ICAI Notes- Unit 4: Performance of Contract | Business Laws for CA Foundation PDF Download

 Page 1


 
 
2.95 
THE INDIAN CONTRACT ACT, 1872 
LEARNING OUTCOMES 
UNIT–4: PERFORMANCE OF CONTRACT 
After studying this Chapter, you will be able to understand: 
? How obligations under a contract must be carried out by the 
parties. 
? Various modes of performance. 
? Consequence of refusal of performance or refusal to accept 
performance, by either of the parties. 
?
Rights of joint promisees, liabilities of joint promisors, and rules 
regarding appropriation of payments.
 
This unit explains who must perform his obligation, what should be the mode of 
performance, and what shall be the consequences of non- performance. 
Performance of Contract
By whom
Liability of 
Joint 
Promisor 
& 
Promisee
Rights of 
Joint 
Promisees
Time & 
Place of 
Performance 
of Promise
Performance 
of Reciprocal 
promises
Agreement 
to do 
Impossible 
Acts
Appropriation 
of Payments
Contracts 
which 
need not 
be 
Performed
Discharge 
of a 
Contract 
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
Page 2


 
 
2.95 
THE INDIAN CONTRACT ACT, 1872 
LEARNING OUTCOMES 
UNIT–4: PERFORMANCE OF CONTRACT 
After studying this Chapter, you will be able to understand: 
? How obligations under a contract must be carried out by the 
parties. 
? Various modes of performance. 
? Consequence of refusal of performance or refusal to accept 
performance, by either of the parties. 
?
Rights of joint promisees, liabilities of joint promisors, and rules 
regarding appropriation of payments.
 
This unit explains who must perform his obligation, what should be the mode of 
performance, and what shall be the consequences of non- performance. 
Performance of Contract
By whom
Liability of 
Joint 
Promisor 
& 
Promisee
Rights of 
Joint 
Promisees
Time & 
Place of 
Performance 
of Promise
Performance 
of Reciprocal 
promises
Agreement 
to do 
Impossible 
Acts
Appropriation 
of Payments
Contracts 
which 
need not 
be 
Performed
Discharge 
of a 
Contract 
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  BUSINESS LAWS 
2.96 
4.1 PERFORMANCE OF CONTRACT 
Meaning: “Performance of Contract” means fulfilment of obligations to the contract. 
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 the Contract Act or of any other law.  
Types: On the basis of Section 37, “Performance of Contract” may be actual or attempted.  
(a)  Actual Performance: Where a party to a contract has done what he had undertaken 
to do or either of the parties has fulfilled their obligations under the contract within 
the time and in the manner prescribed. 
Example 1: X borrows 
`
5,00,000 from Y with a promise to be paid after 1 month. X 
repays the amount on the due date. This is actual performance. 
(b)  Offer to perform or attempted performance or tender of performance: It may 
happen sometimes, when the performance becomes due, the promisor offers to 
perform his obligation but the promisee refuses to accept the performance. 
Example 2: A promises to deliver certain goods to B. A takes the goods to the 
appointed place during business hours but B refuses to take the delivery of goods. 
This is an attempted performance as A the promisor has done what he was required 
to do under the contract. 
4.2  CONDITIONS TO BE SATISFIED FOR A VALID 
 TENDER OR ATTEMPTED PERFORMANCE 
(i) It must be unconditional.  
Example 3:  A offers to B to repay only the principal amount of the loan. This is not a 
valid tender since the whole amount of principal and interest is not offered.  
(ii) It must be made at proper time and place. 
Example 4: If the promisor wants to deliver the goods at 2 a.m., this is not a valid 
tender unless it was so agreed.  
(iii)  Reasonable opportunity to examine goods. 
Example 5: A contract’s to deliver B at his warehouse 1000 Kgs of wheat on certain 
date. A must bring the wheat to B’s warehouse on the appointed day, under such 
circumstances that B may have reasonable opportunity of satisfying himself  that the 
thing offered is wheat of the quality contracted for, and that there are 1000 Kgs.  
© The Institute of Chartered Accountants of India
Page 3


 
 
2.95 
THE INDIAN CONTRACT ACT, 1872 
LEARNING OUTCOMES 
UNIT–4: PERFORMANCE OF CONTRACT 
After studying this Chapter, you will be able to understand: 
? How obligations under a contract must be carried out by the 
parties. 
? Various modes of performance. 
? Consequence of refusal of performance or refusal to accept 
performance, by either of the parties. 
?
Rights of joint promisees, liabilities of joint promisors, and rules 
regarding appropriation of payments.
 
This unit explains who must perform his obligation, what should be the mode of 
performance, and what shall be the consequences of non- performance. 
Performance of Contract
By whom
Liability of 
Joint 
Promisor 
& 
Promisee
Rights of 
Joint 
Promisees
Time & 
Place of 
Performance 
of Promise
Performance 
of Reciprocal 
promises
Agreement 
to do 
Impossible 
Acts
Appropriation 
of Payments
Contracts 
which 
need not 
be 
Performed
Discharge 
of a 
Contract 
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  BUSINESS LAWS 
2.96 
4.1 PERFORMANCE OF CONTRACT 
Meaning: “Performance of Contract” means fulfilment of obligations to the contract. 
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 the Contract Act or of any other law.  
Types: On the basis of Section 37, “Performance of Contract” may be actual or attempted.  
(a)  Actual Performance: Where a party to a contract has done what he had undertaken 
to do or either of the parties has fulfilled their obligations under the contract within 
the time and in the manner prescribed. 
Example 1: X borrows 
`
5,00,000 from Y with a promise to be paid after 1 month. X 
repays the amount on the due date. This is actual performance. 
(b)  Offer to perform or attempted performance or tender of performance: It may 
happen sometimes, when the performance becomes due, the promisor offers to 
perform his obligation but the promisee refuses to accept the performance. 
Example 2: A promises to deliver certain goods to B. A takes the goods to the 
appointed place during business hours but B refuses to take the delivery of goods. 
This is an attempted performance as A the promisor has done what he was required 
to do under the contract. 
4.2  CONDITIONS TO BE SATISFIED FOR A VALID 
 TENDER OR ATTEMPTED PERFORMANCE 
(i) It must be unconditional.  
Example 3:  A offers to B to repay only the principal amount of the loan. This is not a 
valid tender since the whole amount of principal and interest is not offered.  
(ii) It must be made at proper time and place. 
Example 4: If the promisor wants to deliver the goods at 2 a.m., this is not a valid 
tender unless it was so agreed.  
(iii)  Reasonable opportunity to examine goods. 
Example 5: A contract’s to deliver B at his warehouse 1000 Kgs of wheat on certain 
date. A must bring the wheat to B’s warehouse on the appointed day, under such 
circumstances that B may have reasonable opportunity of satisfying himself  that the 
thing offered is wheat of the quality contracted for, and that there are 1000 Kgs.  
© The Institute of Chartered Accountants of India
 
 
2.97 
THE INDIAN CONTRACT ACT, 1872 
(iv)  It must be for whole obligation. 
Example 6: X, a singer enters into a contract with Y, the manager of a theatre to sing 
at his theatres two nights in every week during the next two months, and Y engaged 
to pay her 
` 
10,000 for each night’s performance. On the sixth night, X willfully 
absents herself from the theatre. Y is at liberty to put an end to the contract. 
Example 7: A promises to deliver 100 bales of cotton on a certain day. On the 
agreed day and place ‘A’ offers to deliver 80 bales only. This is not a valid tender. 
4.3 BY WHOM A CONTRACT MAY BE PERFORMED  
(SECTION 40, 41 AND 42) 
The promise under a contract may be performed, as the circumstances may permit, by the 
promisor himself, or by his agent or his legal representative. 
1. Promisor himself: If there is something in the contract to show that it was the 
intention of the parties that the promise should be performed by the promisor 
himself, such promise must be performed by the promisor. This means contracts 
which involve the exercise of personal skill or diligence, or which are founded on 
personal confidence between the parties must be performed by the promisor himself. 
Example 8: A promises to paint a picture for B and this must be performed by the 
promisor himself. 
2. Agent: Where personal consideration is not the foundation of a contract, the 
promisor or his representative may employ a competent person to perform it. 
3. Legal Representatives: A contract which involves the use of personal skill or is 
founded on personal consideration comes to an end on the death of the promisor. 
As regards any other contract the legal representatives of the deceased promisor are 
bound to perform it unless a contrary intention appears from the contract (Section 
37, para 2). But their liability under a contract is limited to the value of the property 
they inherit from the deceased. 
Example 9: A promises to B to pay 
`
 100,000 on delivery of certain goods. A may 
perform this promise either himself or causing someone else to pay the money to B. 
If A dies before the time appointed for payment, his representative must pay the 
money or employ some other person to pay the money. If B dies before the time 
appointed for the delivery of goods, B’s representative shall be bound to deliver the 
goods to A and A is bound to pay 
`
100,000 to B’s representative. 
© The Institute of Chartered Accountants of India
Page 4


 
 
2.95 
THE INDIAN CONTRACT ACT, 1872 
LEARNING OUTCOMES 
UNIT–4: PERFORMANCE OF CONTRACT 
After studying this Chapter, you will be able to understand: 
? How obligations under a contract must be carried out by the 
parties. 
? Various modes of performance. 
? Consequence of refusal of performance or refusal to accept 
performance, by either of the parties. 
?
Rights of joint promisees, liabilities of joint promisors, and rules 
regarding appropriation of payments.
 
This unit explains who must perform his obligation, what should be the mode of 
performance, and what shall be the consequences of non- performance. 
Performance of Contract
By whom
Liability of 
Joint 
Promisor 
& 
Promisee
Rights of 
Joint 
Promisees
Time & 
Place of 
Performance 
of Promise
Performance 
of Reciprocal 
promises
Agreement 
to do 
Impossible 
Acts
Appropriation 
of Payments
Contracts 
which 
need not 
be 
Performed
Discharge 
of a 
Contract 
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  BUSINESS LAWS 
2.96 
4.1 PERFORMANCE OF CONTRACT 
Meaning: “Performance of Contract” means fulfilment of obligations to the contract. 
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 the Contract Act or of any other law.  
Types: On the basis of Section 37, “Performance of Contract” may be actual or attempted.  
(a)  Actual Performance: Where a party to a contract has done what he had undertaken 
to do or either of the parties has fulfilled their obligations under the contract within 
the time and in the manner prescribed. 
Example 1: X borrows 
`
5,00,000 from Y with a promise to be paid after 1 month. X 
repays the amount on the due date. This is actual performance. 
(b)  Offer to perform or attempted performance or tender of performance: It may 
happen sometimes, when the performance becomes due, the promisor offers to 
perform his obligation but the promisee refuses to accept the performance. 
Example 2: A promises to deliver certain goods to B. A takes the goods to the 
appointed place during business hours but B refuses to take the delivery of goods. 
This is an attempted performance as A the promisor has done what he was required 
to do under the contract. 
4.2  CONDITIONS TO BE SATISFIED FOR A VALID 
 TENDER OR ATTEMPTED PERFORMANCE 
(i) It must be unconditional.  
Example 3:  A offers to B to repay only the principal amount of the loan. This is not a 
valid tender since the whole amount of principal and interest is not offered.  
(ii) It must be made at proper time and place. 
Example 4: If the promisor wants to deliver the goods at 2 a.m., this is not a valid 
tender unless it was so agreed.  
(iii)  Reasonable opportunity to examine goods. 
Example 5: A contract’s to deliver B at his warehouse 1000 Kgs of wheat on certain 
date. A must bring the wheat to B’s warehouse on the appointed day, under such 
circumstances that B may have reasonable opportunity of satisfying himself  that the 
thing offered is wheat of the quality contracted for, and that there are 1000 Kgs.  
© The Institute of Chartered Accountants of India
 
 
2.97 
THE INDIAN CONTRACT ACT, 1872 
(iv)  It must be for whole obligation. 
Example 6: X, a singer enters into a contract with Y, the manager of a theatre to sing 
at his theatres two nights in every week during the next two months, and Y engaged 
to pay her 
` 
10,000 for each night’s performance. On the sixth night, X willfully 
absents herself from the theatre. Y is at liberty to put an end to the contract. 
Example 7: A promises to deliver 100 bales of cotton on a certain day. On the 
agreed day and place ‘A’ offers to deliver 80 bales only. This is not a valid tender. 
4.3 BY WHOM A CONTRACT MAY BE PERFORMED  
(SECTION 40, 41 AND 42) 
The promise under a contract may be performed, as the circumstances may permit, by the 
promisor himself, or by his agent or his legal representative. 
1. Promisor himself: If there is something in the contract to show that it was the 
intention of the parties that the promise should be performed by the promisor 
himself, such promise must be performed by the promisor. This means contracts 
which involve the exercise of personal skill or diligence, or which are founded on 
personal confidence between the parties must be performed by the promisor himself. 
Example 8: A promises to paint a picture for B and this must be performed by the 
promisor himself. 
2. Agent: Where personal consideration is not the foundation of a contract, the 
promisor or his representative may employ a competent person to perform it. 
3. Legal Representatives: A contract which involves the use of personal skill or is 
founded on personal consideration comes to an end on the death of the promisor. 
As regards any other contract the legal representatives of the deceased promisor are 
bound to perform it unless a contrary intention appears from the contract (Section 
37, para 2). But their liability under a contract is limited to the value of the property 
they inherit from the deceased. 
Example 9: A promises to B to pay 
`
 100,000 on delivery of certain goods. A may 
perform this promise either himself or causing someone else to pay the money to B. 
If A dies before the time appointed for payment, his representative must pay the 
money or employ some other person to pay the money. If B dies before the time 
appointed for the delivery of goods, B’s representative shall be bound to deliver the 
goods to A and A is bound to pay 
`
100,000 to B’s representative. 
© The Institute of Chartered Accountants of India
  BUSINESS LAWS 
2.98 
Example 10: A promises to paint a picture for B for a certain price. A is bound to 
perform the promise himself. He cannot ask some other painter to paint the picture 
on his behalf. If A dies before painting the picture, the contract cannot be enforced 
either by A’s representative or by B. 
4. Third persons: Effect of accepting performance from third person- Section 41: 
When a promisee accepts performance of the promise from a third person, he cannot 
afterwards enforce it against the promisor. That is, performance by a stranger, if 
accepted by the promisee, this results in discharging the promisor, although the 
latter has neither authorised not ratified the act of the third party. 
Example 11: A received certain goods from B promising to pay 
`
 100,000/-. Later on, 
A expressed his inability to make payment. C, who is known to A, pays 
`
 60,000/- to B 
on behalf of A. However, A was not aware of the payment. Now B is intending to sue 
A for the amount of 
`
 100,000/-. Therefore, in the present instance, B can sue only for 
the balance amount i.e., 
`
 40,000/- and not for the whole amount. 
5. Joint promisors (Section 42): When two or more persons have made a joint 
promise, then unless a contrary intention appears by the contract, all such persons 
must jointly fulfil the promise. If any of them dies, his legal representatives must, 
jointly with the surviving promisors, fulfil the promise. If all of them die, the legal 
representatives of all of them must fulfil the promise jointly.  
Example 12: ‘A’, ‘B’ and ‘C’ jointly promised to pay 
`
 6,00,000 to ‘D’. Here ‘A’, ‘B’ and 
‘C’ must jointly perform the promise. If ‘A’ dies before performance, then his legal 
representatives must jointly with ‘B’ and ‘C’ perform the promise, and so on. And if all 
the three (i.e. ‘A’, ‘B’ and ‘C’) die before performance, then the legal representatives 
of all must jointly perform the promise.
4.4 DISTINCTION BETWEEN SUCCESSION AND 
ASSIGNMENT 
Distinction between two legal concepts, viz., succession and assignment may be noted carefully. 
When the benefits of a contract are succeeded to by process of law, then both burden and 
benefits attaching to the contract, may sometimes devolve on the legal heir. Suppose, a son 
succeeds to the estate of his father after his death, he will be liable to pay the debts and 
liabilities of his father owed during his life-time. But if the debts owed by his father exceed the 
value of the estate inherited by the son then he would not be called upon to pay the excess. In 
other words, the liability of the son will be limited to the extent of the property inherited by him. 
 
© The Institute of Chartered Accountants of India
Page 5


 
 
2.95 
THE INDIAN CONTRACT ACT, 1872 
LEARNING OUTCOMES 
UNIT–4: PERFORMANCE OF CONTRACT 
After studying this Chapter, you will be able to understand: 
? How obligations under a contract must be carried out by the 
parties. 
? Various modes of performance. 
? Consequence of refusal of performance or refusal to accept 
performance, by either of the parties. 
?
Rights of joint promisees, liabilities of joint promisors, and rules 
regarding appropriation of payments.
 
This unit explains who must perform his obligation, what should be the mode of 
performance, and what shall be the consequences of non- performance. 
Performance of Contract
By whom
Liability of 
Joint 
Promisor 
& 
Promisee
Rights of 
Joint 
Promisees
Time & 
Place of 
Performance 
of Promise
Performance 
of Reciprocal 
promises
Agreement 
to do 
Impossible 
Acts
Appropriation 
of Payments
Contracts 
which 
need not 
be 
Performed
Discharge 
of a 
Contract 
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  BUSINESS LAWS 
2.96 
4.1 PERFORMANCE OF CONTRACT 
Meaning: “Performance of Contract” means fulfilment of obligations to the contract. 
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 the Contract Act or of any other law.  
Types: On the basis of Section 37, “Performance of Contract” may be actual or attempted.  
(a)  Actual Performance: Where a party to a contract has done what he had undertaken 
to do or either of the parties has fulfilled their obligations under the contract within 
the time and in the manner prescribed. 
Example 1: X borrows 
`
5,00,000 from Y with a promise to be paid after 1 month. X 
repays the amount on the due date. This is actual performance. 
(b)  Offer to perform or attempted performance or tender of performance: It may 
happen sometimes, when the performance becomes due, the promisor offers to 
perform his obligation but the promisee refuses to accept the performance. 
Example 2: A promises to deliver certain goods to B. A takes the goods to the 
appointed place during business hours but B refuses to take the delivery of goods. 
This is an attempted performance as A the promisor has done what he was required 
to do under the contract. 
4.2  CONDITIONS TO BE SATISFIED FOR A VALID 
 TENDER OR ATTEMPTED PERFORMANCE 
(i) It must be unconditional.  
Example 3:  A offers to B to repay only the principal amount of the loan. This is not a 
valid tender since the whole amount of principal and interest is not offered.  
(ii) It must be made at proper time and place. 
Example 4: If the promisor wants to deliver the goods at 2 a.m., this is not a valid 
tender unless it was so agreed.  
(iii)  Reasonable opportunity to examine goods. 
Example 5: A contract’s to deliver B at his warehouse 1000 Kgs of wheat on certain 
date. A must bring the wheat to B’s warehouse on the appointed day, under such 
circumstances that B may have reasonable opportunity of satisfying himself  that the 
thing offered is wheat of the quality contracted for, and that there are 1000 Kgs.  
© The Institute of Chartered Accountants of India
 
 
2.97 
THE INDIAN CONTRACT ACT, 1872 
(iv)  It must be for whole obligation. 
Example 6: X, a singer enters into a contract with Y, the manager of a theatre to sing 
at his theatres two nights in every week during the next two months, and Y engaged 
to pay her 
` 
10,000 for each night’s performance. On the sixth night, X willfully 
absents herself from the theatre. Y is at liberty to put an end to the contract. 
Example 7: A promises to deliver 100 bales of cotton on a certain day. On the 
agreed day and place ‘A’ offers to deliver 80 bales only. This is not a valid tender. 
4.3 BY WHOM A CONTRACT MAY BE PERFORMED  
(SECTION 40, 41 AND 42) 
The promise under a contract may be performed, as the circumstances may permit, by the 
promisor himself, or by his agent or his legal representative. 
1. Promisor himself: If there is something in the contract to show that it was the 
intention of the parties that the promise should be performed by the promisor 
himself, such promise must be performed by the promisor. This means contracts 
which involve the exercise of personal skill or diligence, or which are founded on 
personal confidence between the parties must be performed by the promisor himself. 
Example 8: A promises to paint a picture for B and this must be performed by the 
promisor himself. 
2. Agent: Where personal consideration is not the foundation of a contract, the 
promisor or his representative may employ a competent person to perform it. 
3. Legal Representatives: A contract which involves the use of personal skill or is 
founded on personal consideration comes to an end on the death of the promisor. 
As regards any other contract the legal representatives of the deceased promisor are 
bound to perform it unless a contrary intention appears from the contract (Section 
37, para 2). But their liability under a contract is limited to the value of the property 
they inherit from the deceased. 
Example 9: A promises to B to pay 
`
 100,000 on delivery of certain goods. A may 
perform this promise either himself or causing someone else to pay the money to B. 
If A dies before the time appointed for payment, his representative must pay the 
money or employ some other person to pay the money. If B dies before the time 
appointed for the delivery of goods, B’s representative shall be bound to deliver the 
goods to A and A is bound to pay 
`
100,000 to B’s representative. 
© The Institute of Chartered Accountants of India
  BUSINESS LAWS 
2.98 
Example 10: A promises to paint a picture for B for a certain price. A is bound to 
perform the promise himself. He cannot ask some other painter to paint the picture 
on his behalf. If A dies before painting the picture, the contract cannot be enforced 
either by A’s representative or by B. 
4. Third persons: Effect of accepting performance from third person- Section 41: 
When a promisee accepts performance of the promise from a third person, he cannot 
afterwards enforce it against the promisor. That is, performance by a stranger, if 
accepted by the promisee, this results in discharging the promisor, although the 
latter has neither authorised not ratified the act of the third party. 
Example 11: A received certain goods from B promising to pay 
`
 100,000/-. Later on, 
A expressed his inability to make payment. C, who is known to A, pays 
`
 60,000/- to B 
on behalf of A. However, A was not aware of the payment. Now B is intending to sue 
A for the amount of 
`
 100,000/-. Therefore, in the present instance, B can sue only for 
the balance amount i.e., 
`
 40,000/- and not for the whole amount. 
5. Joint promisors (Section 42): When two or more persons have made a joint 
promise, then unless a contrary intention appears by the contract, all such persons 
must jointly fulfil the promise. If any of them dies, his legal representatives must, 
jointly with the surviving promisors, fulfil the promise. If all of them die, the legal 
representatives of all of them must fulfil the promise jointly.  
Example 12: ‘A’, ‘B’ and ‘C’ jointly promised to pay 
`
 6,00,000 to ‘D’. Here ‘A’, ‘B’ and 
‘C’ must jointly perform the promise. If ‘A’ dies before performance, then his legal 
representatives must jointly with ‘B’ and ‘C’ perform the promise, and so on. And if all 
the three (i.e. ‘A’, ‘B’ and ‘C’) die before performance, then the legal representatives 
of all must jointly perform the promise.
4.4 DISTINCTION BETWEEN SUCCESSION AND 
ASSIGNMENT 
Distinction between two legal concepts, viz., succession and assignment may be noted carefully. 
When the benefits of a contract are succeeded to by process of law, then both burden and 
benefits attaching to the contract, may sometimes devolve on the legal heir. Suppose, a son 
succeeds to the estate of his father after his death, he will be liable to pay the debts and 
liabilities of his father owed during his life-time. But if the debts owed by his father exceed the 
value of the estate inherited by the son then he would not be called upon to pay the excess. In 
other words, the liability of the son will be limited to the extent of the property inherited by him. 
 
© The Institute of Chartered Accountants of India
 
 
2.99 
THE INDIAN CONTRACT ACT, 1872 
In the matter of assignment, however the benefit of a contract can only be assigned but 
not the liabilities thereunder. This is because when liability is assigned, a third party gets 
involved therein. Thus, a debtor cannot relieve himself of his liability to creditor by assigning 
to someone else his obligation to repay the debt. 
On the other hand, if a creditor assigns the benefit of a promise, he thereby entitles the 
assignee to realise the debt from the debtor but where the benefit is coupled with a liability 
or when a personal consideration has entered into the making of the contract then the 
benefit cannot be assigned. 
4.5 LIABILITY OF JOINT PROMISOR & PROMISEE 
Devolution of joint liabilities (Section 42)
If two or more persons have made a joint promise, ordinarily all of them during their life-
time must jointly fulfil the promise. After death of any one of them, his legal representative 
jointly with the survivor or survivors should do so. After the death of the last survivor the 
legal representatives of all the original co-promisors must fulfil the promise. 
Example 13: X, Y and Z who had jointly borrowed money must, during their life-time jointly 
repay the debt. Upon the death of X his representative, say, S along with Y and Z should 
jointly repay the debt and so on. If in an accident all the borrowers X, Y and Z dies then their 
legal representatives must fulfil the promise and repay the borrowed amount. This rule is 
applicable only if the contract reveals no contrary intention. 
We have seen that Section 42 deals with voluntary discharge of obligations by joint 
promisors. But if they do not discharge their obligation on their own volition, what will 
happen? This is what Section 43 resolves. 
Any one of joint promisors may be compelled to perform – Section 43 
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. 
In other words, if one of the joint promisors is made to perform the whole contract, he can 
call for a contribution from others. 
 
© The Institute of Chartered Accountants of India