Performance of Contract
• Chapter 10 and 11 (Sections 71-81) of the Contract Act of Nepal.
• Performance of a contract takes place when the parties to the contract
fulfil their obligations arising under the contract within the time and in
the manner prescribed.
• Section 74 of the Contract Act: Each party to a contract has to fulfil its
obligations under the contract.
• General Rule: The parties to a contract must perform or offer to
perform their respective promises.
• Rules Regarding the Performance of Contract
• The parties must carry out precisely what they agreed under their
contract—not something less than, or different from, that agreed.
Bolton v. Mahadeva (1972) (Bolton installed a central heating system in
Mahadeva’s house for an agreed price of 560 Pound. The work was carried out
defectively and it was estimated that it would cost 179 Pound to put the
matters right. The Court of Appeal held that since Bolton had not performed his
side of the contract, he could recover nothing for the work he had done).
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Rules contd.
•
Exceptions: Doctrine of Substantial Performance: If the terms of the
contract are substantially carried out, the contract may be deemed to
have been performed. Hoenig v. Isaacs (1952).
• Acceptance of Partial Performance: If one of the parties only partially
fulfils its obligation under the contract and the other party accepts the
benefit of the partial performance, the other party is liable for the
benefit received.
• Prevention of Performance by the Other Party: If a party is prevented
from carrying out its side of the contract by the other party, it can bring
an action to recover for the work it has done. Plancé v. Colburn (1831).
• Divisible Contracts: The issue is whether a contract is ‘entire’ or the
obligations under the contract can be split up into stages or parts.
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Offer to Perform (Attempted Performance or
Tender)
2. A valid offer or tender of performance is equivalent to
the performance of the contract.
• Rules: 1.Offer must be unconditional.
• 2. It must be made at a proper time and place.
• 3. It must be of the whole obligation (but minor
deviation is excused).
• 4. It must be made to a proper person (including duly
authorized agent). If there are joint promisees, it may
be made to any one of them.
• 5. It must provide reasonable opportunity (to inspect
or verify) to the other party.
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Attempted Performance Continue…
• 6. It must be made in a proper form.
• 7. The person making an offer must be able and willing
to perform his/her obligation.
3. Time, Manner and Place for Performance: Sections 71
and 72 of the Contract Act.
• If the time and manner of performance is mentioned in
the contract, the contract must be performed within
the prescribed time period and in the manner as
specified.
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Time and Manner of Performance Continue…..
• Even if no time or manner is prescribed to carry out the work under the
contract, if such work can only be performed in a specific time or in a
specific manner, then the work under the contract must be carried out
within such specific time or in such specific manner.
• In other circumstances where no time or manner is prescribed to
perform the contract, the contract should be performed within a
reasonable time period and in a reasonable manner. Reasonableness in
time or manner depends upon the factual situation of each case.
• Time as the Essence of the Contract
• 1. When the parties have expressly agreed to treat the time as of the
essence of the contract.
• 2. Where the delay in performing the contract operates as an injury to
the party.
• 3. Where the nature and necessity of the contract requires that time to
be the essence of the contract.
• Usually in commercial contracts, time is considered as the essence of
the contract.
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Place of Performance
• If a specific place of performance is mentioned in the
contract, the contract must be performed at the specified
place.
• If a party is required to deliver goods and materials to the
other party and no place for such delivery is specified in the
contract, it will be deemed that the contract requires such
delivery to be made at the place where such goods and
materials are located or stored.
• Even if no specific place is mentioned in a contract to carry
out the work under the contract, if the work to be carried
out is of such type that it can only be carried out in a
certain place or, because of prevailing customs and usages
or its nature, it has to be carried out in a certain place, then
the contract should be performed in such a place.
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Place of Performance Continue….
• In circumstances other than those mentioned above, if the place
of performance is not mentioned in the contract, the party who
needs to perform the contract should request the other party to
prescribe a reasonable place for the performance of the
contract, and the other party should prescribe a reasonable
place for this purpose.
4. Reciprocal Performance of the Contract: Section 75 of the
Contract Act. When a contract consists of exchange of promises,
the promises are called reciprocal promises. Reciprocal promises
form the consideration or part of consideration for each other.
Rules of Reciprocal Performance of a contract:
• Rules: 1. When a contract requires concurrent or simultaneous
fulfillment of the respective obligations of both the parties, then
a party is not required to fulfill its obligations if the other party
is not ready or willing to fulfill its obligation under the contract.
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Rules of Reciprocal Performance continue…
• 2. Where the order in which reciprocal promises are to be
performed is expressly fixed by the contract itself, the promises
must be performed in that order; and where the order is not
expressly fixed by the contract, they must be performed in the
order which the nature of the contract requires.
• 3. In cases where the nature of reciprocal promises is such that
one of them cannot be performed till the other party has
performed his/her promise, then the party, who fails to perform
his/her promise because of the other party’s failure to perform
the contract, will have the right to claim the compensation from
the other party for the loss suffered by it on account of such nonperformance of the contract.
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Rules continue…
• When a contract requires concurrent or simultaneous fulfilment of the
reciprocal promises and a party prevents the other party from
performing its promise, then the party, who is unable to perform its
promise because of such prevention or obstruction, will have the right to
make the contract void and also recover compensation from the other
party for any loss suffered by it.
5. The persons who have to perform the contract: Section 77 of the
Contract Act. (a) The promisor him/herself—
• If the contract indicates that it was the intention of the parties that the
promise should be performed by the promisor him/herself, such promise
must be performed by the promisor.
• The contract involving personal skill or personal consideration of the
promisor must be performed by the promisor him/herself. E.g., a
contract to paint or sing.
• (b) The agent or legal representatives of the promisor or the third
person—
• Except in cases mentioned above, the contract may be performed by the
agent of the promisor, or by a person appointed by the promisor or by a
third person on behalf of the promisor.
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The Persons to Perform…….
• However, without the consent of the other party, no party to the
contract can transfer the obligation under the contract to any third
person.
• Once a party accept the performance of the contract by a third person,
he/she is not entitled, except otherwise provided in the contract, to
claim later on that the contract should be performed by the promisor
him/herself.
• Joint Promisors: When two or more persons enter into a joint agreement
with one or more persons, the promise is called a joint promise. Rule:
(i)Except otherwise provided in the contract, any one or all of the joint
promisors may be compelled to perform the contract. (ii) When one of
the joint promisor has been compelled to perform the whole of the
promise, he may compel the other joint promisors to contribute equally
with him/herself to the performance of the promise.
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Persons Entitled to Demand Performance
6. Persons entitled to demand performance: Section 78 of the
Contract Act. General Rule: Only the party can demand the
performance of the contract. In case of a joint promise, all of the
joint promisees can demand the performance of the contract.
• However, a beneficiary can also demand such performance if the
contract has been concluded for the benefit of such person.
7. When a contract need not be performed: Section 73 of the
Contract Act.
• If one party releases the other party from contractual
obligations.
• When a voidable contract is made void.
• If the contract can not be performed because of the breach of
contract by the other party.
• If it is not required to be performed under the provisions of the
Contract Act; or it becomes impossible to perform the contract.11