Indian Contract Act – Obligation of parties to contracts – Effect of refusal to accept offer of performance

Indian Contract Act – CHAPTER IV.
OF THE PERFORMANCE OF CONTRACTS

Section 37. Obligation of parties to contracts
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 the death of such promisors before performance, unless a contrary intention appears from the contract.
Illustrations
a) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. A’s representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000 to A’s representatives.
b) 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 representatives or by B.

Section 38. Effect of refusal to accept offer of performance
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:-
1) it must be unconditional;
2) it must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person by whom it is made is able and willing there and then to do the whole of what he is bound by his promise to do
3) if the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver. An offer to one of several joint promisees has the same legal consequences as an offer to all of them,
Illustration
A contracts to deliver to B at his warehouse, on the 1st March, 1873,100 bales of cotton of a particular quality. In order to make an offer of a performance with the effect stated in this section, A must bring the cotton to B’s warehouse, on the appointed day, under such circumstances that B may have a reasonable opportunity of satisfying himself that the thing offered is cotton of the quality contracted for, and that there are 100 bales.

Section 39. Effect of refusal of party to perform promise wholly
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.
Illustrations
a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her 100 rupees for each night’s performance. On the sixth night A willfully absents herself from the theatre. B is at liberty to put an end to the contract.
b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every. Week during the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night A willfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A’s failure to sing on the sixth night. By whom contracts must be performe
By whom contracts must be performed

Section 40. Person by whom promise is to be performed
If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it.
Illustrations
a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by causing it to be paid to B by another; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so.
b) A promises to paint a picture for B. A must perform this promise personally.

Section 41. Effect of accepting performance from third person
When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor.

Section 42. Devolution of joint liabilities
When two or more persons have made a joint promise, then, unless a contrary intention appears by the contract, all such persons, during their joint lives, and, after the death of any of them, his representative jointly with the survivor or survivors, and, after the death of the last survivor, the representatives of all jointly, must fulfill the promise.

Section 43. Any one of joint promisors may be compelled to perform
When two or; more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any 1*[one or more] of such joint promisors, to perform the whole of the promise.
Each promisor may compel contribution. Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.
Sharing of loss by default in contribution.-If any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.
Explanation.-Nothing in this section shall prevent a surety from recovering from his principal; payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payments made by the principal.
Illustrations
a) A, B and C jointly promise to pay D 3,000 rupees. D may compel either A or B or C to pay him 3,000 rupees.
b) A, B and C jointly promise to pay D the sum of 3,000 rupees. C is compelled to pay the whole. A is insolvent, but his assets are sufficient to pay one-half of his debts. C is entitled to receive 500 rupees from A’s estate, and 1,250 rupees from B.
c) A, B and C are under a joint promise to pay D 3,000 rupees. C is unable to pay anything, and A is compelled to pay the whole. A is entitled to receive 1,500 rupees from B.
d) A, B and C are under a joint promise to pay D 3,000 rupees, A and B being only sureties for C. C fails to pay. A and B are compelled to pay he whole sum. They are entitled to recover it from C.

Section 44. Effect of release of one joint promisor
Where two or more persons have made a joint promise, a release of one of such joint promisors by the promisee does not discharge the other joint promisor or joint promisors ; neither does it free the joint promisors so released from responsibility to the other joint promisor or joint promisors.

Section 45. Devolution of joint rights
When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from the contract, the right to claim performance rests, as between him and them, with them during their joint lives, and, after the death of any of them, with the representative of such deceased person. Jointly with the survivor or survivors, and, after the death of the last survivor, with the representatives of all jointly.
Illustration
A, in consideration of 5,000 rupees, lent to him by B and C, promises B and C jointly to repay them that sum with interest on a day specified. B dies. The right to claim performance rests with B’s representative jointly with C during C’s life, and after the death of C with the representatives of B and C jointly.
Time and place for performance

Section 46. Time for performance of promise, when no application is to be made and no time is specified
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.
Explanation.- The question “what is a reasonable time” is, in each particular case, aquestion of fact.

Section 47. Time and place for performance of promise, where time is specified and no application to be made
When 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.
Illustration
A promises to deliver goods at B’s warehouse on the first January. On that day A brings the goods to B’s warehouse, but after the usual hour for closing it, and they are not received. A has not performed his promise.

Section 48. appplication for performance on certain day to be at proper time and place
When a promise is to be performed on a certain day, and 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.
Explanation.-The question “what is a proper time and place.” is, in each particular case, aquestion of fact.

Section 49. Place for performance of promise, where no application to be made and no place fixed for 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.
Illustration
A undertakes to deliver a thousand mounds of jute to B on a fixed day. A must apply to B to appoint a reasonable place for the purpose of receiving it, and must deliver it to him at such place. Performance in manner or at time prescribed or sanctioned by promisee.

Section 50. Performance in manner or at 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.
Illustrations
a) B owes A 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 A knows of the transfer, C fails. There has been a good payment by B.
b) A and B are mutually indebted. A and B settle an account by setting off one item against another, and B pays A the balance found to be due from him upon such settlement. This amounts to a payment by A and B, respectively, of the sums which they owed to each other.
c) A owes B 2,000 rupees. B accepts some of A’s goods in reduction of the debt. The delivery of goods operates as a part payment.
d) A desires B, who owes him Rs. 100, to send him a note for Rs. 100 by post. The debt is discharged as soon as B puts into the post a letter containing the note duly addressed to A.

Section 51. Performance of reciprocal promises
Promisor not bound to perform, unless reciprocal promisee ready and willing to perform.
When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
Illustrations
a) A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery.
B need not pay for the goods, unless A is ready and willing to deliver them on payment.
b) A and B contract that A shall deliver goods to B at a price to be paid by installments, the first installment to be paid on delivery. A need not deliver, unless B is ready and willing to pay the first installment on delivery. B need not pay the first installment, unless A is ready and willing to deliver the goods on payment of the first installment.

Section 52. Order of performance of reciprocal promises
Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and, where the order is not expressly fixed by the contract, they shall be performed in that orderwhich the nature of the transaction requires.
Illustrations
a) A and B contract that A shall build a house for B at a fixed price. A’s promise to build the house Must be performed before B’s promise to pay for it.
b) A and B contract that A shall make over his stock-in-trade to B at a fixed price and B promises to give security for the payment of the money. A’s promise need not be performed until the security is given, for the nature of the transaction requires that A should have security before he delivers up his stock.

Section 53. Liability of party preventing event on which the contract is to take effect
When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation 1* from the other party for any loss which he may sustain in consequence of the non-performance of the contract.
Illustration
A and B contract that B shall execute certain work for A for a thousand rupees. B is ready and willing to execute the work accordingly, but A prevents him from doing so. The contract is voidable at the option of B; and, if he elects to rescind it, he is entitled to recover from A compensation for any loss which he has incurred by its non-performance.

Section 54. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises
When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract.
Illustrations
a) A hires B’s ship to take in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B’s promise, and must make compensation to B for the loss which B sustains by the non-performance of the contract.
b) A contracts with B to execute certain builder’s work for a fixed price, B supplying the scaffolding and timber necessary for the work. B refuses to furnish any scaffolding or timber, and the work cannot be executed. A need not execute the work, and B is bound to make compensation to A for any loss caused to him by the non-performance of the contract.
c) A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which cannot arrive for a month, and B engages to pay for the merchandise within a week from the date of the contract. B does not pay within the week. A’s promise to deliver need not be performed, and B must make compensation.
d) A promises B to sell him one hundred bales of merchandise, to be delivered next day, and B promises A to pay for them within a month. A does not deliver according to his promise. B’s promise to pay need not be performed, and A must make compensation.

Section 55. Effect of failure to perform at fixed time, in contract in which time is essential
When a party to a contract promises to do a certain thing at or before a specified time or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed,becomes voidableat the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.
Effect of such failure when time is not essential – If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time ; but the promisee isentitled to compensation from the promisorfor any loss occasioned to him by such failure.
Effect of acceptance of performance at time other than that agreed upon.If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.1*

2007(1) AKAR(NOC) 130 (DEL.)=AIR 2007 Delhi 1 BADAR DURREZ AHMED,J.
(A) Contract Act (9 of 1872), S.55- Agreement to sell – Specific performance – Time whether essence of Contract – Contract clause providing that defendants vendors would get property converted from leasehold to freehold prior to execution of sale deed – Failure on part of defendants to fulfill said obligation Time would not be essence of contract – Plaintiff – vendee cannot be asked to make balance payment immediately on premises that time was essence of contract.

2007(6)AIR Kar R 43 K.RAMANNA,J.
Karnataka Rent Act(34 of 2001),S.43(2)(b)-Transfer of Property Act (4 of 1882)S.54-Contract Act (9 of 1872)S.55-Proceedings under S.43(2)(b)before Rent Court-Agreement to sell between tenant and landlord-Time was essence of Contract-Tenant failed to pay balance of sale consideration before stipulated date-Balance of consideration was paid by him on different dates-Tenants had entered into an agreement of sale without taking possession of schedule property-Tenant cannot be said to be in possession of schedule property in capacity of purchaser under agreement of sale – In view of non-compliance with terms of agreement he cannot be termed as owner of property – He continues to be a tenant and cannot deny relationship of landlord and tenant between them.
AIR 2002 SC 101; AIR 1996 SC 2917, Relied on (paras8,9)

Section 56. Agreement to do impossible act.
An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful
A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the Promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.2*
Compensation for loss through non-performance of act known to be impossible or unlawful.-Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promiseefor any loss which such promisee sustains through the non-performance of the promise.
Illustrations
a) A agrees with B to discover treasure by magic. The agreement is void,
b) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void
c) A contracts to marry B, being already married to C, and being forbidden by the law to Which he is subject to Practice polygamy, A must make compensation to B for the loss caused to her by the non-performance of his promise.
d) 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 war is declared.
e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void.

2007(3) AIR Kar R 99 D.V.SHYLENDRA KUMAR,J.
(A)Contract Act(9 of 1872) S.56 – Karnataka Excise Act (21 of 1966) S.71 – Karnataka Excise (Lease of Rights of Retail Vend of Liquor) Rules (1969), Rr.16,18-Frustration of contract – Forfeiture of bid amount – Validity – Leasing of right to vend liquor – Bid/offer invited by State at public auction – Death of highest bidder after acceptance and confirmation of his bid – Rights and liabilities are statutorily determined and not by volition of parties – Rights and liabilities are not that are to be continued even in hands of legal heirs or legal representatives – Question of frustration of contract does not arise – Legal heir of highest bidder cannot independently plead doctrine of frustration to get himself/herself relieved of consequences of breach of promise,(Paras 50,51,52)

Supreme Court (From 2004(1)Cal LJ 219)
H.K.SEMA & LOKESHWAR SINGH PANTA,JJ.
Contract Act(9 of 1872) S.56-Agreement to sell thika tenancy – Suit for specific performance-Transfer of thika tenancy prohibited by W.B.Thika Tenancy Act(1981), enforced during pendency of sui – Agreement to sell thus becomes impossible of performance passed after 1981 Act, set aside,

Section 57. Reciprocal promise to do things legal and also other things illegal
Where persons reciprocally promise, firstly, to do certain things which are legal, and, secondly, under specified circumstances to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement.
Illustration
A and B agree that A shall sell B a house for 10,000 rupees, but that, if B uses it as a gambling house, he shall pay A 50,000 rupees for it.
The first set of reciprocal promises, namely, to sell the house and to pay 10,000 rupees for it, is a contract.
The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement.

Section 58. Alternative promise, one branch being illegal
In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.
Illustration
A and B agree that A shall pay B 1,000 rupees for which B shall afterwards deliver to A either rice or smuggled opium.
This is a valid contract to deliver rice, and a void agreement as to the opium.

Section 59. Appropriation of payments
Application of payment where debt to be discharged is indicated
Where a debtor, owing several distinct debts to one person, makes a payment to him, either with express intimation, or under circumstances implying that the payment is to be applied to the discharge of some particular debt, the payment, if accepted, must be applied accordingly.
Illustrations
a) A owes B, among other debts 1,000 rupees upon a promissory note which falls due on the’ first June. He owes B no other debt of that amount. On the first June A pays to B 1,000 rupees. The payment is to be applied to the discharge of the promissory note.
b) A owes to B, among other debts, the sum of 567 rupees. B writes to A and demands payment’ of this sum A sends to B 567 rupees. This payment is to be applied to the discharge of the debt of which B had demanded payment.

Section 60. Application of payment where debt to be discharged is not indicated –
Where the debtor has omitted to intimate and there are no other circumstances, indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in force for the time being as to the limitation of suits.

Section 61. Application of payment where neither party appropriates.-
Where neither party makes any appropriation the payment shall be applied in discharge of the debts in order of time, whether they are or are not barred by the law in force for the time being as to the limitation of suits. If the debts are of equal standing, the payment shall be applied in discharge of each proportionally.

Section 62. Contracts which need not be performed
Effect of novation, rescission, and alteration of contract –
If the parties to a contract agree to substitutea new contract for it, or to rescind or alter it, theoriginal contract need not be performed.
Illustrations
a) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to B has been contracted.
b) A owes B 10,000 rupees. A enters into an arrangement with B, and gives B a mortgage of his (A’s) estate for 5,000 rupees in place of the debt of 10,000 rupees. This is a new contract and extinguishes the old.
c) A owes B 1,000 rupees under a contract. B owes C 1,000 rupees. B orders A to credit C with 1,000 rupees in his books, but C does not assent to the arrangement. B still owes C 1,000 rupees, and no new contract has been entered into.

2007(1)AKAR(NOC) 117 (CAL.) GIRISH CHANDRA GUPTA & MANIK MOHAN SARKAR,JJ.
(B) Contract Act (9 of 1872) S.62 – Civil P.C.(5 of 1908),O23,R1 – Novation and recession of contract – Order of arrest of suppliers vessel passed in admiralty suit – Out of Court settlement by plaintiff with owner of vessel – Under subsequent agreement debtor agreed to pay not only sum claimed in suit but cost and interest and third party to transaction guaranteed such payment – Existing cause of action gets substituted by new cause of action arising out of agreement Claim in suit stands abandoned acting upon agreement That apart, ownership of vessel was transferred to defendant when asset was sought to be effected-Admiralty claim not maintainable-In view of Art.3 of International Convention of Arrest Ships 1999, vessel no longer continued to remain charged for payment of dues of plaintiff/secured creditor-Transferee of vessel cannot be made liable for debt incurred by transferor.

Section 63. Promisee may dispense with or remit performance of promise
Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.
Illustrations
a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.
b) A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged.
c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.
d) A owes B, under. a contract, a sum of money, the amount of which has not been ascertained. A’ without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount.
e) A owes B 2,000 rupees, and is also indebted to other creditors. A makes an arrangement with his creditors, including B, to pay them a 3*[composition] of eight annas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand.

Section 64. Consequences of rescission of voidable contract
When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is promisor. The party rescinding a voidable contract shall, if he have received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.’

Section 65. Obligation of person who has received advantage under void agreement, or contract that becomes void
When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.
Illustrations
a) A pays B 1,000 rupees in consideration of B’s promising to marry C, A’s daughter. C is dead at the time of the promise. The agreement is void, but B must repay A the 1,000 rupees.
b) A contracts with B to deliver to him 250 mounds of rice before the first of May. A delivers 130 maunds only before that day, and none after. B retains the 130 maunds after the first of May. He is bound to pay A for them.
c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and B engages to pay her a hundred rupees for each night’s performance. On the sixth night, A willfully absents herself from the theatre, and B, in consequence, rescinds the contract. B must pay A for the five nights on which she had sung.
d) A contracts to sing for B at a concert for 1,000 rupees, which are paid in advance. A is too ill to sing. A is not bound to make compensation, to B for the loss of the profits which B would have made if A had been able to sing, but must refund to B the 1,000 rupees paid in advance

2007(6)AKAR(NOC) 836 (DEL.)= 2007 Cri.L.J.2262
BADAR DURREZ AHMED,J.
(B)Contract Act (9 of 1872) S.65 – Obligation of person receiving advantage under void agreement – Agreements which are void ab initio and their illegality is known to the parties at the time of execution-would not fall within the purview of S.65.

2007(6) AKAR (NOC) 898 (MAD) P.K.MISRA & J.A.K SAMPATH KUMAR,JJ.
Arbitration and Conciliation Act(26 of 1996),S.34 – Contract Act (9 of 1872),- Ss.65,70,73Award-Setting aside of – Works Contract – Terms of Contract expressly stipulated that Contractor has no right to claim compensation on account of premature termination of contract – Award of Tribunal does not indicate anywhere as to on what basis it has come to conclusion that Contractor is entitled to compensation – Neither principle of restitution recognized under S.65 nor S.70 or 73 would apply-Award of Tribunal is liable to be set aside.

Section 66. Mode of communicating or revoking rescission of voidable contract
The rescission of a voidable contract may be communicated or revoked in the same manner, and subject to the same rules, as apply to the communication or revocation of a proposal.

Section 67. Effect of neglect of promisee to afford promisor reasonable facilities for performance
If any 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 non-performance caused thereby.
Illustration
A contracts with B to repair B’s house.
B neglects or refuses to point out to A the places in which his house requires repair.
A is excused for the nonperformance of the contract if it is caused by such neglect or refusal.

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