Discharge of Contract by Performance

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Discharge of contact:

A contract creates an obligation which continues till the contract has been discharged by actual performance. There are other modes of discharge of contract also e.g., offer to perform the promise. These are scattered in various sections of Contract Act which are explained as under:

Modes of Discharge of Contract:

Performance of the promise is the usual mode of discharge of contract, which is describe in section 37 of the contract, but there are also other modes of discharge of a contract which are mentioned in many sections viz  38,30,41,49,51, to 56,62,63 and 73.

Performance:

Performance is of two types.

  1. Actual performance
  2. Offer to performance.

Actual performance:

The parties to a contract must perform their respective promises unless the performance is dispensed with or excused under the provision of the contract.

A contract which places mutual obligations on the contracting parties cannot be treated as wholly executed until the respective obligations have been discharged. In a contract for supply of goods the contractor has to make the supplies and the other contracting party has to make payments for the said supplies and until the payments have been made the contract is not at an end, the liability arising out of a contract is still subsisting. If the contract has been wholly performed, that is to say, the supplies made and the payment received, then there is nothing outstanding and no question of any liability occurring there under arises.

A contracting party cannot rescind a contract after its performance by the other party. Thus the plaintiffs having completed their part of the contract and defendants having received the benefits out of the same, could not deny their liabilities under the contract in question.

Contract to be performed according to its terms:

Where according to the contract the vendee agreed to pay balance amount according to the desire of vendor, who was to determine for himself whether he would receive the same in local currency or in U.S dollar. Vendor demanded payment of balance amount in U.S dollar, therefore, vendee, was bound to pay the amount as desired by the vendor as per terms of contract.

Tender of performance:

Tender is a technical name for an offer of performance. This is used under English law of contracts. Section (38) deals with the offer of performance of contract which may consists.

  1. In a promisor’s attempting to fulfill a promise to do something e.g., delivery of goods in a contract of sale.
  2. In an offer of the amount of a debt due by a debtor to his creditor.

Effect of tender:

If the amount due is validly tendered to the creditor by the debtor or by his agent on debt becoming payable, the creditor is bound to accept the money. It may sometimes happen that a person who is to perform a promise has been ready and willing to perform and has already offered to perform his promise at a proper time and proper place. In such a case, a contract is discharged. It is so discharged even in the case of a wrongful refusal to accept the performance. A valid tender satisfies all the requirements of performance.

Essentials of valid tender:

To constitute valid tender, following conditions must be fulfilled.

It must be absolute:

A tender to be effective must be unconditional and of the full amount due. Incomplete or conditional tender is not equivalent to payments. If the offer is accompanied by a condition which prevents it from being perfect or complete in itself it is not equivalent to payment, and the promisee is not under obligation to accept it. A tender made under protest is not bad in law. Similarly the tender of more than what is due is also good.

Proper time and place:

It must be made at proper time and place. A tender of debt before the due date is not a valid tender and will not prevent interest from running on the loan.

Time for performance of promise where no application is to be made and no time is specified:

  1. 46 states, “where, by a contract, a promisor is to perform his promise without application by the promises, 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, a question of fact.

Time and place for performance of promise where time is specified and no application to be made, section 47 states that “when promise is to be performed on a certain day and the promisor has taken to perform it without application by the promises, 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”.

Application for performance on certain day to be at proper time and place:

Section 48 states that “when promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promise, it is the duty of the promise to apply performance at proper place within a usual hours of business.”

Explanation:

The question, what is proper time and place, is in each particular case, a question of fact.

Tender must be whole:

Tender must be of the whole and not of part only. It must be an offer of the whole payment or performance that is due unless it is provided in that contract. Tender in installment is not valid where a debtors tenders portion of the debt and asks the creditors to accept it in full satisfaction of the debt, the creditor is entitled to it.

Ability and willingness to fulfill obligation:

One of the requisites of valid tender is that the party making the tender must always be ready and willing to fulfill the obligation whenever called upon, or, as it otherwise expressed, a tender in order to be valid must be kept good in accordance with the requirements of law.

Reasonable opportunity of inspection:

A tender of money locked up in a box or of goods enclosed in a case, which the other party is not allowed to open is not sufficient to tender and the plea of tender as an answer to a action is incomplete unless accompanied by tender in court.

Place of inspection:

The natural place of inspection is the place of delivery unless such place of inspection is changed to another destination to the vendees knowledge, and inspection at that place is unsuitable or unreasonable. (AIR 1932 Cal. 879).

Tender to one of several joint Promises:

The last paragraph of this section. 38 states that a tender of performance to one of several joint promises has the same legal consequences as an offer to all of them.

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