This article is written by Srishti Chawla, a 5th-year student at Amity Law School, Noida.
We already know that a contract requires a certain set of basic essentials that must be fulfilled in order to make a contract legally enforceable. But even when the parties to the contract have fulfilled these essentials, its validity can be questioned if the contract is not fulfilled in due time and in the manner prescribed in the contract. In all Commercial contracts for example construction contracts, it is of utmost importance that a contract is completed in due time because a delay in its performance might frustrate the whole objective of the contract making the promisee subject to losses. Although it is on the discretion of the parties to decide the time, and place of the contract but once decided it becomes necessary to comply with such terms.
We will now discuss the rules regarding time, place and manner as specified in sections 46-50 of The Indian Contract Act, 1872.
Rules Regarding Time and Place of Performance of Contract
1) When no application is to be made by the promisee and no time is specified – Section 46
In situations where there is no time period specified for the performance of the contract and the promisor has to perform the contract without any request by the promisee, in such a case the promisor must perform the contract within a “reasonable time”.
Here reasonable time means a fair amount of time that is required to do something conveniently and as soon as the circumstances permit. Hence here time is not important since a specified date for completion is not mentioned but this does not mean that the promisee does not have the right to have the contract performed by the promisor.
Also, the term reasonable time depends on the facts and circumstances of the case and will also depend on the nature of the transaction.
Srishti takes a loan of Rs 10,000 from Shivani and says that she will return it to her when she receives her next salary. Here the reasonable time for performance of the contract is after Srishti receives her next salary.
2) When time and place of performance is specified but no application is to be made by the promisee- Section 47
When the terms of the contract say that the promisor has to perform the contract without any request by the promisee, on the place specified by the promisee and on the exact date specified by him.
In case no specific time is mentioned then the promisor should deliver the goods during the usual hours of business.
Ankita promised to deliver goods to Ira on an advance payment of Rs 10,000. Ira made the payment and asked Ankita to deliver the goods on 13th of the same month at her office at Tis Hazari. Since the time is not specified, she should deliver it between 10 am and 5 pm, assuming those are the regular court timings.
If Ankita attempts delivery after the business hours, then Ira has the right to not accept the goods and ask Ankita to deliver again during business hours.
3) When Performance is to be made on a proper place and time but an application is to be made by the promisee to the promisor for its performance- Section 48
When the terms of the contract say that a performance of a contract has to be made on a particular day but the promisor will only do so when the promisee makes an application to the promisor on that specific day for performance. Hence, here since it is specifically mentioned in the contract that the promisee has to request the promisor for performance on that specific day, he must do so at the proper place and during the usual business hours as specified by him.
Manu agrees to supply Nishant 50 cartons of alcohol on 3rd November at his office. As per terms of the contract, Nishant would have to request Manu for performance. Thus on the due date and within usual business hours, Nishant should request Manu regarding a time and place for the supply of goods.
4) Where no place is fixed and no application has to be made to the promisor by the promisee- Section 49
When the terms of the contract does not specify the place where the goods have to be delivered and that no request has to be made by the promisee for the performance of a contract, in such a situation it is the duty of the promisor to request the promisee of a place reasonable to both where the goods can be delivered and then accordingly perform the contract.
The place for the performance of goods implies both the delivery and payment of goods.
Sheela entered into a contract for supplying 100 cartons of Gram Flour to Anu on 5th September at a specific price. On the due date of performance, Sheela must apply or request Anu for determining a reasonable place and also make the payment at the same place.
5) When the performance has to be made in the time and manner as specified by the promisee- Section 50
A contract can also exist in which the promisor agrees to perform the contract in a manner and at a place and time prescribed by the promisee.
Prankur’s son is in the hospital and needs money for his son’s operation. Harshil owes money to Prankur and agrees to repay him in at any place or time decided by Prankur. In this case, Prankur has the liberty to ask for the performance of the promise in any manner and at any place or time suited to him.
The consequence of Failure to perform the contract at a fixed time when the time is essential
Section 55 of the Indian Contract Act,1872 deals with the effect of failure to perform the contract at a fixed time when the time is essential.
- If an act is not done within the stipulated time, the contract becomes voidable at the option of the promisee provided the Intention of the parties was that time should be of the essence of the contract.
Thus whether time was the essence of the contract depends on the intention of the parties and also on the nature of the contract.
In Bhudra Chand v. Betts(1915) the defendant promised to deliver an elephant to the plaintiff for the capture of a wild elephant as a part of Kheda Operations. The contract provided that the elephant would be delivered on the 1st of October, 1910, but the defendant obtained an extension of the time till 6th Oct and yet did not deliver the elephant till 11th. The plaintiff refused to accept the elephant and sued for damages for the breach. It was held that the plaintiff was entitled to recover damages since it was proved that time was the essence of the contract since the defendant had tried to obtain an extension of time.
- This section says that if it was not the intention of parties to make time of the essence of the contract, the contract does not become voidable by the failure to perform the contract on or before the specified time but the promisee is entitled to claim compensation for any loss caused by the default
- Finally, the section goes on to say that if time is intended to be of the essence by the parties but performance is accepted on some other time other than the time agreed, compensation cannot be claimed by the promisee unless he gives such a notice to the promisor.
In the case of State of Kerala v. M.A Mathai(2007), it was held that if there are any delays in the performance of reciprocal obligations by an employer, the contractor gets the right to avoid the contract but if he does not avoid the contract and accepts the belated performance, he cannot claim compensation for any loss sustained to him due to delay in performance, unless he gives a notice of the same to the delaying party.
The intention of the parties
In Indian law, the question of whether the time is of the essence of the contract or not is determined by the intention of the parties.
The intention of the parties can be determined from:
(a) The express words used in the contract
(b) The nature of the contract itself
(c) The nature of the property which forms the subject matter of the contract
(d) The surrounding circumstances
It has been held in the case of China Cotton Exporters v. Beharilal Ramcharan Cotton Mills Ltd (1961) that in commercial contracts time is ordinarily of the essence of the contract.
Thus It is ordinarily presumed that except in commercial contracts, time is not of the essence in other contracts. This presumption can be rebutted by showing the intention of the parties.
For example, Time is presumed not to be of the essence in contracts relating to immovable property, but of the essence in contracts of renewal of leases.
In M/S Citadel Fine Pharmaceuticals vs M/S Ramaniyam Real Estates Pvt. Ltd. and Ors. (2011), It was held that time was the essence of the contract which was specifically mentioned in clause 10 and the consequences of non-completion are mentioned in clause 9. So, from the express terms of the contract and the commercial nature of the transaction and the surrounding circumstances make it clear that the parties intended time to be of the essence of the contract.
However, merely specifying the time at which the contract has to be performed does not make time the essence of the contract. In order to determine this the terms and conditions of the agreement should be read carefully. If the contract in its terms provides that time is the essence of the contract, but other terms of the agreement show that the parties did not intend time to be of the essence, the court has held that time is not of the essence.
For Example, in the Case of Hind Construction Contractors v. State of Maharashtra (1979) the Appellant entered into a contract with the respondent on July 2, 1955, for some construction work with the condition that the contract should be completed within 12 months from the commencement of the work. The Appellant could not complete the work within the stipulated time and the Respondent canceled the contract with effect from August 16, 1956. The Appellant contended that time was not of the essence and further on account of several difficulties, such as excessive rains, lack of proper road and means of approach to the site, the completion was delayed. The Supreme Court, in deciding that time was not of the essence in relied on two clauses in the contract –
1. First, there was a power to grant an extension of time on reasonable grounds by the respondent on an application by the appellant. Even though the appellant made an application for extension, the respondent revoked the contract which was wrong.
2. Second, there was a provision to recover penalty/compensation from the appellant at specified rates during the time the work remains unfinished.
These two provisions, as per the court, exclude the inference that time was intended to be of the essence of the contract.
Time Can Be Made Essence By Notice
When time is not of the essence in a contract, it can be made so by giving notice to the promisor. The notice must contain clearly that it wants to make time as the essence of the contract and the necessary implications if it is not adhered to. The promisor can also be intimated through the notice that default in the compliance with the terms will lead to the cancellation of the contract. The party serving the notice must himself be bound by it.
Extension of time
Since one party to the contract cannot unilaterally vary the terms of the contract, he also cannot extend the time without the consent of the other party through an agreement, Therefore, time for performance can be extended only by an agreement arrived at between the promisor and promisee. Thus if one party requests the other party for extension of time but the other party does not communicate his acceptance, the time cannot be extended in such a case.
What we gather from the provisions of law relating to time as the essence of contracts is that what matters most in such cases is the intention of the contracting parties. The intention can either be expressed in the contract or can be inferred by the nature of the transaction. If in the terms and condition of the contracts the parties have no intention that time should be of the essence of the contract does not become voidable by the failure to do such thing at or before the specified time but the promise is entitled to compensation from the promisor for any loss occasioned to him by such failure .when the time is the essence of the contract, non performance of the contract in time would frustrate the purpose which the parties have in mind and therefore if in such a case, there is a delay in the performance by one party, the other party has a right to avoid the contract.