Performance of Contract

1. Meaning of Performance of Contract

Performance of a contract refers to the act of fulfilling the obligations agreed upon by the parties. It is the execution of the promises made in the contract. Once the performance is completed, the contract is considered discharged, and the parties no longer have obligations toward each other.

  • Example: A agrees to sell 50 chairs to B at a specified price. If A delivers the chairs on time and B pays the agreed amount, the contract is performed and concluded.

Performance is the natural way to complete a contract and differs from cases where the contract ends due to breach, impossibility, or mutual consent.

2. Legal Basis (Indian Contract Act, 1872)

The rules regarding performance are mainly covered under Sections 37 to 67 of the Indian Contract Act, 1872:

  • Section 37: Obligations must be performed unless legally excused.
  • Section 38: Defines the rules for tender (offer) of performance.
  • Section 40: Explains by whom performance must be done.
  • Sections 41–67: Deal with refusal, performance by agents, joint performance, and related matters.

These sections provide a clear framework to ensure contracts are properly executed.

3. Types of Performance

(a) Actual Performance

This occurs when both parties fully carry out their contractual duties exactly as agreed.

  • Example: A promises to deliver 100 kg of rice to B on a certain date. A delivers the rice, and B pays the price. The contract is fully performed.

(b) Attempted Performance (Tender of Performance)

A tender occurs when one party is willing and ready to perform, but the other party refuses to accept it. A valid tender counts as performance in the eyes of the law.

  • Example: A offers to deliver goods to B on the agreed date, but B refuses to accept them. A’s obligation is considered discharged because he attempted performance.

Tender protects the promisor from liability when the promisee refuses to cooperate.

4. Who Must Perform the Contract (Section 40)

  1. The Promisor
    • Personal performance is required if the contract depends on specific skills or abilities.
    • Example: A agrees to paint a portrait for B. Only A can perform this contract.
  2. An Agent
    • If personal skill is not essential, performance can be delegated to a competent agent.
    • Example: A contracts to deliver goods to B. A may send an agent to deliver the goods.
  3. Legal Representatives
    • If the promisor dies, his legal representatives are generally responsible for performing the contract unless it is of a personal nature.
    • Example: A promises to pay B ₹10,000. After A’s death, his heirs must pay from his estate.

5. Who Can Demand Performance

  1. Promisee – The person to whom the promise is made.
    • Example: A contracts to deliver goods to B. B can demand delivery.
  2. Legal Representatives of the Promisee – Rights pass to heirs if the promisee dies, unless the contract is personal.
    • Example: B dies before receiving goods. His son can demand delivery.
  3. Third-Party Beneficiaries – In some contracts made for the benefit of a third party, that person may enforce performance.

6. Conditions for a Valid Tender (Section 38)

For a tender to be legally effective:

  • It must be unconditional – No strings attached.
  • Made at the proper time and place – As agreed or reasonably expected.
  • For the full obligation – Not partial performance.
  • Allow inspection – Promisee should have the opportunity to check the goods or services.
  • Made to the correct person – Promisee or authorized agent.
  • Example: A must deliver all 500 bags of wheat at the agreed time; delivering only 250 bags does not count as a valid tender.

7. Effect of Refusal to Accept Performance

  • If the promisee refuses a valid tender:
    • The promisor is discharged from the obligation to perform further.
    • The promisee cannot demand performance later, but may claim damages if refusal causes loss.
  • Example: A offers to deliver goods on the due date, but B refuses. A is no longer required to deliver, though B could face legal consequences for losses incurred.

8. Conclusion

Performance of a contract is the most straightforward way of discharging contractual obligations. It ensures that agreements are honored and that parties receive what they are entitled to. Actual performance is ideal, while tender of performance provides protection to the promisor when the promisee wrongfully refuses.

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