Performance of Contracts

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 Performance of Contract

Overview

A contract legally obliges the parties to perform their mutual promises until the contract is either discharged or terminated. Performance of a contract involves fulfilling the obligations as per the terms set in the contract. Exact and complete performance by both parties results in the discharge of the contract. Courts expect performance to match the contractual obligations exactly and completely.

Key Concepts

  • Performance of Contract:
    • The fulfillment of respective obligations by both promisor and promisee.
    • Example: A buys a calculator from B. A pays, and B delivers the calculator.
  • Section 27 of the Indian Contract Act:
    • Parties must perform or offer to perform their promises unless excused by the Act or other laws.
    • Promises bind representatives in case of death unless stated otherwise.

Types of Performance

  • Actual Performance:
    • Fulfillment of contractual obligations as agreed.
    • Subdivided into Substantial and Partial Performance.
  • Substantial Performance:
    • Nearly complete performance with minor defects.
    • Payment is due minus the cost to correct the defects.
    • Applicable only if the contract is not entire and is severable.
    • Example: A delivers 10 bags of cement with minor defects; B pays minus the correction costs.
  • Partial Performance:
    • Part of the contract is performed and accepted by the other party.
    • Payment is based on the portion performed.
    • Example: A delivers 5 out of 10 promised bags of cement, and B accepts them, paying for 5 bags.
  • Attempted Performance (Tender):
    • An offer to perform obligations.
    • If the offer is refused without reason, the promisor is discharged from further liability.
    • Example: A offers to deliver rice on the due date, but B refuses without a reason.

Delivery and Law on Sales

  • Definition of Delivery:
    • Voluntary transfer of possession of goods.
  • Section 31 of the Sale of Goods Act, 1930:
    • Seller must deliver goods; buyer must pay for and accept them.
  • Section 32 of the Sale of Goods Act, 1930:
    • Delivery and payment are concurrent conditions unless agreed otherwise.

Rules for Delivery of Goods

  • Section 33:
    • Delivery is made by putting goods in the buyer's possession or an authorized person.
  • Section 34:
    • Part-delivery with intent to deliver the whole operates as full delivery.
  • Section 35:
    • Seller is not bound to deliver until the buyer applies for delivery unless agreed otherwise.
  • Section 36:
    • Delivery place and time should be as per contract terms. If not specified, delivery is at the sale location or production location.
  • Section 36 (3):
    • No delivery if goods are with a third party unless acknowledged.
  • Section 36 (4):
    • Tender of delivery should be at a reasonable hour.
  • Section 36 (5):
    • Seller bears delivery expenses unless agreed otherwise.
  • Section 37:
    • Delivery of wrong quantity allows the buyer to accept or reject the delivery partially or wholly.
  • Section 38:
    • No obligation to accept installment deliveries unless agreed.
  • Section 36 (1):
    • Delivery to a carrier is delivery to the buyer unless otherwise agreed.
  • Section 40:
    • Buyer bears liability for deterioration during transit unless agreed otherwise.
  • Section 41:
    • Buyer has the right to examine goods to ensure conformity with the contract.
  • Section 42:
    • Acceptance occurs when the buyer informs the seller, acts inconsistently with the seller's ownership, or retains goods beyond a reasonable time.
  • Section 43:
    • Buyer must inform the seller of rejection but is not bound to return rejected goods unless agreed.
  • Section 44:
    • Buyer’s failure to accept delivery makes him liable for any loss and reasonable care charges.

Important Considerations

  • Exact Performance: Courts expect the performance to match the obligations precisely.
  • Discharge of Obligations: Exact and complete performance results in the discharge of the contract.
  • Rights and Liabilities: Both parties have specific rights and liabilities regarding the performance and delivery of goods.

Understanding these points ensures that contracting parties know their obligations, rights, and the legal implications of performance and delivery in a contract.