Performance of Contract

Performance of Contract and its Related Provisions

It is well known that every valid contract imposes certain legal obligations on both the contracting parties and this obligation lasts until the contract is actually performed or otherwise discharged. The performance of the contract is one of the several ways through which a contract is discharged, and it is the most natural, preferred, and common way of discharging an obligation.

Performance of Contract means….

The term “performance” denotes that the parties to a contract have fulfilled or carried out their respective responsibilities arising out of the contract. For instance, A may agree to sell his book to B for Rs. 500. The contract is discharged by performance when A delivers the book and B makes the payment.

Law also defines “Performance of a Contract”. Section 37 of the Indian Contract Act, 1872 establishes the obligations of parties regarding performance. It states that the parties to a contract must either perform or attempt to perform their respective promises unless such performance is waived off or excused by the provisions of this Act or any other legislation.

Types of Performance of Contract

It can be inferred from Section 37 that performance may be of two types: actual or attempted.

Actual performance:

When a party to a contract has completed what he agreed to do and there is nothing more left for him to do, the promise is said to have been really executed, and the party’s liability comes to an end. For example, A, who owes B Rs. 1,000, offers to repay the sum in two months. A then gives back the money on time. This is an example of actual performance.

Attempted performance (or Tender):

Sometimes when the performance is due, the promisor may offer to fulfill his obligation, but the promisee may decline to accept the performance. This is referred to as ‘attempted performance’ or ‘tender’. For instance, A undertakes to deliver certain items to B. A delivers the items at the designated location during business hours, but B refuses to accept the delivery of goods. As a result, A has completed what he was required to do under the contract. It is, therefore, an attempted performance.

In the event of attempted performance, the promisor is not liable for non-performance because an attempted performance or tender is as good as performing the contract. Section 38 of the Contract Act states that if a promisor makes an offer of performance to the promisee and the offer is not accepted, the promisor is neither liable for non-performance nor does he lose his rights under the contract.

Essentials of a valid tender

As previously indicated, a tender of performance releases a party from further liability. The tender, however, has to be valid. The following conditions must be met for a tender to be valid:

  • The tender, to be valid, should be unconditional.
  • It should be made at the proper time, place, and manner as may be agreed to under the contract.
  • The tender or offer should be made to the promisee or his authorized agent.
  • In the case of a tender of goods, it must provide the promisee with a reasonable opportunity to verify that the products offered are identical to those that the promisor is obligated to deliver.
  • In the case of a tender for payment of money, it should be for the exact amount due and should be in the legal currency or medium of exchange.
  • A tender made to any of the “joint promisees” has the same impact as a tender made to all of them.
  • Lastly, the tender must be for the whole obligation.

Who can demand performance and who must perform?

Only the promisee has the authority to demand performance. However, in the event of his death, his legal representatives may demand performance.

Further, when the contract is of a personal nature, it must be performed by the promisor. In other situations, it may be performed by his agent, and in the event of his death, by his legal representatives.

In other words, if it seems from the nature of the contract that the parties intended for the promise to be performed by the promisor himself, such promise must be fulfilled by the promisor. Contracts involving personal ability, taste, or artwork are usually subject to this. A agrees to paint a picture for B, for example. Because this contract involves A’s personal skill, it must be carried out by A.

When two or more people make a joint promise, then unless the contract expressly states otherwise, all of them must perform jointly. If any of the joint promisors dies, his legal representative is obligated to act alongside the other joint promisors (Section 42). For example, A, B, and C agree to pay Rs. 30,000 to D jointly. When A dies, B and C, as well as A’s legal representative, are jointly and severally liable to D for the amount.

This is known as the rule of “devolution of joint liabilities”. It is, however, subject to the requirement that the contract contains no other intention. In other words, if the contract indicates a contrary intention, the preceding rule does not apply.

In addition, where the joint promisors fail to perform their promise jointly, Section 43 of the Contract Act steps in. It states that “where two or more persons make a joint promise, the promisee may, in the absence of an express agreement to the contrary, compel any one or more of such joint promisors to perform the entire promise”. As a result, the obligation of joint promisors is joint & several, and any of the joint promisors can be compelled to execute the contract. For example, A, B and C promised to pay Rs. 30,000 to D jointly. In this situation, D may compel either A or B or C to pay the whole amount of Rs. 30,000.

Section 43 further states that except where a contrary intention appears from the contract, each joint promisor may compel every other joint promisor to contribute equally to the fulfillment of the contract. If any of the joint promisors makes a default in such contribution, the remaining promisors should bear the loss resulting from such default in equal shares.

For example, A, B and C promised to pay Rs. 30,000 to D jointly. C is compelled to pay the whole amount. Thereafter, he may compel all the other joint promisors to contribute equally. But A is declared insolvent and his assets are sufficient to realize only half of his debts. In this case, C is entitled to receive Rs. 5,000 from A’s legal estate and Rs. 12,500 from B.

Wrapping it up

To sum up, the most natural way to terminate a contract is to perform on it. The performance can be actual or attempted (also known as Tender). The contract is discharged when one party offers to perform his promise in line with the contract and the other party refuses to accept it.

Attempted performance or tender is the same as actual performance. The party who offered to perform is no longer obligated to do so. To be valid, the tender must be unconditional, made at the appropriate time, place, and manner, made to the promisee or his authorized representative, and for the entire obligation.

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