Chapter 6: Performance of Contracts-I-Theory

Question 1

What is the meaning of performance?

Answer 1

Performance means fulfilling the promise made under the contract.

Question 2

Enlist two types of performance.

Answer 2

1. Actual performance.
2. Attempted (or Tendered or Offer) of Performance.

Question 3

What is actual performance?

Answer 3

If a promisor actually performs the promise, and promisee accepts it.

Question 4

What is Attempted (or Tendered or Offer) of Performance?

Answer 4

If a promisor offers to perform the promise in accordance with terms of contract, but promisee does not accept it.

Question 5

What are the Essentials of a valid Tender/Offer of Performance? (8 Points)

Answer 5

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.

Question 6

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

Answer 6

Tender is said to be unconditional when it is made in accordance with the terms of the contract.

Question 7

What are the Essentials of a valid Tender/Offer of Performance?
2. At proper time.

Answer 7

Tender must be made at specified time.

Question 8

What are the Essentials of a valid Tender/Offer of Performance?
3. At proper place.

Answer 8

Tender must be made at specified place.

Question 9

What are the Essentials of a valid Tender/Offer of Performance?
4. To proper person.

Answer 9

Tender must be made to the promisee or his agent.

Question 10

What are the Essentials of a valid Tender/Offer of Performance?
5. According to terms and conditions.

Answer 10

Tender should be made in accordance with the terms of the contract (e.g. Specified quantity/quality).

Question 11

What are the Essentials of a valid Tender/Offer of Performance?
6. Reasonable opportunity to inspect.

Answer 11

Promisor should give reasonable opportunity of inspection to promisee to check that goods offered are same as agreed.

Question 12

What are the Essentials of a valid Tender/Offer of Performance?
7. For whole obligation.

Answer 12

Tender must be for the whole obligation and not for a part of the obligation.
However, a minor deviation from the terms of the contract does not make tender invalid.

Question 13

What are the Essentials of a valid Tender/Offer of Performance?
8. Exact Amount in Legal tender.

Answer 13

In case of tender of money, it must be of exact amount in legal tender.

Question 14

What is effect of refusal/neglect to accept performance?
1. If tender of goods or services is refused?

Answer 14

• Contract becomes voidable at the option of Promiser.
  If he rescinds the contract, he is discharged from his liability
  i.e. He is not liable to deliver goods or services again.
• Promisor can claim damages as compensation.

Question 15

What is effect of refusal/neglect to accept performance?
2. If tender of money is refused?

Answer 15

• 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.

Question 16

What is the meaning of appropriation of payment?

Answer 16

Appropriation of payment means making allocation of current payment between previous debts.

Question 17

What are the rules for appropriation of payment? (3 & 3)

Answer 17

1. If debtor intimates (whether express or implied) which debts to settle, payment must be applied to discharge those debts.
2. If debtor does not intimate about which debt to settle, creditor can adjust any previous debt.
3. If no party makes appropriation, previous debts shall be adjusted in the order of time.
   - If debts occur on same day, they shall be adjusted proportionately.
   - If principal and markup both are due, then markup is settled first.
   - In rule 2 & 3 above, Time barred debt can also be adjusted but disputed debt cannot be adjusted.

Question 18

What is meant by discharge of a contract?

Answer 18

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

Question 19

Describe various modes of discharge of a contract
(or liabilities of parties).

Answer 19

(i) Discharge by performance.
(ii) Discharge by mutual agreement.
1. Alteration.
2. Novation.
3. Rescission.
4. Waiver.
5. Promisee’s Neglect/Refusal.
(iii) Discharge by impossibility of performance.
1. Initial Impossibility.
2. Supervening impossibility.
(iv) Discharge by breach of contract.

Question 20

Define discharge by performance. (How)

Answer 20

A contract can be discharged by actual performance.

Question 21

Under modes of discharge of contract, define alternation.

Answer 21

Alternation means a material change in the terms of a contract, with mutual consent of the parties.
Parties to the contract remain same.

Question 22

Under modes of discharge of contract, define novation. (3 points)

Answer 22

Novation means parties agree to substitute a new contract in place of old contract.
Parties to the new contract may also change.
After novation, parties cannot demand the performance of old contract.

Question 23

Under modes of discharge of contract, define recission.

Answer 23

If both parties agree to cancel the contract by mutual consent before the date of performance (without substitution of new contract), it is called Recission by mutual agreement.

Question 24

Under modes of discharge of contract, define remission.

Answer 24

Remission means acceptance of lesser consideration in place of original promise
(e.g. accepting a lesser amount of debt or extending time for performance of contract).

Question 25

Under modes of discharge of contract, define Waiver.

Answer 25

Waiver mean the person surrenders his legal right under the contract, thus other party is released from his obligation.

Question 26

Under modes of discharge of contract, define promisee’s neglect/refusal.

Answer 26

If promisee does not give promisor reasonable facilities for the performance of the contract, promisor is discharged by such neglect or refusal.

Question 27

Under modes of discharge of contract, define initial impossibility.

Answer 27

Initial impossibility means impossibility existed at time of making contract.
In case of initial impossibility, agreement is void ab-initio.

Question 28

Under modes of discharge of contract, define supervening impossibility.

Answer 28

Supervening impossibility means it becomes impossible to perform the contract after its formation, due to reasons beyond the control of promisor.
In case of supervening impossibility, contract becomes void.

Question 29

Under modes of discharge of contract, define discharge by breach of contract.

Answer 29

Breach of contract means a party willfully refuses or fails to perform his promise.

Question 30

Write down 5 examples causing supervening impossibility.

Answer 30

1. Destruction of subject matter after the contract.
2. 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.

Question 31

Write down 5 examples NOT causing supervening impossibility.

Answer 31

1. Strikes, Lockdowns and civil disturbances (unless agreed).
2. Default of a third party on whose work promisor relied.
3. Difficulty of performance.
4. Commercial impossibility (Contract becoming expensive or unprofitable).
5. Partial impossibility of some of the objects of contract.