Of the Performance

of Contracts
SYMBIOSIS LAW SCHOOL, NOIDA
Obligation of parties to contracts
Section 37 of the Indian Contract Act, 1872 states:
"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.
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."
 Introduction
Section 37 states the duty of performance in general. A promisor under an obligation to
perform his promise under the contract, or at least to offer to perform it, i.e., to attempt to
perform it (Section 38). The section also states the extent to which the promises bind legal
representatives of deceased promisors.
Performance as a Mode of Discharge
Exact Performance
Nature Obligation
 Performance as a Mode of Discharge
A contract, being an agreement enforceable by law creates a legal obligation, which subsists until
discharged.
Performance of the promise or promises remaining to be performed is the principal and the most
usual mode of discharge.
Other modes of discharge are provided in Sections 62 to 67 and Sections 51 till 58 of the Indian
Contract Act, 1872.
- By proper performance, When performance becomes impossible or unlawful, by death of the
contracting party if the contract is personal in its character, by rescission, By novation, By remission, By
accord and satisfaction
Section 37 lays down the general principle that the parties to a contract are under a duty of
performing their respective promises.
Exact Performance
The basic rule is that the promisor must perform exactly what he
has undertaken to do.
The obligation to perform is absolute.
When a contract expressly or impliedly provides
that performance is to be done in a customary manner, it must be
carried out in that manner which is customary.
If there is deviation in performance, the aggrieved party is
entitled to sue for damages for breach (Section 73), or may also be
discharged from performance of his own promise (Section 54)
Unilateral and Bilateral Contracts
Offer of a promise for an act.
In the offer of a promise for a promise.
Nature obligation
Contractual obligations must be distinguished from liberties
and enabling provisions. In a contract of pledge of goods
for repayment of loan to the bank, the borrower was
required to insure the goods, and the bank was also
entitled to insure the goods at the risk and expense of the
borrower, but did not do so. The goods were destroyed.
The bank was not liable because the provision was an
enabling provision for the bank, the primary liability of
insuring the goods being that of the borrower.
 Effect of Death
• A contract which is such that the promisor must perform it in person, viz. Involving personal
considerations or personal skills or qualification, are by their nature not assignable.
• Legal representatives are bound by the promise to perform the contract in absence of
a contrary intention.
• A promise to perform the obligations under a contract of sale is not personal, and binds the
legal representatives of the vendor under Section 37 of the Indian Contract Act, 1872.
• Heirs of a guarantor are bound to fulfil the guarantee.
• A contract to pay a certain sum of money to a near relative during his life, the
consideration being natural love and affection and the document being registered, is
enforceable against the heirs of the deceased promisor, by virtue of Section 25(1), read with
Section 37, unless the contrary intention appears..
 Effect of Death

• The representatives of a promisor are bound to perform his contracts (except personal
contracts) to the extent of the assets of the deceased falling in their hands.
• LRs are not personally liable on the contracts of the deceased, but only to the extent of
the assets of the estate.
• LR's are bound to complete the performance at the demand of the other party so far
as the assets of the estate will allow.
'' Just as many of a man's rights survive him, so also do many of his liabilities; and these
inheritable obligations pass to his representative, and must be satisfied by him. Being,
however, merely the representative of another, he is not liable in propria persona, and his
responsibility is limited by the amount of property which he has acquired from the
deceased. (Salmond on Jurisprudence, 12th edn., pp. 443-44)
 Illustrations to Section 37
(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
A‟s representatives or by B.
Essentials of valid performance
1. It should be unconditional (Section 38)
2. It should be performance by promisor or by his representative (Section 40)
3. It should be performed at proper time specified in the agreement or within
a reasonable time. (Section 46-47)
4. It should be performed at the place specified in the agreement or at the
place to be appointed by the promisee. (Section 49)
5. The promisee must have reasonable opportunity to ascertain (a) the thing
offered and (b) whether the performance is of the whole or of a part
(Section 38(1)(3))
Section 38: 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, the promisor is not responsible for non-performance, nor does he thereby lose his rights
under the contract.
Every such offer must fulfil the following conditions:—
(1) it must be unconditional;
(2) 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;
(3) if the offer is an offer to deliver anything to the promisee, 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.
An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
Illustrations to Section 38
Illustration
• A contracts to deliver to B at his warehouse, on the 1st March, 1873,
100 bales of cotton of a particular quality. In order to make an offer of
a performance with the effect stated in this section, A must bring the
cotton to B‟s warehouse, on the appointed day, under such
circumstances that B may have a reasonable opportunity of satisfying
himself that the thing offered is cotton of the quality contracted for,
and that there are 100 bales.
Effect of refusal of party to perform promise
wholly: Section 39

“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.”
Illustrations to Section 39
• 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 wilfully absents
herself from the theatre. B is at liberty to put an end to the contract.
• 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 at the rate of 100 rupees for each night. On the sixth night A wilfully absents
herself. 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.
Section 39 and Anticipatory Breach of Contract

• An anticipatory breach is a breach of contract before the time of

performance. So, if a promisor denies to perform his promise and
signifies his unwillingness before the time for performance, then it is an
anticipatory breach of contract.
• Section 39 applies to executory contracts- where the time of
performance has not yet arrived, and not to executed contracts.
• Section 39 means that where a party to a contract refuses altogether to
perform or is disabled from performing his part of it the other side has a
right to rescind it.
 Illustrations
• Patio enters into a contract with Zeus on May 30, 2020. In the contract,
Patio agrees to sell his house to Zeus provided he receives a token amount
of Rs 5,00,000 from Zeus on or before June 30, 2020. However, on June 15,
2020, Zeus informs Patio that he will not be able to provide the token
amount on the said date, thereby expressing rejection of the contract.
• Patio enters into a contract with Zeus on June 01, 2020. As per the
contract, Patio agrees to sell his guitar to Zeus on June 10, 2020, for an
amount of Rs 5,000. However, he sells this guitar to Oliver on June 07,
2020. Hence, it is an anticipatory breach of contract due to Patio’s conduct.
 Types of Breach
• A breach is a failure by a party to fulfil the obligations under a contract. It is of
two types, namely,:
1. anticipatory breach and,
2. actual breach.
The three sets of circumstances giving rise to discharge of a contract by breach are:
(i) Renunciation of a party of his liabilities under it;
(ii) Impossibility of performance created by his own act; and
(iii) Total or partial failure or performance
Anticipatory Breach of Contract
• The anticipatory breach of contract that has affected and gave away immediate rights of
action upon the contracting parties thereto, was recognized as early as 1853 in the case
of:
Hochester v. De La Tour (1853) 2E &B 678:95RR 747: 118Er 922: 22LJQB 455-
Lord Campbell CJ ruled out the objection, and allowing the claim pointed out that a
contract is contract from the date it is made and not from the date that its performance is
due.
• However the principle also applies to contingent contract, as was the case in Frost v
Knight (1872) 7 Exch 111- CockBurn CJ held that the case falls within the principle of
Hochester v. De La Tour, hence the option is with the aggrieved party to sue immediately
or wait for the performance.
 Case Law
• In Hochster v. De La Tour, 95 RR 747
The defendant engaged the plaintiff as his courier on a continental tour from
June 01 for three months at GBP 10 a month. Before the scheduled day, the
defendant changed his mind and wrote to the plaintiff that the services were not
wanted. The plaintiff immediately, before June 01, sued the defendant for
breach of contract. The defendant contended that the plaintiff should have
waited till June 01 before bringing his action, as the contract could not be
considered be broken till then. It was held that the contract had been broken by
express renunciation, and the plaintiff was not bound to wait until the last day of
performance
Anticipatory Breach of Contract
• In 1957 case, Universal Cargo, Justice Delvin said:
“Anticipatory breach means that a party is in breach from the moment
that his actual breach becomes inevitable. Since the reason for the rule
is that a party is allowed to anticipate an inevitable event and is not
obliged to wait till it happens, it must follow that the breach which he
anticipates is of just the same character as the breach which would
actually have occurred if he had waited.”
 Refusal or Renunciation
• A renunciation may occur when one party refuses to perform his
obligations under the contract in some essential respect, either by
expressly so declaring it, or by words or conduct demonstrating an
intention not to perform it.
• It can also occur where one party declares that he is or will be unable
to perform his obligations under the contract in some material
respect.
Mode od Refusal or Renunciation
The promisor can convey his unwillingness either by:
• Expressing it in words (spoken or written)
• Implying it by his conduct
Refusal or Renunciation
• The following four key factors will be taken into consideration in determining whether
there has been a dismissal of a contract amounting to an anticipatory breach:
1. If there has been a clear case of refusal to perform contractual obligations that it
goes to the root of the contract.
2. The renunciation or repudiation to perform a contract cannot be conditional on
certain circumstances taking place. The refusal, therefore should be absolute.
3. When deciding whether there has been a sufficient refusal to perform contractual
obligations, it must be judged according to whether a reasonable person in the
position of the innocent party would regard the refusal as being clear and absolute.
Anticipatory Breach of Contract
• This law has been explained in plain and simple terms in the speech of
Viscount Simon LC in Heyman v Darwin Ltd 1942 AC 356 at p 361: (1942) 1
All ER 337 at p 341.
• It has been held by the Supreme Court in State of Kerala v Cochin Chemical
Refineries Ltd AIR 1968 SC 1316 that by refusing to advance the loan which
the state had undertaken to advance, its obligation to purchase groundnut
cake from the company did not come to an end. That repudiation just by
one party alone does not bring an end to the contract. It has to be
repudiation, on one side and acceptance of repudiation on the other.
Remedial Measures: Anticipatory Breach of
Contract

Specific
Damages Injunctions
Performance
 Actual Breach Of Contract
• While an anticipatory breach is before the time of performance, an actual breach of
contract is on the scheduled time of performance of the contract. An actual breach of
contract can be committed either:
1] At the time when the Performance of the Contract is Due
• Peter enters into a contract with John promising to deliver 50 bags of cotton to him on June
30, 2018. However, on the scheduled day, he fails to deliver the same. This is an actual
breach of contract. Also, this breach is at the time the performance of the contract is due.
2] During the Performance of the Contract
• An actual breach of contract can also occur when one party fails to perform his obligation,
during the performance of the contract. This refusal can be expressed in words or by action.
Effect of Death and Section 40 of ICA
Section 40. Person by whom promise is to be performed.—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. In other cases, the promisor or his
representatives may employ a competent person to perform it.
Illustrations
• (a) 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.
Khardah Company Ltd. v Raymond and Co. Pvt. Ltd., AIR 1962 SC 1810- Rights under a contract are
assignable unless the contract is personal in its nature or the rights are 9inacapable of assignment, in
case of goods covered by personal licenses, the buyer cannot assign his rights to a non-holder of a
license as the import licenses are personal.
• (b) A promises to paint a picture for B. A must perform this promise personally
 • Section 41- When a promisee accepts performance of
the promise from a third person, he cannot
afterwards enforce it against the promiser.
"Effect of • Acceptance of performance from a third person

accepting
involves waiver of right of performance by the
promisor.

performance • Under Section 41 of the Act when a promisee has

accepted performance of the promise from a third
person, the promisee cannot enforce it against the
from third promisor even if the promisor has neither authorised
nor ratified the act of third party.

person“- • Section 41 does not apply to executory contracts, but

only when a contract has in fact been performed by a
Section 41 third person.
• Section 41 will not apply where the payment made by
the third person arises not in contract, but under
liability in tort.
Section 42- Devolution of joint liabilities
Section 42: When two or more persons have made a joint promise, then, unless a
contrary intention appears by the contract, all such persons, during their joint lives,
and, after the death of any of them, his representative jointly with the survivor or
survivors, and, after the death of the last survivor, the representatives of all jointly,
must fulfil the promise.
• Section 42 provides that the liability of a joint promisor is joint and several. All
promisors are bound to perform the promise. On death of any of them, his
liability does not devolve by survivorship upon the surviving promisors, but upon
the representatives of the deceased promisors along with surviving promisors.
Section 43: Any one of joint promisors may be
compelled to perform
Section 43. Any one of joint promisors may be compelled to perform.—When two or more persons
make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel
any [one or more] of such joint promisors to perform the whole of the promise.
• Each promisor may compel contribution.—Each of two or more joint promisors 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.
• Sharing of loss by default in contribution.—If any one of two or more joint promisors makes default
in such contribution, the remaining joint promisors must bear the loss arising from such default in
equal shares.
Explanation.—Nothing in this section shall prevent a surety from recovering from his principal,
payments made by the surety on behalf of the principal, or entitle the principal to recover anything
from the surety on account of payments made by the principal.
 Illustrations
• (a) A, B and C jointly promise to pay D 3,000 rupees. D may compel either A or B or C to pay
him 3,000 rupees.
• (b) A, B and C jointly promise to pay D the sum of 3,000 rupees. C is compelled to pay the
whole. A is insolvent, but his assets are sufficient to pay one-half of his debts. C is entitled
to receive 500 rupees from A‟s estate, and 1,250 rupees from B.
• (c) A, B and C are under a joint promise to pay D 3,000 rupees. C is unable to pay anything,
and A is compelled to pay the whole. A is entitled to receive 1,500 rupees from B.
• (d) A, B and C are under a joint promise to pay D 3,000 rupees, A and B being only sureties
for C. C fails to pay. A and B are compelled to pay the whole sum. They are entitled to
recover it from C.
 Solve
• A, B, and C jointly promise to pay D rupees 3000. ________ can compel either of the three promisors
to pay him the amount stipulated in the promise.
• A, B and C promise D to pay him rupees 3000. In case C is unable to pay anything to D then the
amount owed by C must be borne in equal share by________. in case C is able to pay half of what he
is obliged to pay to D, the remaining amount which is _____ must be paid by _________ to________
• A, B and C jointly promised to pay Rs. 60,000 to D. A was compelled by D to pay the entire amount of
Rs. 60,000. Here _______________.
a) A can file suit against D for recovery of amount exceeding his share
b) A is entitled to recover Rs. 20,000 each from B and C
c) On payment by A, the contract is discharged and B and C are not liable to A
d) D is not justified here, and is liable to refund the entire amount to A
Section 44: Effect of release of one joint
promisor.
• Section 44. Effect of release of one joint promisor.—Where two or more
persons have made a joint promise, a release of one of such joint
promisors by the promisee does not discharge the other joint promisor
or joint promisors neither does it free the joint promisors so released
from responsibility to the other joint promisor or joint promisors
• The effect of a release of any of the joint promisors by the promisee does
not release or discharge the other joint promisors, nor does it affect the
right of such others to claim contribution from the joint promisor so
released.
Section 45-Devolution of joint rights.
• Devolution of joint rights.—When a person has made a promise to two
or more persons jointly, then, unless a contrary intention appears from
the contract, the right to claim performance rests, as between him and
them, with them during their joint lives, and, after the death of any of
them, with the representative of such deceased person jointly with the
survivor or survivors, and, after the death of the last survivor, with the
representatives of all jointly
 Illustration

• A, in consideration of 5,000 rupees, lent to him by B and C, promises

B and C jointly to repay them that sum with interest on a day
specified. B dies. The right to claim performance rests with B’s
representative jointly with C during C’s life, and after the death of C
with the representatives of B and C jointly
 Reading Material
• Avtar Singh, Contract and Specific Relief, 12th ed., EBC Pp. 358-366