Business Law - Performance of Contract

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Preparing for foundation / intermediate examinations of CA / CMA / CS / Business Exams (English and Hindi Languages)

Chapter 1: The Indian Contract Act, 1872

UNIT – 4: PERFORMANCE OF CONTRACT

After studying this unit, you would be able to understand-

♦ Understand how obligations under a contract must be carried out by the parties.

♦ Be familiar with the various modes of performance.

♦ Be clear about the consequence of refusal of performance or refusal to accept performance, by either of the parties.

♦ Understand rights of joint promisees, liabilities of joint promisors, and rules regarding appropriation of payments

SUMMARY

1. The promisor or his representative must perform unless the nature of contract shows that it may be performed by a third person, but the promisee may accept performance by a third party. (Sections 37, 40 and 41)

2. In case of joint promisors, all must perform, and after the death of any of them, the survivors and the representatives of the deceased must perform. But their liability is joint and several. If the promisee requires any one of them perform the whole promise, he can claim contribution from others. (Sections 42, 43 and 44)

3. Joint promisees have only a joint right to claim performance. (Section 45)

4. The promisor must offer to perform and such offer must be unconditional, and be made at the proper time and place, allowing the promisee a reasonable opportunity of inspection of the things to be delivered. (Sections 38, 46, 47, 48, 49 and 50)

5. If the performance consists of payment of money and there are several debts to be paid, the payment shall be appropriated as per provisions of Sections 59, 60 and 61. The debtor has, at the time of payment, the right of appropriating the payment. In default of debtor, the creditor has option of election and in default of either the law will allow appropriation of debts in order of time.

6. If an offer of performance is not accepted, the promisor is not responsible for non-performance and does not lose his rights under the contract; so also, if the promisee fails to afford reasonable facilities. He may sue for specific performance or he may avoid the contract and claim compensation (Sections 38, 39, 53 and 67).

7. Rescission is communicated and revoked in the same way as a promise. The effect is to dispense with further performance and to render the party rescinding liable to restore any benefit he may have received. (Sections 64 and 66)

8. Parties may agree to cancel the contract or to alter it or to substitute a new contract for it. (Section 62).

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