Chapter 6: Performance of Contracts – I

Question 1

What is meant by “Performance” and what are its Types?

Answer 1

Performance means fulfilling the promise made under the contract.

There are two types of performance:
1. Actual Performance:
2. Attempted (or Tendered or Offer of) Performance:

[Chapter 6 LO 1]

Question 2

What are the Essentials of a valid Tender/Offer of Performance?

Answer 2

1. Unconditional.
2. At Proper Time.
3. At Proper Place.
4. To Proper Person.
5. According to Terms and Conditions.
6. Reasonable Opportunity to inspect.
7. For Whole Obligation.
8. Of Exact Amount and in Legal Tender.

[Chapter 6 LO 1]

Question 3

What is the effect on contract if Promisee refuses Tender of goods or services?

Answer 3

 Contract is voidable at the option of Promisor. If he rescinds the contract, he is discharged from his liability.
 Promisor can claim damages as compensation.

[Chapter 6 LO 2]

Question 4

What is the effect on contract if Promisee refuses Tender of money?

Answer 4

 Promisor is not discharged from his liability i.e. he is still liable to pay money.
 However, promisor is not liable to pay the interest for delay in payment.

[Chapter 6 LO 2]

Question 5

What are rules of “Appropriation of Payment”?

Answer 5

1. If debtor intimates, payment must be applied to those debts.
2. If debtor does not intimate, creditor can adjust any previous debt (including time barred, but not disputed).
3. If neither party makes appropriation, previous debts shall be adjusted in the order of time (including time barred, but not disputed).
4. If debts occurred on same day, they shall be adjusted proportionately.
5. If principal and markup both are due, then markup is settled first.

[Chapter 6 LO 3]

Question 6

What is meant by Discharge of a Contract.?

Answer 6

Discharge of a contract means rights and liabilities of parties (under the contract) come to an end.

[Chapter 6 LO 4]

Question 7

List down Modes of Discharge of a Contract.

Answer 7

1. Discharge by Performance.
2. Discharge by Mutual Agreement:
   a. Novation.
   b. Alteration.
   c. Rescission by mutual agreement.
   d. Remission.
   e. Waiver.
   f. Promisee’s neglect/refusal.
   3.** Discharge by Impossibility of Performance:**
   a. Initial Impossibility.
   b. Supervening Impossibility.
3. Discharge by Breach of contract.

[Chapter 6 LO 4]

Question 8

Give some examples of events causing Supervening Impossibility:

Answer 8

1. Destruction of Subject Matter after the contract.
2. Death or Personal incapacity if contract depends on personal skill or ability.
3. Parties become alien enemies on declaration of war.
4. Contracts become illegal due to change of law.
5. Non-existence or non-occurrence of a particular state of things necessary for performance.

[Chapter 6 LO 4]

Question 9

Give some examples of events NOT causing Supervening Impossibility.

Answer 9

1. Strikes, Lockouts and Civil Disturbances
2. Default of a Third Party on whose work promisor relied
3. Difficulty of Performance
4. Commercial Impossibility
5. Partial Impossibility of some of the objects of contract

[Chapter 6 LO 4]