performing his promise. In such a case, the contract become voidable at the option of the party so prevented, and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract.

Illustration: Nishi makes contract to paint a picture for Radha, for Rs.2, 000. Afterwards, Radha refuses to take the picture, even before its completion. In this situation, Nishi can claim compensation for the loss sustained, due to non-performance of the contract.

4. Effect of Default as to Promise to Be Performed First (Sec 54): Where the nature of reciprocal promises is such that one of them cannot be performed till the other party has performed his promise then if the latter fails to perform it, he cannot claim the performance of the promise from the other. In such a case, 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.

Illustration: X promises Y to sell him one hundred bales of merchandise, to be delivered next day, and Y promises X to pay for them within a month. X does not deliver according to his promise. Y’s promise to pay need not to performed, and X must make compensation.

5. Reciprocal Promise to Do Things Legal and Also Other Thing Illegal (Sec 57): Where persons reciprocally promise, firstly, to do certain things which are legal, and secondly, under specified circumstances, to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement.

Illustration: A contract was made to appoint Satish as Manager in Gunn & Company, on monthly payment of Rs. 20,000. However, it was also stated in the contract that if Satish manages tax evasion and smuggling activities also, he will get monthly salary of Rs 22,000. In it, the first part is, the contract and second part is, void agreement.

6. Alternative Promise, One Branch Being Illegal ( Section 58) : In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced by law and not the other one.

Illustration: Nazir makes agreement to pay Rs. 2 lacs to Sonal and in return of it, Sonal will supply him either wheat or the smuggled opium. Here, the contract for supply of wheat is valid, but agreement for supply of smuggled opium is, void. Only the agreement for supplying the wheat is enforceable by law.

7. Contract in Which Reciprocal Promises are Independent: In various contracts, every party has the right to perform its respective promise, without waiting for performance by another party. However, any party claim to compensate loss sustained, due to non-performance of the contract, by another party.

Illustration: X pays the price of rice to Y on 12 November, whereas Y will deliver the goods on 20 November. Both these are independent reciprocal promises and each party can claim, from each other the compensation of loss due to non- performance of the promise.