This article, written by Shivangi Tiwari and updated by Sudhakar Singh, discusses contract performance in detail. It also includes the international perspective and the role of technology in contract performance.

Introduction

When you are talking about the concept of performance of contract law, you should ask yourself a question: What does ‘performance’ mean? It means the discharge of duties by the parties provided under the contract terms. For example, Aman and Surya agreed that Aman would deliver a bundle of pens to Mumbai. Aman delivered a pen to the house of Surya. Can you say that Aman has discharged his duties?

The Indian Contract Act, 1872 [hereinafter termed as ICA, 1872], provides a legal provision for the performance of a contract. The basic principle of the performance of the contract is a principle of ‘pacta sunt servanda,’ i.e., the agreement must be kept. If you perform your contractual obligations, then it builds relationships and makes business easier for you.

Failure to perform a contract may lead to legal disputes between you and other parties. However, you can get remedies from the court for breach of contract, such as damages, specific performance, restitution, termination of contract, etc. To learn more about remedies for breach of contract, click here. Before you understand the performance of the contract in detail, you should understand the meaning and types of performance of the contract.

Meaning of performance of contract

To better understand the concept of performance in a contract, you should understand how a contract is formed. An offer is the first step toward any contract. When a promisee accepts an offer, it becomes an agreement. When an agreement is enforceable by law, it becomes a contract. 

The term “offer” has been defined under Section 2(a) of the ICA, 1872. An offer is an expression of willingness made by a person to do or abstain from doing any act or omission to obtain the assent of the person to whom such an offer of act or abstinence is made.

The term ‘performance’ in its literal sense means the performance of a task or action. In its legal sense, “performance” means fulfilling or completing their obligations towards the other party under the contract they entered into.

According to the Black’s Law Dictionary, ‘performance’ means “The fulfillment or accomplishment of a promise, contract, or other obligation according to its terms”.

For example, you and I entered into a contract. The terms of the contract state that you have to deliver a book to me when I pay five hundred rupees. If I pay five hundred rupees and you provide a book to me, we can say that the contract has been performed.

Types of performance of contract

Section 37 of the ICA talks about performance. According to the Section, there are two types of performance which are:

Actual performance

The actual performance of the contract means the actual discharge of the liability or obligation that a person has undertaken to perform, and there remains no other task that he is obliged to discharge under the promise. He is said to have made the actual performance of the promise.

Attempted performance

At times when the performance becomes due. The promisor cannot discharge his obligation or perform his duty because the promisee prevents him from doing so. This situation, where the promisor intended to perform his obligation or discharge his duty but is prevented from doing so by an intervening disability, is known as the attempted performance of a promise. Attempted performance is also known as tender of performance. A tender can be of two types:

Tender of goods and services

The contract to deliver goods and services is deemed completed when the goods are tendered for acceptance as per the contract. If the goods and services so tendered are not accepted, the offeror must take them back, and he is discharged from liability.

Tender of money

The debtor tenders the money to be paid to the creditor, but the debtor refuses to accept the money. The debtor is not discharged from the ability to pay back the money. Therefore, a money tender can never result in the discharge of debt.

The contracts are of various types. Therefore, their performance depends upon the nature of the contract. 

Place and time for performance of contract

Under contract law, the expression ‘Time is the essence of contract’  has a special meaning. Sometimes, a contract includes the time and place for its performance; therefore, we must understand the applicability of time and place for performance. Sections 46 to 50 of ICA, 1872, deal with the condition regarding time and place for the performance of a contract. Let us understand this concept in more depth. 

Section 46 of the Indian Contract Act, 1872

Section 46 of ICA concerns the timing of contract performance, especially when the parties have specified no time. Where no time has been mentioned, the contract will be performed within a reasonable time. For example, if you are a seller and agreed to deliver goods but the date was not specified, then delivery of goods should be within a reasonable time as per market norms.

The expression ‘reasonable time’ is a flexible term and depends upon various factors that can help to determine reasonable time, such as:

• Nature of contract
• Customary practices and industry standards
• The importance of contract
• Intention of the parties

In Smt. Nakubai Valu Dhokane vs. Shri Bhagwansingh Prakash Chandra [2008], the Bombay High Court held that when no time has been mentioned for the performance of a contract, then performance should be offered within a reasonable time. Three years, as specified under Article 54 of the Limitation Act,1963, is a reasonable time.

You may wonder what happens when the time of performance of a contract is mentioned in the contract. Section 47 of ICA, 1872, explains this question well.

Section 47 of the Indian Contract Act, 1872

It is pretty simple to understand that if time and place are specified for the performance of a contract and no overt act from the promisee is necessary, then the contract should be performed during the usual business hours of such day as stated under Section 47 of ICA, 1872.

For example, you ordered a refrigerator from Amazon and made a payment. It was said that the fridge would be delivered tomorrow between 9 AM and 6 PM. Now, the refrigerator should be delivered during business hours, and if it is not offered during business hours, it will be considered that the contract has not been performed.

You might have observed that sometimes the contract between the parties is made to contain the contract’s time, day, and place of performance. In such a situation, what should be done by the parties for the performance of a contract? The answer to this question is given under Section 48 of ICA, 1872.

Section 48 of the Indian Contract Act, 1872

Section 48 of ICA, 1872, contains the condition that the promisee must apply for the performance if the contract’s day, time, and place of performance have been specified. The promisor is obliged to perform a contract during the working hours of business at a specified time and day.

Let’s say there is a contract between parties, and neither the place for performance is mentioned in the agreement, nor has the promisee applied for the contract’s performance. Such situations are dealt with under Section 49 of ICA, 1872.

Section 49 of the Indian Contract Act, 1872

Section 49 of ICA, 1872, deals with a situation when no place for performance has been specified. If there is a contract and no place for performance has been defined in the contract. Then, in such situations, the promisor must appoint a reasonable place to perform the contract. Now, a question arises: What is a sensible place?

For example, Peter promises to deliver 5 television sets to John on a fixed day and time. However, the contract does not mention an address. It is Peter’s responsibility to ask John to appoint a reasonable place where he can safely accept the delivery of the goods. 

The most practical and relevant location should be chosen for the performance if a promisor has multiple business locations.

Under common law, there is a rule that a debtor should find his creditor and pay him there. In Jose Paul vs. Jose (2002), the Kerala High Court held that Section 49 of ICA, 1872, imposes a duty on a promisor to ask the promisee to fix a reasonable place for the performance of a contract.

In another case, L.N. Gupta vs. Tara Mani (1984), a promissory note was executed at Bangalore and included that the note would be payable at Bangalore or any place in India. The payee lives in Delhi; therefore, he demanded payment in New Delhi. Delhi High Court held that, under Section 49, the debtor has to find his creditor and pay him there.

Let’s take a situation where Raman and Akash have contracted to deliver goods. They decided on a time for the performance of the contract. Now, Raman wants extra time to perform the contract. The question arises whether Raman can change the time for the performance of the contract. This answer to the abovementioned question is under Section 50 of ICA, 1872.

Section 50 of the Indian Contract Act, 1872

A contract can also exist in which the promisor agrees to perform the promise in the manner, at the place, and at the time prescribed by the promisee.

Under Section 50 of ICA, 1872, the promisee can prescribe a different method or time for performing a contract. 

For example, John’s son is in the hospital, and he needs money for his son’s operation. Peter owes money to John and agrees to repay him in cash or cheque at any place or time John decides. In this case, John has the liberty to ask for the performance of the promise in any manner and at any place or time suited to him.

Time for Performance

Generally, parties are expected to perform their obligations at a specified time. But if one fails to do so, the question arises: What is the effect of such failure upon the contract? Section 55 contains the answer to the abovementioned question.

Specified time

The provisions of Section 55 apply when the parties have specified the time for the performance of any obligation under the contract. It is not always required that parties specify time in a contract. They may use some other expression to bind themselves to the completion by words such as ‘as soon as possible’ or ‘within a reasonable time’ or with an undertaking to perform the contract in the shortest period.

You may ask whether performance is required at the end of the given period or before the end.

Time is the essence of a contract

The phrase ‘time is the essence of a contract’ can sometimes be misleading because it raises the question of whether time is essential for a particular term or the whole. For example, in a contract for the sale of goods, the time is specified for delivery and payment. Here, time may be of the essence for delivery but not payment.

Generally, time is considered to be the essence of the contract in the following three cases:

• Where the parties have expressly agreed to treat it as of the essence of the contract.

• Where the delay in performance causes an injury.

• The nature and necessity of the contract require it to be so construed, for example, when a party asks for an extension of time for performance.

The parties’ intentions can be gathered either from the express terms of the contract or from the terms implied into the contract.

In the case of Sachidananda Patnaik and Anr. vs. G.P. and Co. (1964), both parties had an agreement for the sale of land. The Petitioner paid some money in advance, but the Defendant had a defective title over the property, so he did not perform his obligation of the contract. The petitioner filed a suit for the recovery of money given in advance. The Orissa High Court said that the intention of the parties can be ascertained from:

• The express words used in the contract
• The nature of the property that forms the subject matter of the contract;

• The nature of the contract itself, and

• The surrounding circumstances

The court also pointed out that the parties’ intention is either a question of fact or a mixed question of law and fact.

The contract becomes voidable

When a party fails to perform his obligations under the contract at the specified time, the time being of the essence of the contract, the contract becomes voidable at the other party’s option, which gives the other party an option to treat the contract as an end.

If time is of the essence and one party fails to perform at the specified time, the other party has a right to avoid the contract. But in the State of Maharashtra & Anr. vs. Digambar Balwant Kulkarni (1979), the contract of work provided that time is the essence of the contract, and the contract continues to be in force till the completion of the work or its cancellation. Apex Court held that the right to cancel the contract would accrue to the other party only when the compensation exceeded the security deposit amount or the contractor abandoned the work. Till then, the contract remained in force.

When time is not of essence

Time is not of the essence where the contract includes a clause of damages for delayed completion, or for an extension of time in certain circumstances. If these conditions are fulfilled then time is not of essence even if express provision has been made making time of the essence.

In M/S. Arosan Enterprises Ltd. vs. Union of India & Anr (1999), the Supreme Court held that if there is an inordinate delay on both sides in the performance of a contract, then it may be inferred that the contract has been abandoned. However, no such notice has been given. Though time is not of the essence, the promisee cannot be expected to wait indefinitely, and the promisor must perform his promise within a reasonable time.

To understand a contract’s performance well, we must realize the reciprocal promise and its legal position in the performance of the contract.

Performance of reciprocal promises

Section 51 to 54 ICA, 1872, deal with reciprocal promises’ performance.

Section 2(f) of the ICA defines reciprocal promises. It says that such promises that form the consideration or part of consideration for each other are called reciprocal promises.

For example, you went to the shop to purchase a biscuit. You asked for a biscuit, and you paid for it. Here, the performance of a contract is dependent on the performance of the contract by another party.

Section 51 of the Indian Contract Act, 1872

Section 51 of ICA, 1872, deals with reciprocal promises, where one party’s promise is to be performed simultaneously with the other party’s promise. If one party is denied the performance of its obligations, then another party is not bound to perform its duties.

For example, if you order something on Amazon in cash on delivery, the delivery boy is not obliged to give you the goods if you don’t pay the amount at delivery time. Here, the performance of one party is dependent on the other party.

In M/s Shanti Builders vs. Ciba Industrial Workers’ Co-Op (2012), the Bombay High Court held that in case of reciprocal promises, if the promise of one party is dependent on the obligation of the other party, then the other party cannot force him to perform his promise unless he performs his obligation.

Readiness and willingness

Willingness is a mental process to do an act, whereas readiness implies the proximity of such willingness and its ultimate physical expression. Readiness includes something that converts will into action. Whether a party to a contract is ready and willing to perform his obligation is a question of fact.

In National Insurance Company Ltd vs. Seema Malhotra And Ors (2001), the Supreme Court held that a contract of insurance contains reciprocal promises. When the insured gives a cheque to the insurer to pay a premium or part of the premium, it is a performance of a reciprocal promise. The drawer of the cheque promises the insurer that the cheque will make the amount available in cash. Hence, if the bank dishonors the cheque, the insurer need not perform his part of the promise.

The Section does not give any extraordinary remedy to a party who performed his part without insisting on the performance of the reciprocal promise.

One fine day, Aman wants to buy Ayush’s car from Ayush, and they make a contract. Here, Ayush will not sell his car unless he receives money, which means that Ayush’s promise depends on Aman’s performance. Such a situation is well explained under Section 52 of ICA, 1872.

Section 52 of the Indian Contract Act, 1872

Section 52 of ICA deals with dependent promises, where one promise is dependent upon the performance of the other promise. The parties may also agree to perform the promises in a particular order. The order may be expressly fixed in the contract, or it will be determined as per the nature of the contract. Once the contract expressly fixes the order of performance of the reciprocal promises, then the contract must be performed in such order.

For example, Ram promises Shyam a fixed price for building his house. Ram must build the house before Shyam pays for it.

Tender of performance

The offeror should offer the performance of an obligation under the contract to the offeree. The offer is called the “tender of performance”. It is the discretion of the promisee to accept the offer. If the promisee chooses not to accept the offer, then neither the offeror could be held liable for the non-performance of the terms of the contract nor he loses his rights under the contract terms. Therefore, it is a settled principle that non-acceptance of the tender of performance would result in the exclusion of the promisor from further performance of the terms of the contract, and he is also entitled to sue the other party for not performing the terms of the contract.

Section 37 to Section 39 specifically deal with the performance of the contract by the parties thereto. According to Section 37 of the ICA, 1872, the parties to a contract are under the obligation to either perform or offer to perform the promises that have been agreed upon under the contract. Section 2(b) of the ICA defines the meaning of promise as a proposal made by the offeror that the offeree has accepted. Thus, each party is legally obliged to perform his obligation, which has been agreed upon under the contract terms. Unless the contract terms expressly exempt or dispense the performance of obligation upon the person.

Section 38 of the Contract Act makes it clear that a tender of performance is tantamount to performance. Every tender of performance must fulfill a specific essential condition:

• Section 38(1): The offer should be unconditional;
• Section 38(2): The offer must be made at a proper time and place to allow the party to have a reasonable time for ascertaining that the person who is making the offer to him is competent to enter into a contract;
• Section 38(3): If the offer to the offeree is such as to deliver some goods addressed to the offeree then the offeror must provide reasonable time to the offeree in which he can ascertain that the goods offered to him is the same by which the offeror is bound under the terms of the contract.

Obligation of parties to perform

The obligations in a contract are those duties the parties to the agreement have to abide by. In a contract, the parties usually exchange something of value in the eyes of the law. The thing that is decided to trade can be a product, services, money, etc. The sale of a product or automobile is an example of a contractual obligation.

In Geo-Group Communications Inc. vs. Iol Broadband Ltd (2009), the parties to the contract signed an agreement, and they acted entirely on the agreements’ terms so much that there arose no further need for the documents to be executed. The agreement was described as one of the preliminary and tentative drafts for discussion and deliberation only. When the contract was challenged in a court of law, the court held that the agreement was valid and entitled the claimant to relief.

Submission of tender tantamounts to a proposal

When a tender is submitted in response to an invitation, it is considered a proposal to contract and not an acceptance. In M/S Great Eastern Energy vs. M/S Jain Irrigation Systems Ltd (2010), the tender specified a validity period of four months. The court held that no acceptance could be made after the expiry of the tender period. The forfeiture of the security deposit amount by acceptance of the tender after the expiry of its validity period and failure of performance by the tenderer was not improper.

Clause for renewal

The clause for renewal is the provision by which the contract terms initially agreed upon are renewed or recommenced.

In Hardesh Ores Pvt. Ltd vs. M/S. Hede And Company, (2007), the contract terms contained a renewal clause. The party that has the authority by the terms of the contract to renew the same exercised it. However, the other party refused to accept the new terms caused by renewal. The Supreme Court held that in such a case, the best course of action for the party who is empowered by the terms of the contract to renew the terms of the agreement is to get the renewal declared and enforced by a court of law or to get the declaration of renewal of contract by the court.

Tender of performance should be unconditional

Section 38(1) states that for a tender to be valid, it must be unconditional, which means that it should not be accompanied by any clause, provision, or condition precedent or subsequent. In Haji Abdul Rehman Haji Mahomed vs. Manjibhai Khatao And Co. (1926), the Bombay High Court explained the situations in which the tender became conditional.

For example, A promises B to pay a certain amount if B supplies certain goods to him. It is a conditional tender, and therefore, it is invalid. Similarly, in a case where A sent a single cheque for two items, only one of which was due at the time, while the other was payable after some time. Being one and indivisible, the cheque could be accepted as a whole or not at all. It was held that the promisee was within his right while rejecting the cheque.

You need to understand the importance of time and place in the tender of performance.

Tender of performance must be made at a proper time and place

Section 38(2) of the Act mandates that the tender of performance should necessarily be made at a time and place and under such circumstances to afford the person to whom the offer is made a reasonable opportunity to ascertain that the offeror is able and bound to do whatever he has promised under the terms of contract to do.

In Startup vs. Macdonald (1843) 6 Mann & G 593, the Defendant purchased ten tons of linseed oil to be delivered to the Plaintiff within the last fourteen days of March. The Plaintiff tendered the Defendant at night on the fourteenth day. The Defendant, however, citing the tender’s lateness, rejected the tender’s acceptance. The court, in this case, held that the Defendant should be held liable for the breach of the terms of the contract and the contention made by him that the late acceptance of the tender could not be entertained because, although the acceptance was made lately still the acceptance was still made before midnight.

In Afovos Shipping Co. vs. R Pagnan (1980) 2 Lloyd’s Rep 469, the Plaintiff and Defendant entered into a contract. The contract’s term provided that the payment, which formed the consideration, should arrive on the 14th day of the month. However, the Defendant repudiated the agreement before the 14th day of the month. The court held that the Defendant should have delayed the repudiation of the contract until the 14th of the month.

In Vidya Vati vs. Devi Das (1977), the debtor was obligated to pay back his loan to recover the vacant possession of his premises, and his tender was also rejected. However, the court held that the debtor was not released from the obligation to pay before he recovered the possession.

Before moving further into the topic, let us understand the performance of contingent contracts.

Performance of contingent contract

The term ‘contingent contract ‘ has been defined under Section 31 of ICA, 1872. It says contingent contracts are contracts in which performance depends on the occurrence or non-occurrence of certain events. If agreed-upon events happen, then the contract is enforceable, and if agreed-upon events do not occur, then the contract is not enforceable. For example, Ram promises Shyam to pay Rs.10,000 if Shyam’s house gets burnt in 10 days. Then, it is a contingent contract.

Contingent contracts are conditional contracts, and conditions are uncertain. A contract containing an absolute condition cannot be said to be a contingent contract. 

For example, if a contract to pay a sum of money on the expiry of time or the death of any person exists, it cannot be said to be a contingent contract, as these events are inevitable. If the conditions in a contract are uncertain, only then can the contract be called a genuinely contingent contract. To learn more about ‘contingent contracts,’ click here.

Contingency should be condition precedent

For better understanding, the contract’s collateral conditions should be fulfilled first. In other words, the conditions should be satisfied first, and only then can the performance of the contract be demanded.

For example, if a person is required to deposit a guarantee in a bank to accept the offer, then the non-fulfillment of such conditions would mean that the contract between the parties is not complete.

Contingency depends upon the will of a person

Sometimes, conditions in a contract depend upon the will of a party. There may be a contract where performance relies on a marriage of promisee, and such a contract is also contingent. The marriage is exclusively under the control of the promisee.

In Collector of Customs, Bombay vs. Rakesh Press, New Delhi (1997), the Supreme Court observed that a contract requiring goods to be inspected before dispatch would be valid.

When performance depends on the happening of an event

Section 32 of ICA defines the conditions when the performance of a contract depends on the happening of an uncertain future event. The Section lays out two basic principles:

• If there is a contract that depends on the happening of uncertain future events, then such a contract cannot be enforced unless such an event happens.
• If the happening of such events becomes impossible, then the contract becomes void.

For example, if Radha survives Mohan’s death, Radha contracts with Shyam to buy Shyam’s house. This contract cannot be enforced until Mohan dies in Radha’s lifetime.

In Nandkishore Lalbhai Mehta vs. New Era Fabrics P. Ltd. & Ors. (2015), there was a contract between the seller and New Era Fabrics (P) Ltd. concerning a land sale. The condition under the agreement was that the contract could only be performed if there was the consent of labour unions and the approval of appropriate government authority. None of these conditions were fulfilled. The court held that the contract could not be enforced against the seller.

When performance depends upon the non-happening of an events

Section 33 of ICA, 1872 deals with the condition when the performance of a contingent contract depends on the non-happening of uncertain future events. It says that the contingent contract cannot be enforced until and unless the happening of events becomes impossible. In such conditions, parties have to wait till the event becomes impossible. Only when it is clear that an event cannot happen, only then can the performance of the contract be done.

In Frost vs. Knight (1872) L.R. 7 Ex. 111, the Defendant promised the Plaintiff to marry when his father died. While the Defendant’s father was alive, he married another woman. The court held that the Plaintiff is entitled to sue the Defendant for breach of contract as it becomes impossible for the Defendant to marry the Plaintiff.

By whom must contracts be performed

Section 40 of the ICA contains provisions regarding the performance of the contract. The Section provides that if by the contract terms, the parties’ intention to the contract was such that any promise contained in it must essentially be performed by the promisor himself and no other person on his behalf can perform his promise. In all the different contracts, the terms of which do not indicate any similar intention then in the absence of the promisor for the performance of the promise, any other competent person can perform the pledge on his behalf.

For example, A and B entered an agreement, and A promised B to pay Rs.1000. The money could be paid to B personally or by any other person authorised by A on his behalf. If, in the above case, A dies without authorising the person who can make the payment on his behalf, then his representative will be bound to make the payment on his behalf, or they can appoint any other person to do so.

Effect of accepting performance by the third party

Section 41 of the Contract Act contains provisions regarding the effect of acceptance of the performance of a promise by a third party. The Section provides that where the promisee agrees to the performance of a promise made to him by the offeror by the third party, he cannot, at a later point in time, enforce the contract against the promisor who initially promised to perform the promise.

Suppose the terms of the contract indicate that from the very beginning of entering into the contract, the parties to the agreement intended specific performance of the promise by the promisor himself. The promisor himself should perform the pledge, and neither promise can be enforced against the legal representative nor the legal representatives enforce the promise. This situation can usually be seen in cases involving the promisor’s skills.

Generally, the rule under Section 37 is that the promises of the deceased promisor will bind his representatives. Therefore, the general principle of contract law is that unless a contrary intention appears in the contract terms. The representatives of a deceased promisor are bound by the promise of the deceased, and the promises of the deceased are enforceable against his representatives.

In the case of Kapur Chand Godha vs. Mir Nawab Himayatalikhan Azamjah (1962), the court declared that English and Indian law differ substantially on the point of the contract’s performance by the deceased promisor’s representatives. In the British law system, the rule is that the third party or the representatives of the deceased promisor could discharge his obligations only when it is evident from the promise that it was the parties’ intention. In contrast, the formation of the pledge binds their representatives in case any of the promisors dies. 

The position of Indian law concerning the performance of the promise by the representatives of the deceased is contrary to the English law. You can infer the same from the words of Section 41 of the ICA, which leave no ray of doubt that in cases where the appellants expressly declare the intention of the performance of their promise from the third party, they can not afterward enforce the promise against the promisor.

Joint promises

Section 42 of the ICA discusses joint promises. When two or more promisors agree to perform the pledge terms together, they are said to have made a joint promise, and the people who jointly decided to conduct the pledge are called the joint promisors. 

The Section provides that the promisors are jointly liable to fulfil the promise until the terms of the contract provide otherwise.

Performance of joint promises

According to English law, in a case where one of the several joint promisors dies. The surviving joint promisor would be bound by the rights and liabilities of the deceased joint promisors unless a single joint promisor remains alive. The legal representatives of the promisor will not acquire any rights or liabilities. This rule is sometimes considered to put the creditor at a loss as he has no security of the solvency of the creditors. This lacuna of the English rule is filled by Section 42 of the ICA.

Have you ever wondered what happens if a contract has more than two parties? What will be their obligation to perform the contract? Therefore, you need to understand the concept of joint liabilities.

Devolution of joint liabilities

You might have noticed that, in some contracts, there are more than two parties. The devolution of joint liabilities is beneficial in such a contract. It guides us on how each party’s liability is distributed in a contract with more than two parties. You will find that this concept is closely related to the contract’s performance and helps decide how parties will perform their obligations under the contract.

When two or more persons enter into a joint promise, unless a contrary intention appears by the contract, all promisors during their joint lives and after the death of any of them or their representatives will be bound jointly along with the surviving promisor or promisors. After the death of all the promisors, the representatives of all the promisors will be bound by the promise jointly entered into by the deceased promisors. Section 42 of the ICA deals with the same concept.

This Section provides security to the promisee by assuring him that the promisors would be bound by their promise during their joint life. After the death of either of the promisors, their representatives will be bound by the promise made by the deceased promisor.

In Gannmani Anasuya & Ors vs. Parvatini Amarendra Chowdhary & Ors (2007), the Supreme Court held that Section 42 shifts the burden of the fulfillment of the promise on the representatives of the deceased promisors. However, the promisor’s liability is subject to the express or implied prescription of Section 42.

Joint and several liability

Section 43 of the ICA contains the essential facets of the joint promises. According to the Section, when two or more persons jointly make a promise, the promisee can compel any joint promisor to perform the promise. To learn more about joint and several liability, click here.

Each promisor may compel contribution

Section 43 provides that each of the promisors in a joint promise may compel the other promisors to contribute equally with him in the performance of the promise unless a contrary intention appears from the terms of the contract.

Sharing of loss by default in contribution

Furthermore, Section 43 provides that if any two or more joint promisors default in contributing to the promise, then the remaining promisors must bear the burden of loss and should make good the loss suffered by the other party by contributing in equal shares.

The explanation attached to the Section provides that nothing contained under Section 43 of the ICA shall prevent the surety, from recovering the money that he has paid on behalf of the principal nor the Section empower the principal from recovering anything from the surety on account of the surety’s payment made on behalf of the principal.

Rules under Section 43 of the Indian Contract Act, 1872

Section 43 lays down the following three rules:

Rule 1

In a joint promise agreement, the promisee has the discretion to specifically require only one of the joint promisors to pay the amount jointly promised by the promisors.

Rule 2

Where a specific joint promisor agrees to pay the whole amount, then, he may compel the other joint promisors to pay the amount to him.

Rule 3

Where one of the joint promisors defaults in contributing to pay the stipulated amount due to his inability to make payment, the remaining joint promisors must bear the cost in equal shares.

Release of one joint promisor

Section 44 of the Contract Act grants the right to release to the creditor under which he may release either of the joint promisors from liability. The Section provides where the creditor has released either joint promisors from the liability. The other joint promisors are not discharged from their liabilities and are still bound to fulfill their promise to the person. However, the release of the promisor from his liability towards the promisee does not result in his release from his liability towards the other joint promisors.

Section 44 of the ICA, 1872 marks a departure from the common law principle in which the release of one of the promisors from liability amounts to the release of the other promisors from their liability towards the promisee. Unless the promisee expressly provides for the preservation of rights against them.

Devolution of joint rights

Section 45 of ICA, 1872, deals with the rights of joint promisees. It says that when there are two or more promisees in the contract, all the promisees should act together to enforce the agreement. If some specific clauses or conditions prevent the performance of the contract by one or more promisees, then such conditions shall prevail over the general rule of Section 45. It means that each promisee of a contract is entitled to a joint right, and no promisee can enforce the contract independently.

It emphasised that each promisee must collaborate to enforce the performance of the contract. If one of the promisees dies, the surviving promisee should retain the right to claim the performance of the contract. For example, if a promise is made to Meena, Riya, and Jiya jointly, and Riya dies, then the right to claim the performance would remain with Meena and Jiya.

However, if all the joint promisees die, their legal representatives will inherit the right to claim the performance of the contract. To learn about joint rights in detail, click here.

In Shanti Devi vs. Bhojpur Rohtas Gramin Bank (2007), a husband and wife opened a savings account. Later on, due to bad relations between husband and wife, the condition of either survivor was withdrawn by the husband. After some time, the husband died, and as a result, the bank restricted the wife from operating the account without a succession certificate. The court held that banks should adopt a consumer-friendly approach. There is no illegality if the legal heir consented to their mother to withdraw the amount.

Impossibility of performance and frustration of contract 

You can call any contract a frustrated contract when the performance of the contract becomes impossible due to unforeseen circumstances. Under this concept, the contract becomes inoperative due to its impossibility of being performed. Section 56 of ICA, 1872, deals with the situation when a contract is impossible to perform. It contains three paragraphs.

• While dealing with the first paragraph of Section 56, it can be understood that an agreement to do an impossible act is void.
• The second paragraph provides that if due to some reasons or event which the promisor could not prevent, then the contract to do an impossible act becomes unenforceable if the act becomes impossible. 
• The third paragraph imposes liability upon a promisor to compensate the promisee for non-performance of the promise, where the promisor knows that the act promised by the promisor is impossible or unlawful.

There are two kinds of impossibility of contract:

Initial impossibility

Section 56 states that an agreement to do an impossible act is void. For example, an agreement to discover treasure by magic is void as it is impossible to perform.

Subsequent impossibility

Sometimes, the performance of a contract is possible when the parties make it. Subsequently, due to some events, its performance becomes impossible or unlawful. In either case, the contract becomes void. For example, a contract is made to import goods, but later on, the import of such goods is forbidden by a Government order, or when a singer contracts to sing and becomes too ill to do so, the contract, in each case, becomes void.

In Taylor & Anor vs. Caldwell & Anor (1863), a contract was made between Plaintiff and Defendant, to use the music concert hall on specific dates by Plaintiff. But on the opening day of the Plaintiff’s concert, the hall was destroyed by fire without the fault of either party. The court held that the contract was not absolute and its performance depended upon the hall’s existence. The performance of the contract becomes impossible due to an external event. Thus, the contract was discharged. To learn more about the frustration of the contract in detail, click here. 

Difference between Section 32 and 56 of the Indian Contract Act, 1872

Basis of difference	Section 32	Section 56
Type of events	This Section deals with uncertain future events.	This Section deals with impossible or unlawful events.
Timing	It depends on such an event which may happen or may not happen.	It happens when a contract is made between the parties and performance of such a contract is not possible due to unforeseen events.
Performance of contract	Enforceable if the event occurs.	It deals with a contract which is impossible  from its beginning or later on the contract becomes frustrated.
Examples	Lets say, you made a contract with Ram that you will pay Rs.500 to him, if ships arrive at port on time. This is a contingent contract.	Raman made a contract with a restaurant owner that he will sing in a restaurant on a specific date. Before the performance of the contract, Raman dies. Now, the contract becomes impossible to perform.

Landmark judgements on the performance of contract

Satyabrata Ghose vs. Mugneeram Bungar & Co., And Another (1954)

Facts of the case

In this case, Mugneeram Bangur and Co. sold land to Satyabrata Ghose in Calcutta. The agreement involved Mugneeram Bungar and Co. developing the surrounding area into residential colonies and implanting other facilities such as roads, sewerage, parks, etc. Meanwhile, World War II broke out, and the government of India requisitioned part of the land for military use. 

Satyabrata Ghose demanded either land development or the refund of his advance payment. Mugneeram Bangur and Co. argued that land development became impossible due to an unforeseen government act, and the contract became frustrated. Therefore, they are liable for neither the development of land nor the refund of payment.

Issue of the case

Whether the requisition of land by the government made the contract impossible to perform, therefore the contract is frustrated under Section 56 of ICA, 1872.

Judgment

The Supreme Court held that the doctrine of frustration can be applied when subsequent changes in circumstances make the performance of the contract impossible. The court also held that the contract did not mention a specified time limit, and the demand was only short-term. Thus, there wasn’t any unspecific slowdown. Therefore, the contract is not frustrated, as the land requisition does not make the contract impossible; it only causes a delay in the performance.

Sushila Devi And Anr vs Hari Singh And Ors (1971)

Facts of the case

In this case, in January 1947, the Petitioner and Respondent entered into a lease contract in Tehsil Gujranwala. In between, the partition of India happened, and Tehsil Gujranwala became part of Pakistan. Due to these conditions, the agreement was not enforced. Respondent asked for the performance of the contract. Petitioner argued that the contract could no longer be implemented due to unforeseen events.

Issues of the case

• Whether the contract between Petitioner and Respondent is frustrated due to the impossibility of contract performance.

Judgment of the case

The Supreme Court held that the doctrine of frustration is applicable in the given circumstances whereby parties are discharged from their obligations. The parties could not contemplate and control the partition of India. The court emphasised that the impossibility of performance is not a mere inconvenience but a fundamental change like the contract.

Role of technology in the performance of contract

We live in a modern world, and technology significantly impacts our daily lives. You must understand how technology is helpful in contract performance. With the help of technology, you can sign a contract from a distance, decide how the contract should be performed, and change other terms and conditions.

You might have heard about new inventions like electronic and digital signatures. These inventions have increased efficiency, accessibility, and security in contract making. You should understand the impact of technology in brief.

Electronic signature

You can call an electronic signature a mark made by parties to agree with the terms of a contract. Electronic signature is legally accepted in India under the Information Technology Act, 2000 [hereinafter referred to as IT Act, 2000]. Using an electronic signature allows you to make a contract without a physical meeting, saving time and resources. Under Section 5 of the IT Act, 2000, it is provided that you can make an electronic signature, and it is legally acceptable in the courts. 

In The State of Maharashtra vs. Dr. Praful B. Desai (2003), the Supreme Court clearly stated that digital signatures and electronic evidence are admissible in court under Section 65 of the IT Act, 2000. 

In Trimex International Fze Ltd. Dubai vs. Vedanta Aluminium Limited, India (2010), the Delhi High Court said digital signatures are equally valid as handwritten ones. This case has emphasised the importance of digital signatures in contracts.

For example, you have made a contract with a company in the USA, by using an electronic signature. This contract instantly becomes valid and parties are bound to perform your obligations.

Digital Contracts

When a contract is created, signed, and stored in electronic form using any special platform or software, you can call it a digital or smart contract. In digital contracts, you do not need paperwork or storage costs. Smart contract allows you to update terms and conditions and track the contract’s performance.

For example, you have made a smart contract with Surya to deliver goods. A smart contract releases payment once the goods are delivered and verified.

Let’s take another example: In insurance contracts, sometimes payment is released once you upload the required documents and they are verified.

Remote performance and monitoring

Technology allows you to monitor contract performance remotely. For example, you made a contract with Aman to deliver goods. Now, you can use a tracking device to know whether the goods are delivered. You can also use technology for video conferencing and collaboration, enabling you to deal with other people so that contracts are performed seamlessly.

International perspective on the performance of contract

As you know, there is rapid growth in global business and multinational agreements. So, you need to understand the performance of the contract from an international perspective. Let’s discuss how the contract is performed in the international platform in brief;

International principles related to the performance of contract

United Nations Conventions on Contracts for the International Sale of Goods [CISG]

This is a widely accepted convention that provides rules for contract performance. When you make a contract for the sale of goods with a person from a different country, you must follow the rules provided under CISG. Under this principle, parties are under obligation to do their duty in good faith, including delivery of goods and payment.

For example, you contracted with a German seller to sell goods under CISG. Now, both of you are obliged to follow the rules of CISG for delivery, quality, and payment.

UNIDROIT Principles of International Commercial Contracts

[hereinafter referred to as the UNIDROIT principles]- The UNIDROIT principles govern international commercial contracts. These principles help you draft, interpret, and perform contracts when the contract’s law is unclear. It is also helpful to the parties when parties want neutral rules.

You must understand that the UNIDROIT principles are not legally binding to the parties unless they choose to follow them. These principles are used for international contracts but can also be used in domestic contracts. Under these principles, parties can decide the terms of the contract within the limits of law and public policy. 

For example, a US company and an Indian company made a contract that included a penalty for late delivery. The UNIDROIT principles protect the parties’ right to decide the contract terms.

Challenges in international contract performance

If you observe the performance of a contract from an international perspective, you will find that there are various challenges which parties in international agreements face, such as the following;

Different legal system

As you know, every country has its laws, which means the contract law of one country is different from another. This difference in law can create difficult situations for interpreting and performing contracts.

For example, you made a contract with Robert, an American citizen. The contract between you and Robert may be valid under Indian law but invalid under American law.

Currency fluctuation

Whenever an international contract is made, payment is mainly affected by the currency exchange rate. For example, you made a contract with an American citizen. Payment under the contract is to be made in dollars. If the local currency depreciates, you will pay extra costs.

Cultural differences

If you are making an international contract, there is an excellent chance that it will be affected by cultural differences. Differences in business practices and customs often affect the meaning and performance of contracts.

For example, Aman[Indian citizen] and Robert[American citizen] have made an oral contract. Oral contracts may be valid in India, but they are not valid under American law.

Modern trends in the performance of contract

We live in a modern world, and society is changing daily. Contemporary trends in contract law show us how the legal system is changing due to changes in society and technology. If you observe this trend, you will find that modern trends try to remove difficulty in business transactions, adapt technological advancements, and focus more on the fairness and flexibility of contractual relationships. Some modern trends are as follows;

Digitalisation and technology in the contract

We have already discussed how contracts are made in the modern world using technology. Electronic signatures and digital contracts are examples of digitalisation and technology in contract law. 

For example, when you buy a subscription to any streaming platform, you enter into an online agreement. This online agreement for purchasing software services is an example of an electronic contract.

Protection of consumers

In recent years, various legislation has been enacted to protect the interests of consumers. If you are a consumer and have entered into any contract, these legislations defend your interests by ensuring transparency and fairness.

For example, a law in European countries makes providing refunds for online purchases mandatory.

Data privacy and security clause

You might have noticed that many businesses are data-driven. Because of these businesses, modern contracts include terms that protect data privacy.

For example, if you are using Instagram or WhatsApp and you read the terms and conditions of these apps. Then, you might have observed that there is always a clause that tells you about how your data will be collected, stored, and used.

Dispute resolution trend

In the modern world, almost every contract has a clause that states how a dispute will be resolved. If you notice, the parties often choose Alternative Dispute Resolution mechanisms, standard in international agreements.

Conclusion

We expect the other party to fulfill its obligations whenever we make a contract. Performance of contract is the ultimate goal of any agreement, and parties must understand that remedies are available to protect their interests in case of violation of their rights. The primary goal of any contract is to fulfill the expectations of both parties. If you violate any terms of the contract or have not fulfilled your contractual duties, you can be held liable for breach of the contract.

The ICA (Indian Contract Act, 1872) imposes a duty on the parties to perform their duties specified in the contract. Proper contract execution enhances business stability and builds trust between the parties. On the other hand, non-performance of the contract usually leads to legal disputes and often ends with compensation or specific performance of the contract. There are circumstances when breach or performance of the agreement are unavoidable; in such cases, the ICA protects the parties’ interests.

The parties need to understand the profound implications of non-performance of the contract. Parties can avoid breaches by understanding the potential risk and remedies against non-performance.

Frequently Asked Questions (FAQs)

Whether a third party performs the obligations of a contract?

Generally, third parties can perform an obligation of a contract. But if the contract says that a third party cannot perform it or the nature of the contract is a personal service, then it cannot be performed by a third party.

What do you mean by partial performance?

When one party to a contract fulfills only one portion of his obligation, this is called partial performance. It is acceptable if both parties to the contract agree to such performance.

What do you mean by condition precedent and condition subsequent in the performance of the contract?

Condition precedent:

When a condition must be fulfilled before the contract is performed, it is a condition precedent. For example, Aman made a contract to build a house for Suyash. Suyash agreed to supply the goods to Aman. Here, the contract to make a house for Suyash cannot be performed unless goods are provided to Aman. Therefore, it is a condition precedent.

Condition subsequent

When a contract contains any condition that can terminate the duty of performance, it is a condition subsequent. For example, Manish took some money from Vikash as a loan. In the loan agreement, there is a clause that says that Manish has to pay the loan immediately if he declares bankruptcy. 

The condition of bankruptcy triggers Vikash’s right to get his money back. This condition is subsequent.

References 

• Contract & Specific Relief by Avtar Singh, 13th edition 

• • The ICA by R.K. Bangia, 15th Edition 

• https://blog.ipleaders.in/doctrine-of-frustration/

• https://www.mondaq.com/india/contracts-and-commercial-law/1441750/law-of-digital-signatures-in-india

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