Business and Labour Laws - MGT 611 VU

Lesson 14

PERFORMANCE OF RECIPROCAL PROMISES

Performance of Contract
Refusal by a party to perform under the contract –effect thereof: Section 39
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.

Illustrations

(a) A, a singer,-enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in
every week during the next two months, and B engages to pay her 100 rupees for each night's
performance: On the sixth night A willfully absents herself from the theater. B is at liberty to put an end
to the contract.
(b) A, a singer, enters into a contract with B, the manager of a theatre, to sign at his theatre two nights in
every week during the next two months, and B engages to pay her at the rate of 100 rupees for each
night. On the sixth night A willfully absents herself. With the assent of B, A signs on the seventh night.
B has signified his acquiescence in the continuance of the contract, and cannot now put an end, to it,
but is entitled to compensation for the damage sustained by him through A's failure to sing on the sixth
night.
(c) Mr. X a cricket player enters into contract with cricket board to play 5 tests and 4 one day international
matches as per schedule against payment of agreed amount. Mr. X willfully refuses to play in second
one day international. The cricket board has a right to put an end to the contract.

Explanation

Refusal to perform contract: As to failure in performing other particular terms of a contract, no positive
general rule can be laid down as to its effect. The question is in every case whether the conduct of the party
in default is such as to amount to an abandonment of the contract or a refusal to perform it, or having
regard to the circumstances and the nature of the transaction, to evince an intention not to be bound by the
contract. It seems, however, with great submission, that the intention which is material is not that with
which the contract is broken, but that with which it was made. Parties can undoubtedly make any term
essential or non-essential; they can provide that failure to perform it shall discharge the other party from any
further duty of performance on his party, or shall not so discharge him, but shall only entitle him to
compensation in damages for the particular breach. Omission to make the intention clear in this respect is
the cause of the difficulties, often considerable, which the Courts have to overcome in this class of cases.

It may be further observed, with regard to the illustrations, that it would be rash to extend them. In reading
the illustrations to the Act, so far as they bear on questions of construction, it must be assumed that there
are not any terms beyond those stated; the agreements tact with in practice will almost always contain
special terms, which must be considered.

There is nothing in this section to confine it to anticipatory refusals; it includes refusal to perform any
substantial part of the contract which remains to be performed. But a merely conditional refusal withdrawn
before the time for performance cannot be treated by the other party as final. It has been held the section
applies only when the contract is still executory, and the time for performance has not yet arrived. This is
effect restricts, the section to cases of anticipatory breach, or cases of continuing contracts under which
obligations remain to be performed, such as installment contracts.

Where two transactions are separate, the repudiation of one cannot affect the other.

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A buyer who has refused to receive goods on the ground that they were not tendered within the agreed time
cannot afterwards change his ground and raise the objection that in fact the goods were not according to
contract; for the election to rescind, once made, is conclusive.

It may be worth while to add that an unsuccessful attempt to perform a contract which does not disable the
promisor from still performing it effectually within the time limited, or a reasonable time, and does not
cause any damage to the promisee, cannot be treated as a refusal. Such an attempt does not itself affect the
legal rights of the parties at all.

"Disabled himself from performing"---Disability due to the party's own fault must be distinguished
from inability to perform a contract. See Specific Relief Act, S. 14, as to the effect of inability of a party to
perform the whole of his part of a contract. See also S. 24 of the same Act, which enacts, amongst other
things, that specific performance of a contract cannot be enforced in favour of a person who has become
"incapable" of performing any essential term of a contract that on his part remains to be performed.

It is very old law that if a promisor disables himself from performance, even before the time for
performance has arrived; it is equivalent to a breach.

"Promisee may put an end to the contract."---The promisee, if he pleases, may treat the notice of
intention as inoperative, and await the time when the contract is to be executed, and then hold the other
party responsible for all the consequences of non-performance; but in that case he keeps the contract alive
for the benefit of the other party as well as his own; he remains subject to all his own obligations and
liabilities under it, and enables the other party not only to complete the contract, if so advised,
notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstances
which would justify him in declining to complete it.

On the other hand, the promisee may, if he thinks proper, treat the repudiation of the other party as a
wrongful putting an end to the contract, and may at once bring his action as on a breach of it; and in such
action he will be entitled to such damages as would have arisen from the non-performance of the contract
at the appointed time, subject, however, to abatement in respect of any circumstances which may have
afforded him the means of mitigating his loss." When the promisee has so determined his choice, then,
whether he sues for damages or not, it is not open to the promisor to go back on his refusal and treat the
contract as subsisting. Similarly if he freely and with full knowledge elects not to accept the repudiation, he
cannot go back on this election, and sue before the date of performance has arrived. If the law lays down a
particular form in which repudiation must take place, it is not open to the promisee to put an end to the
contract in any other way.

Arbitration clause: ---When a contract is terminated by acceptance of the repudiation, an agreement to

refer all disputes to arbitration does not become void.

Measure of damages: ---The measure of damages for "anticipatory breach" is not necessarily the same as
it would be for a failure or refusal occurring at the time when performance was due. The injured party is
under an obligation to take, all reasonable steps to mitigate the loss flowing from the breach.

Insolvency of promisor: ---This is not of itself equivalent to a total refusal to perform the contract, though
it may be accompanied by conduct which amounts to a notice of the insolvent debtor's or his
representative's intention not to pay his debts or perform his contracts. A seller, however, is not bound to
go on delivering goods to an, insolvent buyer.

Contract of sale---Breach---Subject of contract sold away to third party---If repudiating party can
rely on arbitration clause in the contract. Where there was an agreement to sell a Textile Mill to a party
but the mill was sold to another party. The party which repudiated the contract relied on the arbitration
clause in the agreement and wanted the matter to be referred to arbitration. It was contended that as the
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contract had been repudiated and the dispute had not arisen out of the performance of the contract the
arbitration clause had ceased to be effective.

Held: The repudiating party is not prevented from invoking the arbitration clause in the contract for the
purpose of setting all questions to which his repudiation has given rise to. It is not correct to say that the
arbitration clause will be given effect in the agreement but not when the contracts ended by something with
reference to the agreement.

Breach of condition, waiving of---An insurer can waive breach of condition in writing or orally.

Cover not---Loss of goods---Responsibility of insurer---Loss occurring during course of cover note---

Insurer, held, would be responsible for such loss.

Refusal of buyer to pay contract price---Repudiation of contract---Seller may claim damages for
breach of contract without doing anything further. The price in a contract is amongst other things the
foundation of it and if a buyer refuses to pay the contracted price it is putile for him to say that he was not
repudiating the contract. Therefore the refusal of the buyers to pay the contracted price would amount to
repudiation of the, contract, entitle the sellers to put an end to it and claim damages tender the law of
contract. Once a buyer repudiated the price it would not be necessary for the seller to go about doing things
for the performance of the Contract and produce the required quantity of the goods. Upon such
repudiation they would be entitled to treat this as an anticipatory breach and put an end to the contract and
claim damages if they were so entitled.

Suit for cancellation of contract---Where may be filed. Where a contract is entered into at K but the
actual work is to be performed at R, and it is at R that one of the parties is guilty of a breach of contract, it
was contended that the other party could bring a suit for cancellation of contract and rendition of accounts
only at K.

Rescission---Repudiation of contract, held, must be total, absolute and clear.

By whom contract to be performed (Section 40):

If it appears from the nature of the case that it was the intention of the parties to any contract that any
promise contained in it should be performed by the Promisor himself, such promise must be performed by
the Promisor. In other cases, the Promisor or his representatives may employ a competent person to
perform it.

Illustration: A contract between X and Y for the sale/ purchase of goods. X being a seller is required to
deliver the goods at the agreed place and according to the time fixed for delivery against payment of the
agreed amount by Y. In case X dies before the fixed time, it is the duty of the representatives to perform
the promise or to engage some other person for the performance of the said promise.

Illustration: Mr. Aslam enters into a contract with Mr. Zaighum, a renowned painter for painting the
picture of a monument. In this case Mr. Zaighum must perform; he cannot assign this responsibility to
some other person.

Person by whom promise is to be performed---If it appears from the nature of the case that it was the
intention of the parties to any contract that any promise contained in it should be performed by the
promisor himself, such promise must be performed by the promisor. In other cases the promisor or his
representatives may employ a competent person to perform it.

Additional Illustrations

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Business and Labour Laws - MGT 611 VU
(a) A promises to pay B a sum of money. A, may perform this promise either by personally paying the
money to B, or by causing it to be paid to B by another; and, if A, dies before the time appointed
for payment, his representatives must perform the promise, or employ some proper person to do
so.
(b) A, promises to paint a picture for B, A must perform this promise personally.

Explanation

Personal contracts: ---Contracts involving the exercise of personal skill and taste, or otherwise founded on
special personal confidence between the parties, cannot be performed by deputy. But it is not always easy to
say whether a particular contract is, in this sense, personal or not, or what is an adequate performance of a
personal contract.

A contract for personal agency or other service entered into with partners is generally determined by the
death of a partner, or it may be more accurate to say that it is not held to continue with the surviving
partner unless there is something to show a distinct intention to that effect. On the other hand, a contract
with a firm which has nothing really personal about it so far as regards the partners, for example, a contract
to perform at a music-hall belonging to the firm, is not generally determined by the death of one member of
the firm, especially if the individual members of the firm were not named in the contract and not known to
the other party. Every case must really be judged on its own circumstances.

Accepting performance from third person—effect thereof (section 41)

When a Promisee accepts performance of the promise from a third person, he cannot afterwards enforce it
against the Promisor.
Example: if a consignee under the contract recovers the loss from an insurance company, he does not
have the right to sue the supplier of goods for the loss/ damages caused to him.

Concept of joint liabilities (section 42)

When two or more persons have made a joint promise, then unless a contrary intention appears by the
contract, all such persons during their joint lives, and after the death of any of them, his representative
jointly with the survivor or survivors, and after the death of last survivor, the representatives of all jointly,
must fulfill the promise.

Illustrations:

1. Mr. Aslam, Mr. Yasir and Mr. Usman jointly promise to pay Rs. 100,000 to Mr. Kamal. Mr. Kamal has a
right to demand the said amount either from Mr. Aslam or Mr. Yasir or Mr. Usman.

2. Mr. Aslam, Mr. Yasir and Mr. Usman jointly promise to pay Rs.150,000 to Mr.Omar. Mr. Usman is
compelled to pay the entire amount of Rs 150,000. Mr. Aslam has been declared insolvent by court of
law but his assets are sufficient to pay 1/3rd of the debt. Mr. Usman is entitled to receive Rs. 50,000
from the estate of Mr. Aslam and 50,000 from Mr. Yasir.

3. Mr. Aslam, Mr. Yasir and Mr. Usman have jointly promised to pay Rs. 300,000 to Mr. Omar. Mr. Aslam
is unable to pay any amount and Mr. Yasir is compelled to pay the entire amount. Mr. Yasir is entitled
to receive Rs 150,000 from Mr. Usman.

4. Mr. Aslam, Mr. Yasir and Mr. Usman have jointly promised to pay Rs. 900,000 to Mr. Omar. Mr. Aslam
and Mr. Yasir are also the sureties for Mr. Usman. Mr. Usman fails to pay then Mr. Aslam and Mr.
Yasir are compelled to pay the entire amount. Mr. Aslam and Mr. Yasir have the right to recover the
amount from Mr. Usman.

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Devolution of joint liabilities: (Sec. 42): ---When two or more persons have made a joint promise, then,
unless a contrary intention appears by the contract, all such persons, during their joint lives, and after the
death of any of them, his representative jointly with the survivor or survivors, and after the death of the last
survivor, the representatives of all jointly, must fulfill the promise.

Regarding Time of performance Section 46

Where, by the contract, a Promisor is to perform his promise without application by the Promisee, and no
time for performance is specified, the engagement must be performed within a reasonable time the question
“what is a reasonable time” is, in each particular case, a question of fact.

Time for performance of promise where no application is to be made and no time is specified: ---
Where, by the contract, a promisor is to perform his promise without application by the promisee, 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.

Engagement: ---The word "engagement" in this section is a survival from the language of the Original
draft, in which, for some reason not easy to understand, it is constantly used instead of "agreement" or
"promise." Here it is synonymous with "promise".

Reasonable time: ---It is difficult to understand why decisions should be reported on the question of what
is a reasonable time, which is declared by the Act itself to be always a question of fact; but, having been
reported, they must be mentioned.

Breach of contract (sec. 46 & 73) ---Party not bound to allow other party time to perform the
contract even when time is not the essence of the Contract---Damages. The maps printed by the
defendant under the contract were not according to specification and were rejected by the plaintiff. The
plaintiff did not allow the defendant to print fresh maps, and claimed damages.

Held; if goods are not according to specification, the buyer can reject them and that with his rejection the
contract comes to an end.

The plaintiff, therefore, had a right of repudiating the contract and no question of reprint arises.

Sale of land (sec 46) ---Time is not of the essence of the contract of sale. Ordinarily time is not of the
essence of the contract in an agreement for sale of land.

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