Performance of Contract

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.

Definition

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 the act, or 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 in the contract.Thus, it is the primary duty of each contracting party to either
perform or offer to perform its promise.

Types of Performance

Actual performance

When a promisor has made an offer of performance to the promisee and the offer has been accepted
by the promisee, it is called an actual promisee. The contractual obligations are actually performed
whereby the liability of a party under the contract comes to an end.

Attempted performance or tender of performance

Where the promisor has made an offer of performance to the promisee, and the offer has not been
accepted by the promisee, it is called an attempted performance [Section 38]. Such refusal to accept
offer of performance by promisee discharges the party from its liability and from its performance.

Offer of Performance/Tender

The essentials of a valid offer of performance are stated under Section 38 of the Indian
Contract Act, 1872:

• The offer should be unconditional.

• If the offer to the offeree is such as to deliver some goods addressed to the offeree, then it
is the duty of the offeror to provide reasonable time to the offeree in which he can ascertain
that the goods offered to him is the same by which the offeror is bound under the terms of
the contract.

Rules Regarding Time and Place of Performance of Contract

• Time for performance of promise, where no application is to be made and no time is

Where a promisor has to perform his promise without application by the promisee and no time is
specified for performance, the engagement or promise must be performed within a reasonable time.

• Time and place for performance of promise, where time is specified and no
application to be made (Section 47):

When a promise is to be performed on a certain day without application by the promisee, the
promisor may perform at any time during the usual working hours on such a day.

• Application for performance on a certain day to be at proper time and place (Section
48):

When a promise is to be performed on a certain day the promisor may undertake to perform it after
the application by the promisee to that effect. In such a case it is the duty of the promisee to apply
for performance at a proper place and time within usual business hours.

• Place for the performance of promise, where no application to be made and no place
fixed for performance (Section 49):

When a promise is to be performed without application by the promisee and no place is fixed for
the performance, it is the duty of the promisor to apply to the promisee to appoint a reasonable
place for the performance of the promise and perform the promise at such place.
 • Performance in manner or at the time prescribed or sanctioned by the
promisee(Section 50):

The performance of any promise may be made in any manner or at any time which the promisee
prescribes or sanctions. A contract can also exist in which the promisor agrees to perform the
contract in a manner and at a place and time prescribed by the promisee.

By Whom must Contracts be Performed?

Section 40 of the Contract Act, 1872 contains provisions regarding the performance of the contract.
The section provides that if by the terms of the contract it appears that the intention of the parties
to the contract was such that any promise contained in it must essentially be performed by the
promisor himself and no other person on his behalf can perform his promise.

In all the other contracts the terms of which do not indicate any similar intention then in the absence
of the promisor for the performance of the promise any other competent person can perform the
promise on his behalf.

Effect of Refusal of Party to Perform Promise

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.

Promisee– Stranger can’t demand performance of the contract.

Legal Representative– In case of death of the promisee, the legal representative can demand
performance unless a contrary intention appears from the contract, or the contract is of personal
nature.

Third party– A third party can also demand performance of the contract in some exceptional cases
like beneficiary in case of trust, the person for whose benefit the provision is made in a family
arrangement. This is an exception to the doctrine that a stranger to a contract cannot enforce a
contract.
Joint Promisee- In case of several promises, unless a contrary intention appears from the contract,
the following persons must perform the promise-

In case all the promisee are alive- All the promisee jointly can demand performance.

In case of death of any of the joint promisees- Representatives of deceased promisee jointly with
the surviving promisee can demand performance of promise.

In case of death of all joint promisee- Representatives of all of them jointly can demand
performance of the promise.

Who can demand Performance?

1. Promisee: As per the general rule, only the promisee can demand the performance of a
promise under a contract. Even the third party cannot demand a promise even though the
promise is made for his benefit. For example, X promises Y to give ₹1,000 to Z. In this
case, only Y can demand performance from X. Here, Z cannot demand performance from
X, even though the contract is for his benefit.

2. Legal Representative: In a case where the promisee has died, the legal representative of the
promisee can demand performance, unless a conflicting intention appears from the contract
or where the contract is personal. For example, K agrees to marry L. However, before the
marriage takes place, K dies. Since it is a contract of a personal nature, the legal
representative of K cannot demand the performance of the promise from L.

3. Third Party: In some rare cases, the third party can also demand the performance of the
contract. Although he is not a party to the original contract, he is a stranger to a contract.

4. Joint Promisees: Where a person has made a promise to two or more persons jointly, then
the performance of the promise may be demanded either:By all the promisees jointly; or In
case of the death of any of the joint promisees, the representatives of such deceased person
 jointly with the surviving promisees, or In the event of the death of all joint promisees,
representatives of all of them jointly.

So, the rights of joint promisees are only joint, and any of them cannot demand performance unless
it was agreed in the contract. For example, X took a loan from Y and Z, and he promised Y and Z
jointly to repay them ₹5,000 plus interest on a specified day. Y dies and now the right to claim
performance rests with Y’s representative jointly with Z. After Z’s death, it would lie with the
representatives of Y and Z jointly.

By whom are Contracts to be Performed?

1. Promisor: In a case where, from the nature of the contract, it prima facie appears that the
intention of the parties at the time of entering the contract was that the promise should be
performed by the promisor himself, then such a promise must be performed by the promisor
himself. The performer is required to perform the contract himself, usually when the
performance involves personal skill, taste, or artwork. For example, A promises to cook
tiramisu for B. As this promise involves the personal cooking skills of A, it must be
performed by A only.

2. Promisor or His Agent: When the contract does not require the involvement of the personal
skill of the promisor, the contract could be performed by the promisor or by any other
competent person on behalf of the promisor. For example, X promises to pay Y a sum of
money. X may perform this promise either by paying the money personally to Y or by
causing it to be paid to Y by his authorized agent. In both cases, the performance will be
fulfilled.

3. Legal Representative: When the contract does not involve any personal skill or taste, such
a contract may be performed by his legal representative after the death of the promisor.
Such performance will have the same effect as it is performed by the promisor. For
example, X promises to deliver goods to Y on a certain day on payment of ₹5,000. X dies
 before the said day. X's legal representatives are liable to deliver the goods to Y, and Y is
bound to pay ₹5,000 to X’s representatives. However, in a case where the contract involves
some personal skill or taste, the parties will be excused from performance in the event of
the death of the promisor.

4. Performance by a Third Person: In some cases, a contract may also be performed by a third
person, provided that the promisee accepts such an arrangement. According to Section 41
of the act, once the promisee accepts the performance from a third person, he cannot
compel the promisor to perform the contract again, as the performance by the third person
will have the same effect as if it were done by the promisor. For example, X took a loan of
₹5,000 from Y. Z pays on behalf of X. Now, as Z has paid Y the loan amount and Y has
accepted this arrangement, he further can’t demand the amount from X.