Performance of Contract

Performance of Contract- Meaning, Types and Other Important Aspects

Objective

After going through this lesson, you shall be able to understand the following concepts:
 

Before going through this lesson, let us read the meanings of the difficult words that we will come across in this lesson.



Meaning of Performance




As evident from the situation, X agrees to build a house for Y and accordingly starts doing the task to be done. Do you think both these parties have performed their respective obligations?

If not, which party has done its part?

In the contract entered into by X and Y, both the parties were given a task to perform, i.e. building the house and paying at the agreed rate. But in the above case, neither has the house been completely built nor any payment been made by Y to X. Thus, both the parties are still to perform their obligations. In other words, the contract is said to have been performed if both the parties under the contract fulfils their respective legal obligations as specified by the contract. Performance of the contract is the most normal and natural mode of discharging a contract.

The meaning of performance of contract has been specified under Section 37 of the Indian Contract Act, 1872, which says,“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.” In other words, performance of contract is said to be done when either both the parties have performed their obligations or offered to perform their promises. However, the contract is said to be performed if such a performance is excused by provisions of the Indian Contract Act or any other law.

Types of Performance of Contract

From the above definition of the performance of contract, it can be inferred that contract may be performed in either of the following two ways:

Actual Performance: Actual performance is said to take place when the offer of performance by the promisor is accepted by the promisee. This means the obligation has been actually performed by the promisor.

Example: Potu promised to deliver 500 tons of wheat to Motu at Rs 10,000 per ton. The quantity was to be delivered at Motu’s warehouse on a certain date. Potu brought the wheat for delivery at Motu’s warehouse on the appointed day and the delivery was accepted by Motu. Thus, actual performance of contract took place.

Attempted Performance (tender): As against actual performance, attempted performance is said to take place when the promisee does not accept the offer of performance by the promisor.

Example: In the above example, if Motu had refused to take the delivery of wheat by Potu, then it would have been a case of attempted performance. In such a case, Potu is deemed to have fulfilled his obligation of delivering wheat to Motu with Motu’s act of not accepting the offer of performance by Potu.

Based on the subject involved, attempted performance (tender) can be further bifurcated into two categories. These are discussed below.

Types of Tender and Their Effects
  Essentials of a Valid Tender

For a tender to be valid, it must fulfil the following essential conditions:

• It must be unconditional, i.e. it must be strictly in accordance with the terms of contract.

• It must be at the stipulated time as mentioned in the agreement. If nothing is specified in the contract with regard to time, then it must be during business hours. It should be noted that tender of goods or money before the fixed date in the contract is also not a valid tender.

• It must be at the stipulated place as mentioned in the contract. In the absence of any such specification, it can be at the business place of the promisee (or at the promisee’s residence in case of no business place).

• Reasonable opportunity must be given to the promisee to cross examine that the goods are same as the promisor was bound to deliver.

• Tender made should be for the entire obligation and not for just a part of it. However, certain minor deviations are permissible; they do not render a tender invalid.

• It must be made to the promisee himself/herself or to his/her duly authorised agent. In case of joint promises, tender may be made to any one of them.

• In case of tender of money, it must be of the exact amount.

Example 1: Give one word for the following statements
  Solution
  Example 2: Which of the following is not an essential feature of a valid tender?
Solution

A tender should be made for the entire obligation and not for just a part of it. However certain minor deviations are permissible, which do not render a tender invalid.

Hence, the correct answer is option (b).

Effect of Refusal of Party to Perform Promise

Suppose one of the parties to contract refuses to perform his/her obligation.

In such a case, Section 39 of the Indian Contract Act, 1872 comes into play, according to which “if the party to a contract has refused to perform or has disabled himself from performing his promise in entirety, the promisor may put an end to the contract, unless he has signified by words or conduct, his acquiescence in its continuance.”

In simple words, in case a party refuses to perform the promise, the aggrieved party has the following rights under the contract: