Law and You > Business Laws > Indian Contract Act, 1872 > Contracts which must be Performed (Ss. 37 to 39 ICA)
A contract places a legal obligation upon the contracting parties to perform their mutual promises, and it carries on until the discharge or termination of the contract. The most natural and usual mode of discharging a contract is to perform it. A person who performs a contract in accordance with its terms is discharged from any further obligations. As a rule, such performance entitles him to receive the other party’s performance. Exact and complete performance by both the parties puts an end to the contract. In this article let us discuss provisions related to contracts which must be performed under the Indian Contract Act, 1872.
The term ‘performance’ in its literal sense means the performance of a task or action. In its legal sense “performance” means the fulfilment or the completion of the obligations which they have towards the other party by virtue of the contract entered by them. For example, ‘A’ and ‘B’ enter a contract, the terms of the contract state that A must deliver a book to B on payment of the consideration of five hundred rupees. Here, B pays five hundred rupees to A and as stipulated in the contract, A delivers him the book. We can say the contract is performed.
Discharge of Contract:
The term discharge of contract means ending of the contractual relationship between the parties. A contract is said to have been discharged when it ceases to operate i.e. when the rights and obligations created by the parties came to an end. A contract can be discharged if the parties mutually agree to terminate the contract. Also there are different methods through which contracts can be discharged. The different methods of discharge of contract are as follows:
- Discharge by Performance
- Discharge by Agreement or Consent
- Discharge by Impossibility of Performance
- Discharge by Lapse of Time
- Discharge by Operation of Law
- Discharge by Breach of Contract
Discharge by Performance:
The term ‘Performance of contract means that both, the promisor, and the promisee have fulfilled their respective obligations, which the contract placed upon them. In expecting exact performance, the courts mean that, performance must match contractual obligations. In requiring a contract to be complete, the law is merely saying that any work undertaken must be carried out to the end of the obligations. A contract should be performed at the time specified and at the place agreed upon. When this has been accomplished, the parties are discharged automatically and the contract is discharged eventually.
Obligation of Parties to Contracts:
According to Section 37 of the Indian Contract Act, 1872 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.
There are two illustrations attached to the Section.
- 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.
- 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.
Thus, it is the primary duty of each contracting party to either perform or offer to perform its promise. For performance to be effective, the courts expect it to be exact and complete, i.e., the same must match the contractual obligations. However, where under the provisions of the Contract Act or any other law, the performance can be dispensed with or excused, a party is absolved from such a responsibility.
Effect of Refusal to Accept Offer of Performance:
According to Section 38 of the Indian Contract Act, 1872 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 fulfil the following conditions:—
- it must be unconditional;
- 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;
- 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.
For example, A contracts to deliver to B, 100 tons of basmati rice at his warehouse, on 6 December 2015. A takes the goods to B‘s place on the due date during business hours, but B, without assigning any good reason, refuses to take the delivery. Here, A has performed what he was required to perform under the contract. It is a case of attempted performance and A is not responsible for non-performance of B, nor does he thereby lose his rights under the contract.
Effect of Refusal of Party to Perform Promise Wholly:
According to Section 39 of the Indian Contract Act, 1872 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 wilfully 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 night’s 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 wilfully 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.
Conclusion:
Contracts are fundamental legal agreements that establish obligations between parties. Contracts create binding obligations, and each party is expected to fulfill their commitments as outlined in the agreement. Performance can be complete, substantial, or partial, each carrying different legal implications regarding rights to payment and potential remedies for breach. The specific terms of the contract dictate how and when performance must occur, including timelines, methods, and standards of quality. Failure to perform as required can lead to legal consequences, including claims for breach of contract. Parties may seek remedies such as damages, specific performance, or rescission. Successful performance often requires cooperation and communication between parties to ensure that obligations are met and any issues are promptly addressed.
Ultimately, understanding the requirements and expectations surrounding contract performance is crucial for protecting rights and fulfilling obligations effectively. Adhering to these principles fosters trust and accountability in contractual relationships, contributing to smoother business transactions and personal agreements.