When a Contract considered to be performed?

Contract Money Trade Handshake Law Insider

By Nirupam Deo

Published on: March 17, at 09:40 IST


Chapter IV of Indian Contract Act (Section 37-67) deals with the performance of the Contract. Under this article, we shall discuss these sections in detail, commiserating all its intricacies in-depth, looking into some interesting case laws and talking about its various variants.

In this Article, we are going to discuss the procedure of performance of Contract.

Performance of Contract

  • Section 37: Obligations of parties to Contract.

“The parties to a Contract should either perform, or request to perform, their respective promises unless such performance is administered with or pardoned under the prerequisite of this Act, or any other law.

Promises bind the proxy of the promisor in case of the death of such promisors before performance, unless a contrary intention appears from the Contract.”

Whenever a Contract is made, the parties of the Contract are obliged to perform their end of the bargain. Notwithstanding to this causes the parties to lend penalties for the same.

For example

  • A promises to give 100 tonnes of Sugarcane to B for Rs. 1 Lakh. In this case, A is bound to deliver the sugarcanes and B is bound to pay him the said amount.
  • A promises to teach a certain section in a certain School in exchange for some fixed amount. A dies. Now this Contract cannot be performed by A or his representatives

In the case of A.R Venkatasami Naicker Vs A.R.V Jaganathan[i], the first petitioner’s wife died who was forlorn with the consideration of Rs. 30 thousand. It was contended that the legal heirs to the estate must pay the consideration and the Judge held that indeed now the responsibility falls on the Legal heirs.

  • Section 38: Effect of refusal to accept an 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 been 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 the numerous seam promisee’s has the exact legal effects as an offer to all of them.

A promisor doesn’t need to complete his end of the bargain if they offer ain’t accepted by the promisee. But if it is accepted, it becomes a duty of the promisor to fulfil his end of the bargain.

For example, A promised to deliver sugarcane to B after a week from the said agreement. A is dutybound to deliver the goods and B is dutybound to pay him.

  • Section 39: Effect of refusal of a party to perform promise wholly.

“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.”

For example

A, a teacher promised to teach in School XYZ 4 days a week, he flunked on day 3. Now it’s upon the administration to withdraw the contract or let him resume. Let’s suppose, the administration allowed him to teach on a different day to compensate for the previous one, then they can’t cancel the contract anymore. But they can charge extra damages to him.

In the case of Subbarayya Reddi Vs Mannika Kaundan[ii] it was held by the court that mortgage deeds won’t be cancelled in the case, a party to the contract has compensated in some way and is desirous to pay his debt even after he failed to do so at the assigned time.

  1. Section 40: Person by whom promises is to be performed.

“If it appears from the nature of the case that the parties to any contract intended 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 representative may employ a competent person to perform it.”

A promise binds both parties to the contract.

For example

A promises B to buy his car at Rs. 3 Lakh. A must complete his end of the promise.

  • Section 41: Effect of accepting performance from this person.

“When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.”

It is prima facie held that accepting a third party’s help officially destroys the terms of a contract.

For example

A the promisor accepts terms of painting his house from C. Now he can’t intercept B for not completing his ends.

  • Section 42: Devolution of joint liabilities.

“When two or more person 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.”

In the case of joint liability, all the parties are responsible for the completion of a certain task and it remains relevant until the last member of to joint contract is surviving.

For example:

A, B, C and D took up a contract to pay the mortgage of a building in 15 years. This contract will be valid until they pay the mortgage or till all of them dies.

  • 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, neither does it free the joint promisor so released from responsibility to the other joint promisor or joint promisors.”

  • Section 45: Devolution of joint Rights.

“When a person has made a promise to two or more persons jointly, then unless the 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 one 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.”

  • Section 46: Time for performance of a promise

“Where no application is to be made and no time is specified. Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time.”

This reasonable time shall be an issue of validity and shall be a subject- matter of the Court.

In the case of Mustaq Mahibub Shaikh Vs Vijay Mahadev Suryavanshi[iii] the appellants brought into notice an agreement signed almost 13 years ago about the terms of construction and demolition of a building, the judges held the appeal was past the reasonable time and hence past the subject matter of consideration overall.

  • Section 47: Time and place for the performance of a promise,

“Where time is specified and no application to be made.

When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without the application by the promisee, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.”

It is important to keep the time frame in mind while performing a contract otherwise the aggrieved party can distort the contract or may ask for compensation.

For example

A asksB to complete a certain project at a certain time, then B is bound to complete that project within that timeframe.

  • Section 48: Application for performance on a certain day to be at the proper time and place.

“When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, the promisee must apply for the performance at a proper place within the usual hours of business”

Here the term “proper time and place” is to be accentuated reasonably and is a subject matter consideration of the Court.

  • Section 49: The place for the performance of a promise, where no application to be made and no place fixed for performance.

When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, the promisor must apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such a place.

For example

A asks B to deliver 100 bags of cement

at a certain time, he must also ascertain the place where it has to be delivered.

  • Section 50: Performance in manner or at the time prescribed or sanctioned by promise.

“The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions.”

It’s completely at the promisor’s discretion, the terms have to be followed as he wants.

  • Section 51: Promisor not bound to perform, unless reciprocal promisee ready and willing to perform.

“When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.”

Contracts are binding on both parties and if one party doesn’t keep their end of the bargain, the other is not obliged to follow the terms and conditions of the Contract.

For example

A promises B to buy his Car at 3 Lakh rupee. A doesn’t give B the money, B is not obliged to sell A his Car.

In the case of Har Bilas Vs State of Allahabad[iv] the appellant wanted the delivery of silica against the promised money and the Court held that there was no reason to hold back the delivery of Silica and hence no payment for any amount was necessary.

  • Section 53: Liability of party preventing event on which contract is to take effect.

“When a contract contains reciprocal promises and one party to the contract prevents the other from performing his promise, the contract becomes 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.”

In a case in which any party obstructs the flow of discharge of responsibility of one party, the contract becomes voidable at the option of the aggrieved party.

For example,

A promises B to sell his car. B tries to destroy A’s car, the agreement becomes voidable at the option of A.

  • Section 55: Effect of failure to perform a fixed time, in contract in which time is essential.

“When a party to a contract promises to do a certain thing at or before a specified time, or certain thins at or before a specified time and fails to do such thing at or before a specified time, and fails to do such thing at or before a specified time, the contract or so much of it as has not been performed, becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence of the contract.”

Time constrained contracts are often of the essence of time and are very important to be completed within a given frame of time. Any delay to the performance of such contract leads it to become voidable at the option of an aggrieved party.

  • Section 56. Agreement to do impossible act.

“An agreement to do an act impossible in itself is void.”

The simple rationale behind it is those agreements are irrelevant and must not be considered by any sensible person at all.

For example:

X promised Y to bring stars for her after their marriage. This agreement is void due to the impossibility of its performance in normal circumstances.

  • Section 57: Reciprocal promise to do things legally, and also other things illegal.

“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 promise is a contract, but the second is a void agreement.”

This is because the law works with the motif to keep the relevant part and destroy the irrelevant one.

For example:

X lends Y his house for living. He uses it to make a Casino forbidden in that state. Here X lending Y the land is relevant but the part of Y using it for gambling is illegal and hence subject to omission.

  • Section 58: Alternative promise, one branch being illegal.

“In the case of an alternative promise, one branch of which is legal and other illegal, the legal branch alone can be enforced.”

  • Section 59: Application of payment where debt to be discharged is indicated.

“Where a debtor, owing to several distinct debts to one person, makes a payment to him, either with express intimation or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment if accepted, must be applied accordingly.”

This payment is to be considered in the discharge of promissory notes.

For example:

C has a debt of Rs. 3456 to D, D asks him to pay accordingly in a certain manner. C does that, this payment should be considered by C on the discharge of debt.

  • Section 62: Effect of novation, rescission, and alteration of contract.

“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.”

The rationale being that the terms are destroyed and a new contract is forged so the old one can’t sustain at all.

For example

A has money indebted to B at the rate of Rs 10000 at 5% interest per annum. He pays 6000 and B changes the term of payment and forges a new contract for the leftover 4000 rupees at 7% interest per annum, now this is a new contract by which A must abide.

  • Section 64: The consequence of rescission of the voidable contract.

“When a person at whose option a contract is voidable rescinds it, the other party thereto need to perform any promise therein contained in which he is the promisor. The party rescinding a voidable contract shall if he have received any benefit thereunder from another party to such contract restore such benefit, so far as may be, to the person from whom it was received.”

  • Section 65: Obligation of person who has received advantage under the void agreement, or contract that becomes void.

“When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore, it, or to make compensation for it, to the person from whom he received it.”

This is to ensure no party receives any form of unfair advantage over the other and the contract may proceed fairly.

For example

B unscrupulously delivered 150 tonnes of sugarcane instead of 100 tonnes to A for whom 100 tonnes of sugarcane had to be delivered. B has to compensate A.

  • Section 66: Mode of communicating or revoking rescission of the voidable contract.

“The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to some rules, as apply to the communication or revocation of the proposal.”

This ensures uniformity and the least confusion about the contract.

  • Section 67: Effect of neglect or promise to afford promisor reasonable facilities for performance.

“If any promisee neglects or refuses to afford the promisee reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to non-performance caused thereby.”

For example

A promises to sell his car to B at Rs 3 lakh. A does not specify the car, Bis excused from giving the money.

Types of Performance

  • Actual Performance

When a promisor to a contract has completed his responsibility in agreement with the extent of the contract, the promise is told to have been certainly performed.

Actual performance bestows a discharge to the contract and the detriment of the promisor terminates to exist.

For example, A concedes to transmit 10 bags of cement at B’s factory and B promises to pay the price on delivery. A delivers the cement on the outstanding date and B gives rise to the payment. This is actual performance.

Actual performance can further be categorized as substantial performance and partial Performance

  • Substantial Performance

This is where the task decided upon is virtually completed. The Court then decrees that the capital must be paid, but discriminates the quantity desired to rectify trivial occurring deformity.

Substantial performance is relevant only if the contract is not an entire contract and is detachable. The rationale behind establishing the principle of substantial performance is to avert the likelihood of one party circumventing his detriments by contending that the contract has not been wholly performed.

Nonetheless, what is considered to be substantial performance is an issue of validity to be agreed in both the case. It will primarily depend on what persists undone and its importance in comparison to the contract as an entirety.

  • Partial Performance

This is an occurrence where one of the parties has performed the contract, but not fully, and the other side has indicated readiness to abide by the portion performed. Partial performance may arise where there is a shortfall on delivery of goods or where a service is not fully carried out.

There is a narrow line of disparity between substantial and partial performance. The two following points would help in distinguishing the two types of performance.

Partial performance must be approved by the other party. In different phrases, the party who is at the receiving end of the partial performance has a profound possibility of whether to approve or dismiss. Substantial performance, on a different note, is Legally enforceable against the other group.

Expenditure is made on a varied footing from that for substantial performance. It is made on quantum meruit, which precisely means as much as is earned.

An illustration, if half of the job has been finalized, half of the negotiated capital would be due. In circumstances of substantial performance, the party that has performed can recoup the percentage reasonable to what has been done under the contract, provided that the contract is not a whole contract. The price is thus, often due in such situations, and the amount reduced exemplifies the cost of overhauling impaired workmanship.

  • Attempted Performance

When the performance has evolved unpaid, it is sometimes adequate if the promisor offers to perform his responsibility under the Contract. This offer is understood as attempted performance or more generally, a tender.

Thus, tender is an offer of performance, which certainly, compared with the phrases of the Contract. If interests are submitted by the dealer but declined by the consumer, the dealer is discharged from further detriment, provided that the interests are in agreement with the Contract as to quantity and quality, and he may prosecute the consumer for violation of Contract if he so intends.

The justification is that when individual requests to perform, he is willing, inclined and eligible to perform. Thus, a tender of performance may regulate as an alternative for actual performance and can impact a detailed discharge.


Performance of a Contract is a steady term which deals with the transaction and manner of transaction that takes place after a Contract has been established. It deludes to the matters to be taken care of after the establishment of a Contract.

There are many rules which govern the interests of both parties to the Contract. There are various types of performance of Contract, and all of them are done to preserve the interests of both the parties to the Contract.

[i] A.R Venkatasami Naicker Vs A.R.V Jaganathan, Civil Petition No. 1415 of 1997

[ii] Subbarayya Reddi Vs Mannika Kaundan, 1911 M.W.N 265

[iii] Mustaq Mahibub Shaikh Vs Vijay Mahadev Suryavanshi, Writ Petition No. 10536 of 2015

[iv] Har Bilas Vs State of Allahabad, Second Appeal Number 753 of 1929

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