City Law College Unit -3

LECTURE 4
Q.4(a) What do you mean by Performance of contract?
Meaning of performance of contract
Every valid contract creates legal obligation on both the contracting parties and this obligation continues till the contract
has been actually performed or otherwise discharged. Performances of the contract is one of the various modes of discharge
of the contract and this is the most natural desired and usual mode of discharging an obligation.
The term ‘performance’ means that the parties to the contract have fulfilled or carried out their respective obligations
arising out of the contract. For example, A contracts to sell his book to B for Rs. 50. A delivers the book and B makes the
payment; the contract is discharged by performance.
Section 37 of the Indian Contract Act lays down the obligations of the parties regarding performance. It provides 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 provision of this Act, or any other law.
Q.4(b) What do you mean by attempt to perform?
Types of Performance
Section 37 says that the performance may be either actual or attempted.
1. Actual performance:When a party to a contract has done, what he had undertaken to do and there remains nothing to be
done by him the promise is said to have been actually performed and the liability of such a party comes to an end. For
example, A, who is indebted to B for Rs. 1,000, promises to repay the amount after two months. A repays the amount on
the due date. This is actual performance.

2. Attempted Performance: Sometimes, when the performance becomes due, the promisor offers to perform his obligation but
the promisee refuses to accept the performance. This is known as ‘attempted performance’ or ‘tender’. For example, A
promises to deliver certain goods to B. A takes the goods to the appointed place during business hours but B refuses to take
the delivery of goods. Thus, A has done what he was required to do under the contract. It is an attempted performance. In
case of an attempted performance, the promisor shall not be held liable for non-performance as an attempted performance
or tender is as good as performing the contract. Section 38 of the Contract Act provides 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.
Kinds of Tender
Tender or attempted performance can be of two types (1) tender of goods and services and (ii) tender of money.
1) Tender of goods and services: A contract to deliver goods or render some service is completely discharged when the goods are
tendered for acceptance according to the terms of the contract. If the goods or services are refused, they need not be
offered again and the promisor is discharged from his liability. At the same time, he may file a suit against the promisee for
non-acceptance.

2) Tender of money: Where the debtor (promisor) makes a valid tender i.e., offers to pay the amount to the creditor and the
creditor refuses to accept the same, the debtor is not discharged from his liability to pay the amount. In other words, a
tender of money does not amount to discharge of the debt. The debtor continues to be liable for the payment of debt. But
the debtor will not be liable for interest from the date of a valid tender i.e., no interest. shall become payable from the date
of the rejection of a valid tender of money.
Q.4(c) What are the essentials of valid tender?
Essentials of a Valid Tender
It is necessary that the tender must be valid for this validity the following conditions must be satisfied:
i) It must be unconditional:An unconditional tender is one which is in accordance with the terms of the contract. Thus, a
conditional offer of performance is not a good tender and the other party is entitled to reject it. For example, A debtor
 offered to pay B, his creditor the amount due to him if B sells certain goods to him. It is a conditional tender and therefore,
invalid.
ii) It must be made at a proper time and place: Generally, the time and place of performance are agreed upon by the parties and
the tender must be made accordingly. Thus, a tender of goods after the business hours or of goods or money before the due
date is not a valid tender. For example, if the promisor wants to deliver the goods at 1 a.m., this is not a valid tender unless
it was so agreed.
iii) In case of tender of goods, it must give a reasonable opportunity to the promisee of ascertaining that the goods offered are
the same as the promisor is bound to deliver: Thus, a tender of goods at such time when the other party cannot the goods,
is not a valid tender.
iv) It must be for the whole obligation: Atender of goods or to pay the amount in instalments is not a valid tender. For example,
A promises to deliver 100 bags of rice on a certain day. If on the agreed day and place, A offers to deliver 80 bags only. This
is not a valid tender and A is not discharged from his obligation. However, a minor deviation from the terms of the contract
may not render the tender invalid.
v) It must be made to the promisee or his duly authorised agent:Thus, a tender to a stranger is valid. In case there are joint
promisees, it is not he promisor to offer performance to each one of them. A tender may be made to any one of the joint
promisees.
vi) In case of payment of money, tender must be of the exact amount due and it must be in the legal tender:It should not be in
any other form such as foreign currency or cheque. A payment by cheque is a valid tender provided the person to whom it is
made is ready and willing to accept it.

Q.4(d) Who can demand performance?

1. Promisee: Normally, the promisee is the only person who can demand performance of the promise under a contract. A
third party cannot demand performance of the contract even if it was made for his benefit. For example, A promises B to
pay Rs. 500 to C.The person who can demand performance. is B and not C.
2. Legal Representative:In the case of death of the promisee, his legal representative can demand performance, unless a
contrary intention appears from the contract or the contract is of a personal nature. For example, A agrees to marry B.
However, before marriage takes place, H dies. Since it is a contract of personal nature the legal representative of B
cannot demand performance of the promise from A.
3. Third Party: In some exceptional cases, the third party can also demand performance of the contract even though he is
not a party to the contract.
4. Joint Promisees: When a person has made a promise to two or more persons jointly, then, unless a contrary intention
appears from the contract the performance of the promise may be demanded either (i) by all the promises jointly; or (ii)
in case of death of any of joint promisees, by the representatives of such deceased person jointly with the surviving
promisees or (i) in case of death of all joint promisees, by representatives of all of them jointly. Thus, the right of joint
promisees is only joint and any of them cannot demand performance-unless it was so agreed. For example. A for a
consideration of Rs 5.000 lent to him by B and C. promises B and C jointly to repay them Rs. 5,000 plus interest on a
specified day. B dies. The right to claim perform with B's representative jointly with C during his would lie with the
representatives of B and C jointly.
Q.4(e) Who must perform?
1. Promisor himself: If from the nature of the contract it appears that it was the intention of the parties that the promise
should be performed by the promisor himself, such promise must be performed by the promisor. This usually applies to
contracts involving personal skill or art work. For example. A promises to paint a picture for B. As this promise involves
personal skill of A, it must be performed by A.

2. Promisor or Agent: Where the contract does not involve personal skill of the promisor, the contract could be performed by
the promisor himself or by any competent person employed by him for the purpose. For example, A promises to pay to B a
sum of money. A may perform this promise either by paying the money personally to B or by causing it to be paid to B by his
authorised agent.
3. Legal Representatives: The contracts which do not involve any personal skill or art may be performed by his legal
representative after the death of the promisor. For example. A promises to deliver goods to B on a certain day on payment
of Rs. 2,000. A dies before the said day A's legal representatives are liable to deliver the goods to B and B is bound to pay Rs.
2,000 to A's representatives. If, however the contract involves some personal skill or art it comes to an end with the death
of the promisor.

4. Third Person: In some cases, a contract may be performed by a third person provided the promisee accepts the arrangement.
According to Section 41, once the promisee accepts the performance from a third person, he cannot compel the promisor to
perform the contract again. That is performance by stranger, accepted by the promise, produces the result of discharging
the promisor, although the latter (promisor) has neither authorised nor ratified the act of third party. Mohan promises to pay
Sohan an amount of Rs. 10,000 for Painting his house. Sohan finishes the job but Mohan is unable to pay him. Sunny, a
common friend of Mohan and Sohan, offers rs.6000 to Sohan on behalf of Mohan, which he accepts. Eventually, Sohan files
a suit for recovery against Mohan. It was held that Sohan accepts Rs. 6000 from a third person. Mohan has not authorised
the third person(Sunny). Hence, Sohan’s act has discharged Mohan of his liability to pay the entire amount. Sohan can only
claim Rs. 4,000 from Mohan now.
5.Performance of Joint Promises: According to section 42, when two or more persons have made a joint promise, the joint
promisors must fulfil the promise jointly during their life time. And if any one of them dies, then his legal representatives and
survivors must jointly fulfil the promise. For example,
A, B and C jointly promise to pay Rs 3.000 to D. A dies. B and C along with A’s legal representative are jointly and severally
liable to pay the amount to D. This rule is called devolution of joint liabilities. It is however. subject to the condition that no
other intention appears from the contract. In other words, if a contrary intention appears from the contract then the rule
given above shall not apply.
Q.4 (f) If time is not specified in contract, then how contract will be performed.

1. Performance of a promise within a reasonable time:According to section 46, where the time for
, and the promisor himself has to perform the promise without being asked for by the promise, the contract
must be performed within a reasonable time.The question what is a reasonable time is in each particular case, a question of
fact. Thus, it is clear from this provision that if time for performance is not stated, the contract is not bad for want of
certainty.

2. Performance of promise where time is specified:In such cases, the promisor must perform his promise on that particular day
during the usual hours of business and at a place where the promise ought to be performed (sec. 47). A promises to deliver
goods at B’s warehouse on Jan 1, 1990. On that day A brings the goods to B’s warehouse, but after the usual hours of
closing, and they are not received. A’s performance is not valid.

3. Performance of promise on an application by the promisee:It may also happen that the day for the performance of the
promise is specified in the contract but the promisor has not undertaken to perform it without application or demand by the
promise. In such cases, the promise must apply for performance at a proper place and within the usual hours of business.
(section 48)

4. Performance of promise where no place is specified and also no application is to be made by promise:It is the duty of the
promisor to apply or ask the promise to fix a reasonable place for the performance of the promise and to perform it at such
place (sec.49). A undertakes to deliver 1,000 kilos of jute to B on a fixed day. A must apply to B to fix a reasonable place for
the purpose of receiving it, and must deliver it to him at such place.

5. Performance of promise in the manner and time prescribed or sanctioned by promisee: In such cases, the promise must be
performed in the manner and at the time prescribed by the promisee. The promisor shall be discharged from his liability if he
performs the promise in the manner and time prescribed by the promisee (sec. 50).
 LECTURE 5
Q.5(a) What do you understand by the Discharge of contract?

Discharge of a contract by operation of law means that a contract is terminated due to the operation of law,
without any specific act or agreement by the parties involved. The term ‘discharge of a contract’ means that the
parties to it are no more liable under the contract.

Q.5(b) How many Modes of discharge of contract under ICA,1872?

A contract may be discharged in any one of the following ways.

1. By performance

2. By mutual agreement

3. By lapse of time

4. By operation of law

5. By impossibility of performance

6. By breach
Q.5 (c) Explain Discharge by Mutual agreement.
Just as a contract is created by means of an agreement, it can be terminated or discharged by mutual agreement. If the
parties to a contract agree to make a fresh contract in place of the original contract, the original contract is discharged
contract can be discharged by mutual agreement in any of the following ways.
a) Novation: The term "novation” means the substitution of a new contract for the existing one. This arrangement may be
either between the same parties or between different parties. The consideration for the new contract is the discharge of
the original contract. Since novation implies a new contract, all the parties to the existing contractmust agree to it.
E.g.A owes money to B under a contract.It is agreed between A& Bthat B shall thenceforth accept C as his debtor instead
of A. The old debt of A to B is discharged, and a new debt from C to B has been contracted. This is novation involving change
of parties.
b)Rescission: Rescission means cancellation of the contract. If by mutual agreement the contracting parties agree to
rescind the contract, the contract is discharged. A contract can be rescinded before the performance is due.
Non-performance of a contract by both the parties for a long periodwithout complaint, amounts to implied rescission. This is
different from novation in the sense that in case of novation a new contract is substituted for the original contract
whereas in rescission the original contract is cancelled and no new contract is made.
b) Alteration: It means a change in one or more of the terms of a contract with consent of all the parties. Alteration has the
effect of terminating the originalcontract. In an alteration there is a change the terms of a contract but no change of
parties to it. In novation there may be change of parties.

c) Remission: It means the acceptance for or a lesser sum than what was contracted for or a lesser fulfilment of the promise
made. According to section 63, every promisee may (a) remit or dispense with it, wholly or in part, or (b) extend the time of
performance, or (c) accept any satisfaction instead of performance. A owes B Rs. 5.000. A pays to B Rs. 3,000 who
accepts it in full satisfaction of the debt. The whole debt, is discharged.

d) Waiver: Waiver means abandonment or intentional relinquishment of a right the other party under the contract. When a
party waives his rights under it, the other party is released from his obligation. For example, A promises to paint a picture for
B. B afterwards forbids him to do so. A is no longer bound to perform the promise.
Q.5 (d)Explain discharge of contract by Lapse of Time.
The rights and obligations under a contract can be enforced only within a specified period called the period of limitation. The
Limitation Act has prescribed the period of limitation for various contracts. For example, period of limitation for exercising
right to recover an immovable property is twelve years and right to recover a debt is three years. After the expiry of this
limitation period, the contractual rights cannot be enforced. In other words, if a debt is not recovered within three years of
its payment becoming due, the debt becomes time barred and is discharged by lapse of time.

Q.5(e) Explain discharge of contract by Operation of Law.

A contract may be discharged by operation of law in the following cases.
i) Death of the Promisor: Contracts involving the personal skill or ability of the promisor come to an end with the death of the
promisor.

ii) Insolvency: When a person is declared insolvent by an Insolvency Court, he is discharged from his obligation existing at that
time. So, it a promisor is declared insolvent, he is discharged from his liability.

iii) Merger: When an inferior right accounting to into the superior rights accruing to the same party,the earlier contract is
discharged. For example. A took a land on lease from B. subsequently, A purchases that very land. Now A becomes the owner
of the land the earlier contract of lease stands terminated.

iv) Material alteration: In a written contract if any party makes some material alteration in the terms of the contract without
the approval of the other party, the contract stands terminated. A material alteration is one which varies the rights,
liabilities or the position of the parties as such, you should note that immaterial alterations, such as correcting the clerical
errors or the spelling of a name has no effect on the validity of the contract.

Q.5(f) Explain discharge of contract by Impossibility of Performance.

A contract to be valid it must be capable of being performed but sometimes, due to some reasons which are beyond the
control of the parties, the performance of contract becomes impossible. In such cases, the contract is discharged on the
ground of impossibility of performance. Section 56 of Contract Act provides that an agreement to do an act impossible in
itself is void. This rule is based on the principle that law does not recognise the impossible and what is impossible does not
create any obligations.
Impossibility may be of two types: (1) initial and (2) subsequent
Initial impossibility:It means impossibility at the time of making the contract, Whether the fact of impossibility is known or
unknown to the parties, the agreementis void ab-initio. For example, A agrees with B to discover a treasure by magic. The
agreement is void due to initial impossibility.
If, however, the promisor alone knows about the initial impossibility while making the contract, he shall have to compensate
the promisee for any loss which the promisee may suffer on account of non-performance. This rule is given in Para 3of
section 56. For example, A contracts to marry B, being already married to C. Being forbidden by the law of which he is subject
to practise polygamy, A must compensate B for the loss caused to her by the non-performance of the contract on account
of impossibility. Where initial impossibility is unknown to both the parties, the contract will become void because of mutual
 mistake of fact. For example, A agrees to sell his horse to B for Rs. 1000,unknown to both the parties, the horse was dead
at the time of making the agreement. This agreement is void.
Subsequent or Supervening Impossibility: Impossibility which arises subsequent to the making of the contract is called
supervening impossibility. If the contract was capable of performance at the time of making it, but subsequently because of
some event (over which neither party has any control) the performance becomes impossible or unlawful, the contract
becomes void and the parties are discharged from their obligations.
The supervening impossibility is different from initial impossibility. In case of initial impossibility, the agreement is void
ab-initio while in case of supervening impossibility the contract becomes void.
The doctrine of supervening impossibility is also called as Doctrine of Frustration which is contained in Para 2 of Sec. 56
which provides: A contract to do an act which after the contract is made becomesimpossible, or by reasons of some event
which the promisor could not prevent, becomes void when the act becomes impossible or unlawful.
The contract will become void on the ground of supervening impossibility only if the following conditions are satisfied.
a) The act should have become impossible.

b) The impossibility should be by reason of some event which the promisor could not prevent.

c) The impossibility should not be self-induced by the promisor.

The performance of a contract may become subsequently impossible due to any of the following reasons.
1. Destruction of Subject-Matter: If the subject-matter of a contract is destroyed after the formation of the contract,
without the fault of either party, the contract becomes void.
Examples
i) A musical hall was agreed to be let out on certain dates, but before those dates the hall burned by fire. The contract was
held to have become void on the ground of impossibility of performance(Taylor V. Caldwell)
ii) A person agreed to deliver a part of a specific crop of potatoes. The potatoes were destroyed by a pest through no fault of
the party. The contract was held to be discharged (Howell V. Coupland)

2. Death or personal incapacity: When the performance of a contract depends upon the personal skill or ability of a party, the
contract stands discharged on the death or incapability of that person. For example, A agreed to perform at a concert on a
specified day. A fell seriously ill and so could not perform on the said day. It was held that the contract is discharged on the
ground of impossibility (Robinson v. Davison)

3. Change of Law: A contract which was lawful at the time of making it but becomes unlawful by reasons of subsequent
change in law, the performance becomes impossible and the contract is discharged.
Examples
i) A agreed to transport certain goods belonging to B from one place to another. Subsequently. As trucks were requisitioned by
the Government under a statutory power. It was held that A was discharged from his obligation (Noor Bux v. Kalyan)

ii) A agreed to sell his land to B. Subsequently, the land was acquired by the Government. Now A cannot perform his promise,
the contract was held to become void on the ground of impossibility (Shyam Sunder v. Durga)

4. Cessation of a state of things: If a contract is entered into on the basis of the continued existence or occurrence of a
particular state of things, the contract is discharged if the state of things ceases to exist or changes. It should be noted
carefully that the contract is discharged only when the happening of the event was the basis of the contract.
Examples
i) A and B contract to marry each other. Before the time fixed for the marriage. A goes mad. The contract becomes void.

ii) A took a room on hire in a hotel for viewing the coronation procession of King Edward VII, Because of King's illness the
procession was cancelled. It was held that A was not liable to pay the room rent because the very purpose of hiring the room
was defeated (Knell v. Henry). This type of supervening impossibility is also called "frustration of contract’.
5. Declaration of War: If a war is declared subsequent to the formation of the contract, all pending contracts are either
suspended or declared as void. If the war is of a short duration, such contracts may be revived after the end of the war. For
example. A contracts to take in cargo for B at a foreign port. A's Government afterwards declares war against the country
in which the port is situated. The contract becomes void when the war is declared.
Effects of Supervening Impossibility
a) Contract becomes void: When the performance of a contract becomes subsequently impossible or unlawful; the contract
becomes void (section 56 para 2).
b)Compensation for Non-performance: When the promisor alone knows that the performance is impossible or unlawful, he must
compensate the promisee for any loss which he might have suffered on account of non-performance (section 56 para 3).
c) Benefit to be Restored: When a contract becomes void, any person who has received any advantage under such contract is
bound to restore it, or to make compensation for it, to the person from whom he received it (section 65). For example, A
contracts to sing for B at a concert for Rs. 1,000. which is paid in advance. A is too ill to sing. A must refund the advance
of Rs 1,000 to B.
Lecture 6
Q.6 (a) What do you mean by discharge of contract by Breach?
If any party refuses or fails to perform his part of the contract, a breach of contract occurs and the contract is discharged.
In case of breach the aggrieved party is relieved from performing his obligation and gets a right to proceed against the party
at fault. A breach of contract may arise in two ways: (1) actual breach and (in) anticipatory breach.
Q.6 (b) In how many ways breach of contract may arise?
Actual Breach: Actual breach of contract may take place either on the due date of performance or during the course of
performance. For example, A agreed to deliver 100 bags of rice to B at a certain price on 10th July. If A refuses or fails to
deliver the goods on time there occurs an actual breach. If the promisor has performed part of the contract and then refuses
or fails to deliver the remaining goods, it is also actual breach of contract.
Q.6(c) Define anticipatory breach of contract.
Anticipatory Breach:Anticipatory breach comes under section 39 which occurs when the party declares his intention of not
performing the contract before the performance is due. This intention may be declared expressly by words written or spoken
or impliedly. For example. A agrees to supply certain goods to B on 10th July. Before this date A informs B that he shall not
supply the goods. If, instead of expressly informing B about his intention of not performing the contract. A does something
which makes it impossible for him to perform, this will also amount to anticipatory breach. If in the example given above. A
sell all the goods before the said date to P at a higher price, this action of A clearly indicates his intention.
Thus, a breach of contract operates a discharge of contract. In case of breach, the aggrieved party gets the right to claim
compensation or damages from the defaulter. The various remedies available to the aggrieved party.
Example: A construction company enters into a contact with a supplier to provide building materials for a project. The
supplier informs the construction company that they have run out of stock and will not be able to provide the materials as
agreed. In this scenario, the supplier’s communication serves as an anticipatory breach, as they have indicated their
intention not to fulfil their contractual obligations.
Promisee have following rights in case of breach of contract:
(i) Right to terminate the contract;
(ii) Right to continue contract if partly performed afterwards. (it may be express or implied);
(iii) Claim for damages in above mentioned case.