Performance of Contract (Part-3) - The Indian Contract Act 1872 CA CPT Notes | EduRev

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PERFORMANCE OF RECIPROCAL PROMISE:

The law on the subject is contained in Sections 51 to 58. The provisions thereof are summarized below:
(i) Promisor not bound to perform, unless reciprocal promise ready and willing to perform - Section 51
When a contract consists of reciprocal promises to be simultaneously performed, no promisor need  to perform his promise unless the promisee is ready and willing to perform his reciprocal promise.

Example: A and B contract that A shall deliver the goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery.

Analysis of Section 51
Simultaneous performance of reciprocal promises:
Reciprocal promises may have to be performed simultaneously, or one after the other. Where A promises to deliver rice and B promises to pay the price on delivery, both the promises are to be performed simultaneously, and both A and B must be ready and willing to perform their respective promises. Such promises constitute concurrent conditions and the performance of one of the promises is conditional on the performance of the other. If one of the promises is not performed the other too need not be performed. If A, in the above-mentioned example, is unwilling to deliver the rice on payment, A will be guilty of breach of promise and the breach would relieve B of the obligation to perform his promise and would enable B to treat the contract as at an end.
(ii) Order of performance of reciprocal promises Section 52:
When the order of performance of the reciprocal promises is expressly fixed by the contract, they shall be performed in that order; and where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.

Example: A and B contract that A shall build a house for B at a fixed price. A’s promise to build the house must be performed before B’s promise to pay for it.

Analysis of Section 52 - The order of performance may sometimes be indicated not expressly, but by the nature of the transaction.

For example: A and B contract that A shall make over his stock-in-trade to B at a fixed price, and B promises to give security for the payment of the price. A’s promise to make over his stock need not be performed, until the security is given by , for the nature of the transaction requires that A should have the security from B before he delivers his stock.
(iii) Liability of party preventing event on which the contract is to take effect – Section 53
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 he may sustain in consequence of the non- performance of the contract.
Example 1: A and B contract that B shall execute some work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non performance.
Example 2: In a contract for the sale of standing timber, the seller is to cut and cord it, whereupon buyer is to take it away and pay for it. The seller cords only a part of the timber and neglects to cord the rest. In that event the buyer may avoid the contract and claim compensation from the seller for any loss which he may have sustained for the non-performance of the contract.

(iv) Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises (Section 54)
When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non- performance of the contract.

Analysis of Section 54

Section 54 applies when the promises are reciprocal and dependent. If the promisor who has to perform his promise before the performance of the other’s promise fails to perform it, he cannot claim performance of the other’s promise, and is also liable for compensation for his non- performance.

Example: A hires B’s ship to take in and convey, from Kolkata to the Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B’s promise, and must make compensation to B for the loss which B sustains by the non-performance of the contract. (v) Effects of Failure to Perform at a Time Fixed in a Contract in which Time is Essential(Section 55)
The law on the subject is contained in Section 55 which is reproduced below:
“When a party to a contract promises to do certain thing at or before the specified time, and fails to do any such thing at or before the 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 essence of the contract”.

Effect of such failure when time is not essential
If it was not the intention of the parties that time should be of essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than agreed upon
If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of acceptance, he gives notice to the promisor of his intention to do so.

Analysis of Section 55
But ordinarily, from an examination of a contract, it is difficult to ascertain whether time is intended to be of essence by the parties at the time of its formation. In every case, the intention is to be gathered from the terms of the contract.

In a mercantile contract, the general rule in this regard is that stipulations as to time, except as to time for payment of money, are essential conditions, since punctuality is of the utmost importance in the business world. Thus, on a sale of goods that are notoriously subject to rapid fluctuation of market price, e.g. gold, silver, shares having a ready market the time of delivery is of the essence of the contract. But in mortgage bond, the time fixed for the repayment of the mortgage money can by no means be regarded as an essential condition; consequently, the mortgaged property can be regained even after the due date. Similarly, in a contract to sell land any clause limiting the time of completion is not strictly enforced. But even in a contract for the sale of land, time can be made the essence of the contract by express words.

Contract cannot be avoided where time is not essential: Where time is not essential, the contract cannot be avoided on the ground that the time for performance has expired, there the promisee is only entitled to compensation from the promisor for any loss caused by the delay. But it must be remembered that even where time is not essential it must be performed within a reasonable time; otherwise it becomes voidable at the option of the promisee.

Effect of acceptance of performance out of time: Even where time is essential the promisee may waive his right to repudiate the contract, when the promisor fails to perform the promise within the stipulated time. In that case, he may accept performance at any time other than that agreed. In such an event, he cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless at the time of acceptance of the performance he has given a notice to the promisor of his intention to claim compensation.
(vi) Agreement to do Impossible Act Section 56
contemplates various circumstances under which agreement may be void, since it is impossible to carry it out. The Section is reproduced below:
“An agreement to do an act impossible in itself is void”.

Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful: where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

Example: A agrees with B to discover treasure by magic. The agreement is void.

Analysis of Section 56
The impossibility of performance may be of the two types, namely (a) initial impossibility, and (b) subsequent impossibility.
(1) Initial Impossibility (Impossibility existing at the time of contract): When the parties agree upon doing of something which is obviously impossible in itself the agreement would be void. Impossible in itself means impossible in the nature of things. The fact of impossibility may be and may not be known to the parties.

Example: ‘A’, a Hindu, who was already married, contracted to marry ‘B’, a Hindu girl. According to law, ‘A’ being married, could not marry ‘B’. In this case, ‘A’ must make compensation to ‘B’ for the loss caused to her by the non-performance of the contract.
(i) If known to the parties: It would be observed that an agreement constituted, quite unknown to the parties, may be impossible of being performed and hence void.
Example: B promises to pay a sum of Rs. 5,00,000 if he is able to swim across the Indian Ocean from Mumbai to Aden within a week. In this case, there is no real agreement, since both the parties are quite certain in their mind that the act is impossible of achievement. Therefore, the agreement, being impossible in itself, is void.

(ii) If unknown to the parties: Where both the promisor and the promisee are ignorant of the impossibility of performance, the contract is void.
(iii) If known to the promisor only: Where at the time of entering into a contract, the promisor alone knows about the impossibility of performance, or even if he does not know though he should have known it with reasonable diligence, the promisee is entitled to claim compensation for any loss he suffered on account of non-performance.
(2) Subsequent or Supervening impossibility (Becomes impossible after entering into contract): When performance of promise become impossible or illegal by occurrence of an unexpected event or a change of circumstances beyond the contemplation of parties, the contract becomes void e.g. change in law etc. In other words, sometimes, the performance of a contract is quite possible when it is made. But subsequently, some event happens which renders the performance impossible or unlawful. Such impossibility is called the subsequent or supervening. It is also called the postcontractual impossibility. The effect of such impossibility is that it makes the contract void, and the parties are discharged from further performance of the contract.

Example: ‘A’ and ‘B’ contracted to marry each other. Before the time fixed for the marriage, ‘A’ became mad. In this case, the contract becomes void due to subsequent impossibility, and thus discharged.
(vii) Reciprocal promise to do certain things that are legal, and also some other things that are illegal- Section 57:
Where persons reciprocally promise, first to do certain things which are legal and secondly, under specified circumstances, to do certain other things which are illegal, the first set of promises is a valid contract, but the second is a void agreement.

Example: A and B agree that A will sell a house to B for Rs. 500,000 and also that if B uses it as a gambling house, he will pay a further sum of Rs. 750,000. The first set of reciprocal promises, i.e. to sell the house and to pay Rs. 500,000 for it, constitutes a valid contract. But the object of the second, being unlawful, is void.
(viii) ‘Alternative promise’ one branch being illegal Section 58:
The law on this point is contained in Section 58 which says that “In the case of the alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced”.

Example: A and B agree that A shall pay B Rs. 1,00,000, for which B shall afterwards deliver to A either rice or smuggled opium.

This is a valid contract to deliver rice, and a void agreement as to the opium.

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