Performance of contractLegal Environment of Business

Prepared By

Manu Melwin Joy

Assistant ProfessorIlahia School of Management Studies

Kerala, India.

Phone – 9744551114Mail – manu_melwinjoy@yahoo.com

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Definition

Performance of a contractconsists in doing or causingto be done what thepromisor has promised todo. A contract creates legalobligations. Performance ofa contract means thecarrying out of theseobligations.

Definition

When the terms of a

contract are fulfilled by the

respective parties to the

contract, performance of

contract takes place.

Example

A promises to deliver 100

bags of wheat to B and B

promises to pay Rs. One lakh

on delivery. The contract is

said to be performed when A

delivers 100 bags wheat to B

and B pays Rs. One Lakh to

him.

Who may perform the contract?

• The contract may beperformed by threecategories.

– Promisor

– Agent

– Legal representative

Who may perform the contract?

Promisor – If a contract

involves the exercise of

personal skill and

qualifications of the

promisor, then it must be

performed by the promisor

himself.

Who may perform the contract?

Agent – When the personal

skill of the promisor is not

necessary and the work could

be done by anyone, the

promisor or his representative

may employ a competent

person to perform it. He acts as

the agent of the promisor.

Who may perform the contract?

Legal representative – If the

promisor dies before the

performance of the contract,

his legal representatives like

sons and daughters who inherit

the property of the deceased

promisor are bound to perform

it.

Who can demand performance?• Naturally, it is only the promisorwho can demand performanceof the promise. It makes nodifference whether the promiseis for the benefit of the promiseor for any other person.

• In certain cases, a third partycan also enforce a promiseunder a contract even thoughhe is not a party to contract.

• In the case of death of promisor,his legal representatives candemand performance.

Example• A promises to B to pay C asum of Rs. 500. A does notpay the sum to C. C cannottake any against A. It isonly B or hisrepresentatives who canenforce this promiseagainst A since B is thepromisee.

Time and Place of performance• It is for the parties of thecontract to determine thetime and place ofperformance of contract.

• The following rulesregarding time and placeof performance of acontract are discussed inthe Contract Act.

Time and Place of performance• Where the time is not fixed– According to section 46,where the contract is to beperformed without anydemand by the promise andwhere no time forperformance is fixed, thenthe contract must beperformed within areasonable time.

Example• A borrowed certain sum ofmoney from B and Bdirected to pay the said sumto C, a third party. A alsoagreed to repay to C but Adid not fulfill his promise forthree years. It was held thatthe failure to pay theamount to C by A amountedto a breach of contract sincea period of three yearsconsidered a reasonabletime for performance.

Time and Place of performance–Where the time is fixed –According to section 46,when a promise is to beperformed on a certain dayand the promisor hasundertaken to perform itwithout application by thepromise, the promisor mayperform it at any timeduring the usual hours ofbusiness on such a day andat the place at which thepromise ought to beperformed.

Example• X promises to deliver goodsat Y’s godown on the lst ofJanuary. On that day, Xbrings the goods to Y’sgodown, but after the usualhour for closing it. Hencethe goods are not received.In this case, X has notperformed his contract intime.

Time and Place of performance– Place of performance – Ifthe contract mentions aplace, the contract must beperformed at the placementioned in the contract.If the place is notmentioned, the promisormust ask the promise to fixa reasonable place toperform the contract.

• Performance of contract.