This article is written by Millia Dasgupta, from Jindal Global Law School. This article discusses reciprocal promise, the types of reciprocal promises and rules regarding it.
Contracts are the founding stone of many agreements. When we think of contracts we think of one party agreeing to do something and the other party doing an act in return. I.e, I give you an apple and you pay for it. But many times in contracts, parties just agree to do things or they promise to do certain acts.
Unlike an act, promises are not tangible. Thus, due to its nature, many doubts can come up. What happens when the two promises of the parties are dependent on each other, or the promises become impossible to perform later on? In this article, we will discuss such intricacies.
Definition of a Promise
Section 2 of the Indian Contract Act of 1872 defines what promises are-
- When someone expresses his willingness to do (or not to do) something, he is said to make a proposal.
- When the other person (to whom the proposal is made) accepts the proposal, the proposal becomes a promise.
- Here, the person who made the proposal is the ‘promisor’, and the person to whom the proposal is made is called the ‘promisee’.
- When, at the desire of the promisor, the promisee does something, does not to something or promises to do something; this act of the promise is called ‘consideration of the promise’.
- These promises (that the promisee does to form the consideration) form an agreement.
- Such promises that form an agreement are called reciprocal promises.
- Navya expresses her willingness to pay for some coats to Ashok. (proposal)
- Ashok accepts Navya’s proposal to pay through the word (Now Navya has promised to pay).
- Now Navya is the promisor and Ashok is the promisee.
- Now, due to Navya’s promise to pay, Ashok promises to supply the coat. (Ashok’ promise to provide the coat is a consideration).
- Ashok’s promise to supply sets the agreement in place.
- Ashok’s promise to supply is a reciprocal promise.
What are reciprocal promises?
Section 2(f) of the Indian Contract Act, 1982 talks about what are reciprocal promises. Reciprocal promises which form are a part of the consideration.
Types of Reciprocal Promises
Mutual and independent
This concept has evolved through jurisprudence. It states that the two promises of the parties are independent of each other and they do not have to rely on each other for performance. Suppose there is a contract where A will give chocolates to B and B will give Pokemon cards to A.
A can fulfil his promise even if B does not give him the pokemon cards i.e- the absence of Pokemon cards does not make the performance of his promise impossible. The same goes for B. Thus while the acts are binding, they are mutually exclusive and are thus independent of each other.
However, if the contract states the acts must be done in a certain order then that clause should be upheld.
In Mrs Saradamani Kandappan vs. Mrs S. Rajalakshmi and Ors, Sadarmani was paying for a piece of land to Rajalakshmi in instalments. Before the payment of the last instalment, Sadarmani wanted to see the title document Rajalakshmi failed to show it and Saradamani thus did not pay the last instalment.
Thus, Rajalakshmi terminated the contract. Sadarmani moved to the court and argued that failure to show the title document was the reason she could not pay the last instalment. The court ruled that these two promises (the promise to show the title document and the promise to pay for the last document) were exclusive as Sadarmani could pay the last instalment without showing the title document. Thus, Sadarmani should have paid the last instalment.
This is when the performance is dependent upon the prior performance of the other party. If the first party fails to perform his promise, then it will be impossible for the second party to perform his side of the contract.
Suppose the contract if A promises to give money to B, if B promises to buys Maggi for A. If A defaults, i.e- he fails to pay B, then it will be impossible for B to hold up his side of the contract as he won’t be able to buy the Maggi if A does not pay him. Thus, this type of contract is considered a conditional contract.
In M/s Shanti Builders vs. CIBA Industrial Workers’ Co-Operative Housing Society Ltd., the defendant, CIBA alleged that they suffered losses as Shanti builders did not do their work on time. On the other hand, Shanti builders contested they were not given plots of land (as per payment for construction). Since this plot of land was not given to them, they were not able to complete construction.
The court held in favour of Shanti Builders and stated that if the nature of the transaction states that certain promises must be performed first before others, then that order must be followed. They also stated that in regards to conditional promises, the first party can not ask for the performance of the second party without performing their act first.
Here, parties promise to do acts that have to be performed simultaneously. A party will be exempted from doing their promise if the other party is not ready or willing to do their promise. Here ‘readiness’ means financial abilities and ‘ willingness’ is perceived through the action of the party.
For example, P is supplying coats to R. P will only supply the coats if R financially can and is willing to, and R will only pay if P is willing to and has the goods.
In J.P. Builders vs. A. Ramadas Rao, the court stated the definitions of readiness and willingness.
Rules Regarding Performance of Reciprocal Promises
Section 51– Simultaneous Performance
Like we had discussed in concurrent promises, if the other party is not ready or willing to perform their promise, then the other party does not need to perform their side of the promise.
Thus, if Ashok and Navya are in a contract, Ashok need not pay for the goods unless Navya is willing and ready. Similarly, Navya need not give the goods unless Ashok is willing and ready.
In Pushkarnarayan S. Maheshwari vs Kubrabai Gulamali, it was held that the burden of proof is on the Plaintiff to prove that he performed or remained ready and willing to perform the contract.
Section 52– A sequence of Performance
If the contract calls for an order in which the acts promised should be performed, then the acts should be performed in that order. Otherwise, the sequence of the order is determined by the nature of the promises.
For example, if B cannot build a road he promised to build without providing material, then A’s promised act should be performed first, then B’s.
Section 53– One party preventing the other to perform their promise
If one party prevents, or makes it impossible for the other party to perform their job, then the affected party has the option of voiding the contract. They also have the option of asking for compensations for the damages.
For example, Ashok is willing to supply coats to Navya, but on the day of delivery, Navya does not show up or locks Ashok in his shop; then Ashok can void the contract or collect compensation.
Section 54– Reciprocal and dependent promises
When the nature of the promise is conditional, the first party (the party who has to perform in order for the other party to perform) can not ask the other party to perform their promise, if they do not perform first.
The second party can also ask for compensation if they face damages due to the non-performance of the first party.
For example, Aaryan is a carpenter and Sara provides wood. They have a contract that Sara will provide wood to Aaryan and then he will make a table for her. If Sara refuses to provide the wood, then she can not expect Aaryan to make the table. If Aaryan faces any loss due to the fact Sara failed to provide wood, then he can ask for compensation.
Section 55– Failure to perform in stipulated time
If performing an act in a specific time frame is essential to the contract, and the promisor fails to do so, then the aggrieved party or the promisee can either void the contract and ask for compensation for losses.
If time is not essential to the contract then the promisee can not void the contract, he can also ask for compensation of losses that were suffered due to the delay.
In M/S Citadel Fine Pharmaceuticals vs M/S Ramaniyam Real Estates Pvt. Ltd. and Ors. (2011), it was stated that the intentions of the parties expressed in the contract are imperative to signal whether the time is of the essence when the nature of the transaction does not make it very clear.
Section 56– Impossible or unlawful act
If the promisor promises to do something which is impossible to do, then the contract is void. This section, thus, deals with the ‘Doctrine of Frustration’.
The conditions that should be satisfied in order to invoke this section are –
- The cause should not be a result of a default of the parties.
- The cause must be unforeseeable and inevitable.
- The cause must render the entire contract impossible to do.
There are two scenarios which are illustrated below-
This is when the promisor and promisee enter into a contract to do any act which they both know is impossible to do then the contract is void.
If the promisor promises to do an act that he knows can not be done, then he is liable to pay compensation for the losses suffered by the promisee due to his incapability to perform the act.
Thus, Ashok promises to supply Navya a coat made of bear fur. Navya wishes to wear this coat for a television interview. But, Ashok is aware that it is impossible for him to supply a bear coat to her in this season, but he still promises to sell her one and enters into a contract with her. In this situation, Navya can void the contract and can ask compensation for the losses she suffered.
At the time of making the contract, the act might have been possible and lawful, but later on, it became impossible to do due to some reasons. In this case, the contract becomes void when the act becomes impossible to do.
Taking from the previous example, at the time that Ashok enters the contract, he will be able to provide a coat made of bear fur to Navya. But after he enters the contract, the Government puts a ban on the supply of products made of bear fur. Now Ashok can not supply Navya with the coat she wanted. Thus, the contract becomes void when the Government passes the law.
Section 57– Reciprocal promises or legal and illegal acts
The parties may have entered the contract to do legal acts. But after the contract was established, under specific conditions, they agreed to do illegal acts. In this case, the previous legal acts are valid and the preceding illegal acts are held void.
For example, Ashok promises to supply coats to Navya. Navya then promises to sell such coats on the black market for more profits. Here Ashok’s promise to supply coats to Navya is valid but Navy’s promise to sell such coats on the black market is invalid.
Section 58– Alternative promise of legal and illegal acts
Parties may promise to do legal acts that branch off into illegal acts.
For example, Preeti promises to pay back her loan to Rohit. But this loan shall be paid with black money. Thus, while Preeti’s promises to pay back the loan is valid, the promise to pay with black money is invalid.
In this article, we have defined what a reciprocal promise is. We have also discussed the various types of reciprocal promises (mutual and independent, conditional and concurrent). We have also talked about the various rules that need to be followed with regards to reciprocal promises which are Sections 51-58 of the Indian Contract Act, 1872.
To know about General Principles of Contract, please Click Here.