UNIVERSITY OF CENTRAL PUNJAB
Corporate and Commercial Law
Topic : Performance of obligation is necessary
for the contract
Submitted By:
Name : Sana Riaz
Registration # F1F12MCOM0185
Section: 1A
Submitted To:
Prof Aftab Ahmad Butt
Submission Date :
19TH April , 2013
PERFORMANCE OF OBLIGATION IS NECESSARY FOR CONTRACT
Contract:
A binding agreement between two or more parties for performing, or refraining from performing,
some specified act in exchange for lawful consideration.
Performance
According to Section 37 of the Contract Act
“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
this act, or of any other law.”
ENACTED LAWS OF PERFORMANCE
According to Section 37:
Section 37 lays down that 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 this
Act, or of any other law. Promises bind the representatives of the promisors in case of death of such
promisors before performance, unless a contrary intention appears from the contract.
For Example:
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 representative or by B [section 37]. The performance can be ‘actual
performance’ or ‘attempted performance’, i.e. ‘offer to perform’.
According to Section 38:
Section 38 specifies that where a promisor has made an offer of performance to the promisee, and the
offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose
his rights under the contract.
Every such offer must fulfill the following conditions:
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It must be unconditional.
It must be of the whole quantity
It must be made at the proper time and place.
It must be made to the proper person etc.
It must be for whole obligation.
It must be exact amount.
According to Section 39:
Effect of refusal of party to perform promise wholly (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.
PERFORMANCE OF CONTRACT
Contract May be performed by following:
1.Personal Performance
In cases involving personal skill, taste, or credit, the promisor must himself perform the
contract. The courts will enforce the intention of the parties, as expressed in the contract,
or as may be inferred from the circumstances of the case.
2.Performance by representatives
In all other cases the Promisor or his representatives may employ a competent person to
perform It.
Example: Q promises to paint a picture for B ; Q must perform this promise personally.
3. Effect of Performance from a third person
When a promise accepts performance of the promise from a third person, he cannot
afterwards enforce it against the promisor:
LIMITATIONS OF PERFORMANCE OF CONTRACT:
A contract becomes void when, by reason of some event which the promissory could not prevent the
performance of the contract become impossible. The impossibility must happen after the formation of the
contract.
1. Legally Performance becomes Impossible:
The contract was legal at the time of formation but it come become its performance become
impossible due to changes in law
For Example:
A in England agree to supply good to B in Germany. After the formation of the contract war breaks
out between England and Germany. And the supply of goods to Germany I prohibited by legislation.
2. Physically Performance becomes Impossible:
Some times performance become physically impossible to perform
For Example:
A promised to a car to B but before performance it got an accident due to which
performance become physically impossible.
TIME AND PLACE OF PERFORMANCE
General Rules:
The time and the place of performance of a contract are matters to be determined by agreement
between the parties to the contract.- In sections 46 to 50 of the Indian Contract Act certain
general rules have been laid down regarding the time and place of performance. They are as
follows
1. Time for performance without application :
“Where, by the contract, a promisor is to perform his promise without application by the
promisee and no time for performance is specified, the engagement must be performed
within a reasonable time” (Sec. 46)
2. Time and. place, where time is specified :
“When a promise is to be performed on a certain day, And the promisor has undertaken
to perform it without application by the promisee, the promisor may perform it at any
time during the usual hours of business on such day and at the place at which the promise
ought to be performed” (Sec. 47)
Example :
D promises to deliver goods at B’s warehouse on the first January. On that day D brings the
goods to B’s warehouse but after the usual hour for closing -it and they are not received. D has
not performed his promise.
3. Application for performance to be at proper time and place :
“When a promise is to be performed on a certain day, am, the promisor has not
undertaken to perform it without application by the promisee, it is the duty of the
promisee to apply for performance at a proper place and within the usual hours of
.business.”(Sec.48)
4. To appoint A reasonable place for the performance :
“When a promise is to be performed without application by the promisee, and no place is
fixed for the Performance. of it, it is the duty of the promisor to apply to the promisee to
appoint a reasonable place for the performance of the promise, and to perform it at such
place.” (Sec. 49)
Example :
D undertakes to deliver a thousand mounds of jute to B on a fixed day. D must apply to B to
appoint a reasonable place for the purchase of receiving it, and must deliver it to him at such
place.
5. Manner and time prescribed or sanctioned by promisee :
“The performance of any promise may be made in any manner or at any time which the
promisee prescribes or sanctions.”(Sec. 50)
Example:
B owes .4 2,000 rupees. A desires B to pay the amount to A’s account with C, a banker. B, who
also banks with C, orders the amount to be transferred from his account to A’s credit and this is
done by C. Afterwards and before .9 knows of the transfer, C fails. There has been a good
payment by B.
CONTRACTS THAT NEED NOT BE PERFORMED
Sections 62 to 67 of the Contract Act are listed under the heading “Contracts which need not be
performed”. The relevant provisions are as follows :
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1. If by mutual agreement there is Novation, Rescission or Alteration, the original
contract need not be performed. (Sec.62)
2. The same rule applies in cases of Remission. (Sec.63)
3. When a voidable contract is rescinded, the other party need not perform his promise.
(Sec. 64)
4. If the promisee neglects or refuses to afford the promisor reasonable facilities for the
performance of his promise, the promisor is excused by such neglect or refusal as to any
nonperformance caused thereby.”( Sec.67)
Il. Under the Law of Contract the following agreements need not be performed :
1.
Unlawful consideration and object (Sec.23)
2.
Where the performance is unlawful or illegal (Sec.56)
LEGAL EFFECT OF PERFORMANCE:
1. Divisible contracts
A contract may be entire or divisible. An entire contract is one where the agreement provides
that complete performance by one party is a condition precedent to contractual liability on the
part of the other party. With a divisible contract, part of the consideration of one party is set off
against part of the performance of the other. Contrast:
2. Acceptance of partial performance
Where the party to whom the promise of performance was made receives the benefit of partial
performance of the promise under such circumstances that he is able to accept or reject the work
and he accepts the work, then the promisee is obliged to pay a reasonable price for the benefit
received
3. Completion of performance prevented by the promisee
Where a party to an entire contract is prevented by the promisee from performing all his
obligations, then he can recover a reasonable price for what he has in fact done on a quantum
meruit basis in an action in quasi-contract.
4. Substantial performance
When a person fully performs the contract, but subject to such minor defects that he can be said
to have substantially performed his promise, it is regarded as far more just to allow him to
recover the contract price reduced by the extent to which his breach of contract lessened the
value of what was done, than to leave him with no right of recovery at all.
CONCEQUENCES OF NON PERFORMANCE OF CONTRACT
Breach of contract refers to the non performance of duty, but not every nonperformance of duty
can be accounted as breach of contract .A party to the contract need not have to perform his
promises under a contract until performance is due.
A breach occurs when a party:
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Denial to perform the contract
Indulges in an action which is prohibited by the contract
Hinders the other party from performing his obligations
Types of breach:
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Actual Breach:
When there is an actual non- performance or a violation of the terms of the contract by any of
the parties to the contract it is termed as actual breach. The affected party can claim for
damages in the court of law.
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Anticipatory breach:
Anticipatory breach happens when a party to the contract, announces well in advance of the
due date for performance, that he cannot perform his quota of obligations as stated by the
contract. In such cases, the other party may sue for damages resulting from non-performance,
immediately after the breach is announced.
Remedies Available for Non Performance :
1. Damages
Damages as one of the Remedies for Breach of Contracts are monetary compensation
allowed to the injured party of the loss for the injures suffered by him or her as a result of
the breach of contract.
1. Quantum Meruit
These may be available to ether parties without claiming damages or compensation for
work done it can also be done by claiming reasonable compensations
2. Specific Performance
It is an equitable remedy and it may be granted where monetary compensation is not
adequate relief, where there is no standard for asserting the actual damage and where it is
probable that the compensation in money can’t be gotten.
3. Injection
Injection is another of the Remedies for Breach of Contracts. It is a court order
restraining a person from doing a particular act.
4. Rescission
The last but not least of the Remedies for Breach of Contracts is rescission. It occurs
when the aggrieved party decides not to perform his part of the contract. He may even
sue and be granted rescission by the court in which case he becomes entitled to
compensation for any damage which he has sustained through non-fulfillment of the
contract.
Conclusion:
All these concepts of performance tells
that the “performance of obligations” is
necessary for the Contract.
References:
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6.
http://www.lawteacher.net/contract-law/lecture-notes/discharge-lecture.php
http://www.fangerlaw.com/understanding-contracts.php
http://bdlaws.minlaw.gov.bd/pdf_part.php?id=26
http://www.slideshare.net/DeborahSharon/indian-contract-act-1872-14444088
http://www.paksearch.com/Government/CORPORATE/Contract/CH_1V.html
http://www.thailandlawonline.com/civil-and-commercial-code/194-240-contractobligations-and-performance-law
7. http://athanne.hubpages.com/hub/Business-Law-Five-Remedies-for-Breach-of-Contracts
8. http://mercantilelaws.blogspot.com/2012/12/rules-regarding-performance-ofcontract.html
9. http://www.bms.co.in/write-a-note-on-performance-of-contracts/
10. http://www.reportbd.com/articles/42/1/Void-Contract/Page1.html