IfAs a general rule, we know that all agreements are contract if it is enforceable by law, backed by the free consent of parties competent to enter into a contract, for a lawful consideration and object. Once the contract is entered into, the fulfillment or performance of the object of the parties comes into the picture, and the liabilities of the parties come to an end. Henceforth, the contract is said to be discharged. However, performance is not the only way to discharge a contract. In this article, we will discuss how a contract is discharged, specifically the performance of a contract, who can perform a contract, types of performance, specific performance of a contract, and contracts that need not be performed.
What is the Performance of a Contract?
Performance of a contract is one of the methods of discharging a contract. Once the party fulfills the obligations set out in the agreement, the contract is said to be discharged. There are no further rights and obligations between the parties.
Section 37 of the Indian Contract Act lays down the obligations of the parties to the contract. It states that the parties to the contract must either perform the promise or offer to perform their promises (such an offer is called a tender of performance), except where such promise is dispensed with or excused under the applicable law’s provisions.
However, unless otherwise intended by the parties, the promise can bind the promisors’ representatives in the event of death of the said promisor before the performance of its obligations.
E.g. ‘A’ promises to deliver certain goods to ‘B’ on a specific day on payment of Rs 10,000. ‘A’ dies before that day. ‘A’s representatives are bound to deliver the said goods to ‘B’ and ‘B’ is bound to pay ‘A’s representatives.
Types of Performance
Performance of a contract can be actual, substantial, partial, or attempted. Let us discuss in detail each of these types.
In actual performance, the promisor to the contract has fulfilled its obligations in accordance with the terms of the contract. Thus, the liability of the promisor gets discharged on the performance of the obligation of the promisor. Actual performance can be substantial or partial performance.
In substantial performance, the promisor delivered a semi-finished or defective product to the promisee. In other words, the contract is almost fulfilled.
In partial performance, the promisor has not entirely performed the contract. The promisee has accepted the part performed by the promisor. E.g., If there is a shortfall of goods, the promisee agrees with the promisor’s less quantity.
In attempted performance, the promisor has made an offer of performance, but the promise is yet to be accepted. Then the promisor shall not be responsible for the non-performance and neither lose any right under the contract.
Specific Performance of a Contract
A contract’s specific performance is an equitable relief granted by the court to enforce a contract against the promisor that he promised to perform. The remedies available for breach of obligations of the party are both by way of damages and the contract’s specific performance. The remedy of the contract’s specific performance is granted when the court is satisfied that the remedy by way of damages is insufficient or inadequate to compensate for the breach.
Person By Whom the Contract must be Performed?
Section 40 of the Indian Contract Act provides that where the intention of the parties can be clearly seen from the contract that the promise made has to be performed by the promisor personally. Then the promisor only must perform the promise.
However, when no such intention is made, any competent person appointed by the promisor (agent) or his representative can perform the promise.
E.g., ‘A’ promises ‘B’ to paint a picture. ‘A’ must himself perform his promise.
What is the Effect of Accepting Performance from the Third Person?
Section 41 of the Indian Contract Act states that where a person accepts the performance by a third person (other than promisor), he cannot enforce it against the promisor afterward.
Time and Place of Performance (Section 46-50)
- Where no time has been prescribed and performance has to be made without application – Where the promisor promises to perform his promise under a contract, without any application made by the promisee and no time has been provided by the promisee, then in such case, the promisor must perform his obligation within a reasonable time.
- Time and place for performance where time is prescribed without any application – Where a promise is to be performed by the promisor on a certain day, and the promisor has agreed to perform the said promise, without any application by the promisee then, the promisor must perform the promise within reasonable hours of business on the said day and at a proper place at which the promise must be performed.
- Application for performance at a proper place and time – Where a promise is to be performed at a fixed location specified by the promisee, and the promisor does not agree to perform without any application made by the promisee. In such a case, the promisee should make an application to the promisor for the performance of a contract at a proper place and within reasonable business hours of the day.
- Application for a reasonable place of performance – Where a promise is to be performed by the promisor, without any application by the promisee, and the location of performance is not fixed. The promisor should apply to the promisee to set a reasonable place for the promise’s performance and perform it at such a place.
- Performance in a manner and such time prescribed by the promisee – Where the promisee prescribes or sanctions a manner or time of performance of a promise, then the promisor should perform the said promise accordingly.
What is the Standard of Performance?
The performance obligations are generally strict to ensure that the contractual obligations are fully and precisely performed. Some examples of the standard of performance would include obligation as described, satisfactory quality, fit the purpose, etc.
However, an exception to this rule is the de minimis rule, i.e., only minute deviations. Suppose the de minimis rule is not applied (in other words, one should exercise reasonable care and skill) in a particular situation. In that case, it constitutes a breach of contract.
How is a contract discharged?
Any of the following methods discharge a contract.
- By performance, where a contract has been performed (Section 37 to 67, 56)
- By impossibility of performance, where the contract has become impossible to perform (Section 58)
- By agreement, where contract need not be performed (Section 62 to 67) and
- By breach, the contract is discharged by breach of either party (Section 39 to 73).
Effect of refusal to accept the offer of performance
Section 38 of the Indian Contract Act states that where a promisor offers to perform any obligation, i.e., tenders to perform to the promisee. The promisee has not accepted the said offer. The promisor is not responsible for non-performance of the obligations, nor does the promisor lose his rights under the contract.
However, such an offer should fulfill the following conditions:
- The offer must be unconditional, i.e., it must be according to the terms of the contract.
- The offer must be made at such time and place that the promisee should have a reasonable opportunity to examine the promisor’s capability and willingness to perform the said promise.
- The offer is made to deliver a particular product to the promisee. The promisee should have a reasonable opportunity to examine whether the product is the same as promised to be delivered.
This section further states if that there are several joint promisees, then an offer made to one of the several joint promisees will have the same effect or consequences as an offer made to all of them.
E.g., ‘A’ enters into a contract with ‘B’ to deliver 1000 silk saree of a certain quality at his store on 1st September 2021. As per Section 38, ‘A’ must provide the product at the stipulated time and place as agreed between the parties, and ‘B’ should be given a reasonable opportunity to examine whether the product’s quality and quantity are as promised to be delivered by the promisor.
What is the Effect of Refusal of a Party to Perform a Promise?
Section 39 of the Indian Contract Act states that when a promisor refuses to perform a promise or disables itself from performing the said promise wholly or in entirety, then the promisee may either put an end to the contract, provided, the promisee has not indicated (expressly or impliedly), his willingness to continue with the contract.
E.g., ‘A’, a singer, enters into a contract with ‘B’, the manager of a hotel, to sing every Sunday night at his hotel for 2 months at a consideration of Rs 1000 show. On the 3rd week, ‘A’ wilfully absents herself from the performance. Here ‘B’ can put an end to the contract.
E.g., ‘A’, a singer, enters into a contract with ‘B’, the manager of a hotel, to sing every Sunday night at his hotel for 2 months at a consideration of Rs 1000 show. On the 3rd week, ‘A’ wilfully absents herself from the performance. However, with the permission of ‘B’, ‘A’ sings the following week. Here ‘B’ has expressly indicated his willingness to continue with the contract. Now, he cannot end the contract but can recover compensation from ‘A’ for the loss he sustained by her non-performance.
Contracts that need not be Performed (Discharge by Agreement)
- If the parties to the contract agree to substitute, rescind, or alter a new contract, then the original contract need not be performed. It is also called novation (Section 62).
- A voidable contract is rescinded, then the other party may not perform his part of the contract.
Suppose the promisee refuses or neglects to provide the promisor with reasonable facilities to perform his promise. In that case, the promisor is released from his obligation for any non-performance.
- Where the contract’s performance is illegal or unlawful or where the object or consideration of the contract is unlawful, such a contract need not be performed.
Performance of a contract is a promise to perform or offer to perform a promise by the promisor. The obligation of performance must be as per the standard prescribed. The contract gets discharged on the contract’s performance or impossibility of the performance, agreement, or contract breach. The promisee can claim damages or specific performance of the contract for the enforcement of the contract.