Performance of Contract (Part-5) - The Indian Contract Act 1872 CA CPT Notes | EduRev

Business Laws for CA Foundation

Created by: Sushil Kumar

CA CPT : Performance of Contract (Part-5) - The Indian Contract Act 1872 CA CPT Notes | EduRev

The document Performance of Contract (Part-5) - The Indian Contract Act 1872 CA CPT Notes | EduRev is a part of the CA CPT Course Business Laws for CA Foundation.
All you need of CA CPT at this link: CA CPT

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.
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)


TEST YOUR KNOWLEDGE

Multiple Choice Questions

Question 1. On the valid performance of the contractual obligations by the parties, the contract

(a) Is discharged

(b) becomes enforceable

(c) becomes void

(d) None of these

Question 2. Which of the following person can perform the contract?

(a) Promisor alone

(b) Legal representatives of promisor

(c) Agent of the promisor

(d) All of these.

Question 3. A contract is discharged by novation which means the

(a) cancellation of the existing contract

(b) change in one or more terms of the contract

(c) substitution of existing contract for a new one

(d) none of these.

Question 4. A contract is discharged by rescission which means the

(a) change in one or more terms of the contract

(b) acceptance of lesser performance

(c) abandonment of rights by a party

(d) cancellation of the existing contract

Answers to MCQs

1 (a)
2 (d)
3 (c)
4 (d)


Theoretical Questions
Question 1: 
“The basic rule is that the promisor must perform exactly what he has promised to perform.” Explain stating the obligation of parties to contracts.

Question 2: Discuss the   effect of accepting performance from third person.
Question 3: “When a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract”. Explain.

Answer to the Theoretical Question

1. Obligations of parties to contracts (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. Promises bind the representatives of the promisor in case of death of such promisor before performance, unless a contrary intention appears from the contract.

Example 1: A promises to deliver goods to B on a certain day on payment of Rs. 1,00,000. A dies before that day. A’s representatives are bound to deliver the goods to B, and B is bound to pay Rs. 1,00,000 to A’s representatives.

Example 2: A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by A’s representatives or by B because it involves use of personal skill.

Analysis of Section 37,

A contract being an agreement enforceable by law, creates a legal obligation, which subsists until discharged. Performance of the promise or promises remaining to be performed is the principal and most usual mode of discharge.

The basic rule is that the promisor must perform exactly what he has promised to perform. The obligation to perform is absolute. Thus, it may be noted that it is necessary for a party who wants to enforce the promise made to him, to perform his promise for himself or   offer to perform his promise. Only after that he can ask the other party to carry out his promise. This is the principle which is enshrined in Section 37.

Thus, it is the primary duty of each party to a contract to either perform or   offer to perform his promise. He is absolved from such a responsibility only when under a provision of law or an act of the other party to the contract, the performance can be dispensed with or excused. Thus, from above it can be drawn that performance may be actual or   offer to perform.

2. 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: A received certain goods from B promising to pay Rs. 100,000/-. Later on, A expressed his inability to make payment. C, who is known to A, pays Rs. 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 Rs. 100,000/- whether he can do so? Advice.
As per Section 41 of the Indian Contract Act, 1872,

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, accepted by the promisee, produces the result of discharging the promisor, although the latter has neither authorised nor ratified the act of the third party. Therefore, in the present instance, B can sue only for the balance amount i.e., Rs. 40,000/- and not for the whole amount.

3. effect of a Refusal of Party to Perform Promise According to Section 39,

when a party to a contract has refused to perform, or disabled himself from performing his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

Example: A, singer, enters into a contract with B, the Manager of a theatre, to sing at his theatre two nights in every week during next two months, and B engages to pay her Rs. 10000 for each night’s performance. On the sixth night, A willfully absents herself from the threatre. B is at liberty to put an end to the contract.

Analysis of Section 39 From language of Section 39,

it is clear that in the case under consideration, the following two rights accrue to the aggrieved party, namely,

(a) to terminate the contract;

(b) to indicate by words or by conduct that he is interested in its continuance.

In case the promisee decides to continue the contract, he would not be entitled to put an end to the contract on this ground subsequently In either case, the promisee would be able to claim damages that he suffers as a result on the breach.

Complete Syllabus of CA CPT

Dynamic Test

Content Category

Related Searches

video lectures

,

Performance of Contract (Part-5) - The Indian Contract Act 1872 CA CPT Notes | EduRev

,

past year papers

,

MCQs

,

Previous Year Questions with Solutions

,

Important questions

,

Performance of Contract (Part-5) - The Indian Contract Act 1872 CA CPT Notes | EduRev

,

pdf

,

shortcuts and tricks

,

Objective type Questions

,

Summary

,

Viva Questions

,

Sample Paper

,

study material

,

Semester Notes

,

Extra Questions

,

ppt

,

Exam

,

practice quizzes

,

Free

,

Performance of Contract (Part-5) - The Indian Contract Act 1872 CA CPT Notes | EduRev

,

mock tests for examination

;