PERFORMANCE OF CONTRACT

PERFORMANCE OF CONTRACT

 

Every contract consists of reciprocal promises. Each party to a contract is bound to perform the promise made by him.

According to Section 37:

"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."

The parties to the contract have a duty to:

(i) perform, or

(ii) offer to perform,

their respective promises.

According to Section 38, as has been explained below, just like actual performance, an offer of performance (or tender) by the promisor discharges a promisor from his obligation under a contract. Thus, if A offers to perform his part of the promise, but the other party, B, does not avail of such performance, A would be discharged from his obligation under the contract.

The parties to contract, however, need not perform their promises in case:

(i) such performance is dispensed with, or

(ii) excused under the provisions of this Act, or of any other law.

Examples:

·         According to Section 63 of the Indian Contract Act, 1872, the promisee may dispense with the performance of promise by the promisor. In such a case, the promisor need not perform the promise. For example, A promises to paint a picture for B, B afterwards forbids him to do so. A is no longer bound to perform the promise.

·         According to Section 56, if after the making of a contract, its performance becomes impossible or unlawful, the contract becomes void, and the same need not be performed. Thus, if A and B contract to marry each other, but before the time fixed for marriage, A goes mad, the contract becomes void.

·         When a contract is assignable and there is an assignment of the same in favour of the plaintiff, the plaintiff can sue upon it, and the plea that there is no privity of contract with the plaintiff can be of no avail.

Offer of Performance or tender

When the promisor is willing to perform the contract and he offers to perform the same, the promisee has a duty to accept the performance of the contract. If the offer of performance is not accepted by the promisee, they cannot be blamed for the non-performance of the contract. In such a case, the promisor does not incur any liability for non-performance, nor does he lose his rights under the contract.

 

Not providing reasonable facilities for the performance of the contract to the promisor by the promisee also excuses the promisor from the performance of the contract. Section 67, which contains a provision in this regard, is as under:-

Section 67. Effect of neglect of promisee to afford promisor reasonable facilities for performance. -    If any promisee or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby."

Illustration

A contracts with B to repair B's house. B neglects or refuses to point out to A the places in which his house requires repair. A is excused for the non-performance of the contract, if it is caused by such neglect or refusal."

An offer of performance is known as Tender' under English law. The essentials of a valid offer of performance or Tender, and the effect thereof have been mentioned in Section 38, which is as follows:-

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."

Essentials of a valid tender

1. The tender must be unconditional;

2. The tender must be made at proper time and place;

3. The promisee must be given an opportunity to ascertain that the goods are according to the contract; and

4. If there are a number of joint promisees, the offer of performance may be made in favour of any of them.

 

1. The tender must be unconditional

The offer to perform the contract must be unconditional. If the promisor offers to pay only a part of the sum due but s should be considered to be a full payment, he is imposing a condition, and, therefore, this cannot be considered to be a valid tender.

Payment by cheque is deemed to be subject to encashment, and therefore, it is only a conditional tender. When the tender is a conditional one, the promisee can lawfully refuse to accept the same.? In Navin Chandra v. Yogendra Nath A.I.R. 1967 All. 293.  , the tenant sent two cheques in payment of rent to the landlord. The landlord returned these cheques and insisted on the payment of rent in cash. The tenant did not pay cash and the landlord sued him for ejectment. The tenant contended that since he had tendered payment (by cheques), it was a valid tender of payment of rent, and the landlord could not sue him for ejectment. It was held that unless by any agreement or custom the cheque was recognized a valid tender, a debtor cannot claim a legal right to make payment by cheque if the creditor insists on being paid in cash. In this case, the parties not being businessmen, nor did the debt arise out of a business transaction, and there being no agreement or custom permitting payment by cheque, the landlord was held to be justified in refusing payment by cheque on the ground that it was not a valid tender. The action for ejectment was, therefore, successful.

 

2. The tender must be at proper time and place

It is further necessary that the tender must be at proper time and place, with an opportunity to the promisee to ascertain that the promisor will make proper performance. So that the tender is deemed to be a valid one, it is further necessary that 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." If the tender is made at the proper time and place as required by the contract, and the promisee has the reasonable opportunity of examining that the performance is otherwise in order, it is valid tender. In Startup v. Macdonald (1843) 6 Man. & G. 593, the plaintiff agreed to supply 10 tons of linseed oil to the defendant. The delivery was agreed to be made within the last 14 days of the month of March. The plaintiff tendered the oil on the last date of the performance, i.e., 31st March, which happened to be a Saturday, at about 9.00 p.m. Since the time of supply was late in the night, the defendant refused to take the oil. It was held that the defendant had full opportunity to examine, weigh and receive the oil, till 12 o'clock of the said 31st March, and, therefore, the tender was a valid one and the defendant was liable to pay damages for non-acceptance of oil.

3. The whole performance need to be performed there and then

It is also necessary that the person to whom the tender is made should be provided with a reasonable opportunity of that the person the tender is able and willing there and then to do the whole of what he is bound by his promise to do. A tender of part of the sum due, or goods which are less in quantity than agreed is not valid Moreover, there should be ability on the part of the person making the tender to perform the whole contract then and there. If neither the agreement between the parties nor the usage or custom of trade warrant payment by cheque, payment by cheque cannot be considered to be a valid tender. In such cases, the proper tender means payment in cash.

 

4. The promisee must be given an opportunity to ascertain that the goods are according to the contract.

Another requirement of a valid tender is that, if the offer is an offer to deliver anything to the promisee, the promisee must have reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver.'

For example, 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.?

 

4. An offer of performance to one of the joint promisee is a valid tender

When there are several joint promisees, an offer to one of several joint promisees has the same legal consequences as an offer to all of them. It means that when there are more than one joint promisees, an offer of performance to one of them will be treated as a valid tender.