Performance of a Contract - I Flashcards
Ch # 6
PERFORMANCE OF A CONTRACT
A contract is said to have been performed when the parties to a contract either perform or offer
to perform their respective promises.
The parties to a contract must either perform, or offer to perform their respective promises
(unless it is dispensed with or excused under the provisions of this Act, or of any other law)
Types of performance
Actual performance26
When the promisor has made the performance in accordance with the terms of the contract and
is accepted by the promisee it is called an actual performance.
Attempted performance27
When promisor has made an offer of performance but the offer of performance of promisor is
not accepted by the promisee. Attempted performance is also known as tender.
Essentials of a valid tender
An offer of performance is valid if it fulfils following conditions:
▪ It must be unconditional; and
▪ It must be made at a proper time; and
▪ It must be made at a proper place; and
▪ The promisee may have a reasonable opportunity of determining that the promisor is able
and willing to do the whole of promise; and
▪ Promisee must have a reasonable opportunity of seeing that the thing offered is the same as
was promised.
▪ An offer to one of several joint promisees has same legal consequences as an offer to all
other Rules of Performance
▪ If offer of performance has not been accepted by primisee the promisor is not responsible
for non-performance, nor does he thereby lose his rights (of compensation and rescission)
▪ Promises bind the representatives of the promisors in case of the death of such promisors
before performance, unless a contrary intention appears (e.g. contract of personal nature)
▪ 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 willingness in its continuance)
APPROPRIATION OF PAYMENT
Appropriation of payment means allocation of payment to a particular debt or debts where a
debtor owes several distinct debts to one person.
Rules regarding appropriation of payment
Debt to be discharged is indicated28
The payment, if accepted must be applied accordingly.
Debt to be discharged is not indicated
The creditor has option to apply the payment to any lawful debt due from the debtor
(even if it is a time barred debt; but he cannot apply to a disputed debt)
Neither party makes an appropriation
Payment shall be applied in discharge of debts in order of time, whether or not they are time
barred. If debts are of equal standing, payment be applied in discharge of each proportionately
If principal and markup both are due, then mark-up is settled first and then principal is settled.
CONTRACTS WHICH NEED NOT BE PERFORMED (DISCHARGE OF CONTRACT)
A contract is said to be discharged either by performance or when contractual relations between
the parties to a contract are terminated or comes to an end otherwise.
Discharge by Agreement or Consent
▪ If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it,
the original contract need not be performed (i.e. Novation, Recission or Alteration)
▪ A promisee may dispense with or remit, wholly or in part, the performance of the promise
made to him, or may extend the time for such performance, or may accept instead of it any
satisfaction which he thinks fit (i.e. Waiver and Remission)
Discharge due to Promisee refusal or neglect
If any promisee neglects or refuses to afford the promisor reasonable facilities for performance,
the promisor is excused by such neglect or refusal as to any non-performance caused.
Discharge by Impossibility of Performance
▪ An agreement to do an act impossible in itself is void.
▪ If contract is valid at time of formation and subsequently becomes illegal or impossible to
perform (due to some event which the promisor could not prevent), contract becomes void
▪ If promisor hides the impossibility, he is liable to compensate the promisee for any loss.
▪ Every person is bound to restore any benefit received or compensated earlier
If an agreement is proved void, or a contract becomes void, anyone having received any advantage
under that is bound to restore it, or to make compensation to the person from whom he received.
Acceptable grounds of subsequent impossibility or illegality:
▪ If subject matter is destroyed32 after formation of contract.
▪ Death or personal incapacity33 in contracts of personal nature
▪ On declaration of war34 contracts with alien enemies are suspended or declared void.
▪ If that particular state of thing which forms basis of a contract ceases to exist or occur.
Not acceptable excuse from performance on account of supervening impossibility:
▪ If the performance of a contract becomes difficult36, more costly or less beneficial then
that agreed at the time of its formation
▪ When the contract becomes commercially unviable37 or non-profitable
▪ On default of a third party38, on whose work the promisor is relying
▪ Strikes, lockouts and civil disturbances.
39
▪ Partial impossibility of some of the objects of the contract.
Consequences of rescission of voidable contract
▪ Rescission of a voidable contract may be communicated in same manner, and with same
rules, as apply to the communication or revocation of a proposal.
▪ When a person rescind a voidable contract, other party need not perform his promise
▪ Party rescinding a voidable contract shall (if have received any benefit) restore such benefit
