PERFORMANCE OF CONTRACTS

Who must perform? Sec.37: “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.”

Representative’s Liability: Promises bind the legal representative of the deceased promisor.

Ashok promises to deliver goods to Babu on a certain day on payment of Rs.1000. Ashok dies before that day. Ashok’s representative is bound to deliver the goods to Babu who in turn is bound to pay the amount to Ashok’s representative.

Mr.A promises to paint a picture for Mr.B by a certain day, at a certain price. Mr.A dies before the day. The contract cannot be enforced either by Mr.A’s representative or by Mr.B.

What is Tender of Performance?

It is also called “offer of performance.” It is when the parties to a contract offer to perform their respective promises.

Essentials of a valid tender of performance: It must be unconditional: X offers to give

his house to Y, if Z permits. Offer is conditional, hence not a valid tender.

Offer must be made by promisor or representative.

Must be made at reasonable time & place. Offer cannot be of the part of performance.

For example, a stakeholder not bound to accept less than what is actually payable.

Promisor is bound by his promise to deliver the same thing and promisee has opportunity to examine the same.

In case of joint promises, the tender is valid. It must be made to promisee or his duly

authorized agent.

Assignment of Contracts

Under certain circumstances, parties may drop out and bring others in their places.

To ‘assign’ means ‘to transfer.’ An obligation of the party to contract may

be personal or impersonal. The contract to marry being personal in

nature cannot be assigned, whereas debts of an individual is impersonal in nature, hence assignable.

Types of Assignment

Assignment by act of parties: X owes Y Rs.1000. X cannot transfer his liability to a third person. However, if Y agrees to accept Z as his debtor in place of X, the liability can then be transferred from X to Z.

Assignment by operation of law: (i) Upon death of a party, rights & liabilities devolve upon his heirs & legal representatives. (ii) Upon insolvency, rights and obligations pass on to Assignee or Official Receiver.

DISCHARGE OF CONTRACT

It means “termination” of a contract. By discharge the rights and obligations of

the parties come to an end. How is the contract discharged? By performance; By death; By refusal to accept “offer of

performance”; By breach of contract – actual or

anticipatory breach of contract;

By impossibility of performance; Discharge by lapse of time; By promisee failing to offer facilities for

performance; By operation of law; By insolvency or bankruptcy; By merger; By unauthorized material alteration of a

contract; By agreement or by consent – by Novation, by

Accord & Satisfaction, by Waiver, by Rescission.

Novation: It is a substitution of a new for an old debt. The old debt is extinguished by the new one contracted in its stead.

It also generally means, assigning or replacing one or a series of contracts with new contracts, often with a third party replacing one of the originals.

Accord & Satisfaction: The settlement of a debt by paying less than the amount demanded in exchange for extinguishing the debt.

Waiver: Intentional relinquishment of a right, claim, or privilege.

Rescission: The act of rescinding. Rescinding means to make void; repeal or annul.

BREACH OF CONTRACTRemedies to aggrieved party

Suit for specific performance (according to terms of contract)

Suit for injunction (an order of court directing to do or refrain from doing some act)

Suit for damages, for the loss sustained Quantum Meruit (as much as earned or

deserved as far as ‘damages’ are concerned)

Types of Damages

Compensatory Damages (calculated to actually compensate)

Nominal Damages (naturally occurring)

Exemplary/Punitive/Vindictive Damages (based on feelings, sufferings, agony, etc)

Special Damages (arise due to unusual circumstances)

Rules for Ascertaining Damages

Rule – I: When a contract has been broken, party who suffers by such breach is entitled to receive, from the person who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract to be likely to result from the breach of it. Sec.73 (1)

Rule – II: Such compensation is not to be given for any remote and indirect losses or damages sustained by reason of the breach. Sec.73 (2)

Rule – III: In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.

Rule – IV: Quantum Meruit: A person can under certain circumstances claim payment for the work done or goods supplied w/o any contract or under a contract which is discharged by the breach of the other party.

In other words, a person claiming payment can be compensated for the part he has performed even if there is no contract. This is called doctrine of “Quantum Meruit.”

Here, either party may sue the other on an implied contract to pay for the work done.