Additional notes on Indian Contract Act, 1872.

Contingent contracts:-
A contingent contract is a contract to do or not to do something, if some event, collateral to such contract does or
does not happen. (s.31)
Example:- ‘A’ contracts to pay ‘B’, Rs.10,000/-, is B’s house is burnt. This is a contingent contract.
The performance of a contingent contract is made dependent upon the happening or non happening of some
event. This event on which the performance is made to depend is an event COLLATERAL to the contract, ie it does
not form part of the RECIPROCAL PROMISES which constitute the contract.

Rules regarding contingent contracts:-

-Contracts contingent upon the happening of a future uncertain event, cannot be enforced by law unless and until
that event has happened. And if, the event becomes impossible such contracts become void.(S.32)
-Contracts contingent upon the non happening of an uncertain future event can be enforced when the happening of
the event becomes impossible and not before.(S.33)
-If a contract is contingent upon as to how a person will act at an unspecified time, the event shall be considered
to become impossible when such person does anything, which renders it impossible that he should so act within
any definite time, or otherwise than under further contingencies.(S.34)
Example:- ‘A’ agrees to pay ‘B’, a sum of money if ‘B’ marries ‘C’. ‘C’ marries ’D’. The marriage of B to C must now
be considered impossible, although it is possible that D may die and C may afterwards marry B.
-Contracts contingent upon the happening of a specified event within a fixed time become void if , at
the expiration of the time fixed, such event has not happened or if, before the time fixed, such event
becomes impossible. Contracts contingent upon the Non-happening of a specified event within a fixed time may
be enforced by law when the time fixed has expired and such event has not happened, or, before the time fixed
expired, if it becomes certain that such event will not happen.(S.35 para I and II)
- Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the
impossibility of the event is known or not to the parties to the agreement at the time when it was made.( S.36)

Performance of Contracts:-
What is meant by ‘performance of a contract’?
A contract creates obligation and ‘performance of contract’ means the carrying out of these obligations. S.37 of the
Contract Act requires that the parties to a contract must either perform or offer to perform their respective
promises, UNLESS such performance is dispensed with or excused under the provisions of the contract Act or of
ANY OTHER LAW.
It may happen that the promisor offers performance of his obligation under the contract at the proper time and
place but the promisee refuses to accept the performance. This is called as the “tender” or “attempt performance”.
According to S.38 of the Contract Act, if a valid tender is made and is not accepted by the promisee, the promisor
shall not be responsible non performance nor shall he lose his rights under the contract.
A tender or offer of performance to be valid must satisfy the following conditions, namely:-
1) It must be unconditional. A tender is conditional when it is not in accordance with the terms of the contract.
2)It must be made at proper time and place, and under such circumstances that the person to whom it is made
may have a reasonable opportunity of ascertaining that the person offering to perform IS ABLE AND WILLING
THERE AND THEN to do the whole of what he is bound by his promise to do.
eg. X offers by post to pay Y the amount he owes. This is not a valid tender, as X is not able there and then to pay.
3)Since the tender is an offer to deliver anything to the promisee, the promisee must have a reasonable
Opportunity to see that the thing offered is the thing contracted for.

Who should perform?

The promise may be performed by(1) promisor himself or(2) his agent or(3) by his legal representative(in case
of death of the promisor). In case of contracts involving personal skill, it comes to an end with the death of the
promisor.
What are the contracts which need not be performed?
1) If the parties mutually agree to substitute the original contract by a new one or to rescind or alter it.(Novation)
2) If the promisee dispenses with or remits, wholly or in part the performance of the promise made to him or
extends the time for such performance or accepts any satisfaction for it.(S.63)
eg. A owes B Rs.5,000/-. C pays B Rs.3,000/- and B accepts the same, in satisfaction of his claim on A. This
payment is a discharge of the whole claim.
3) If the person, at whose option the contract is voidable, rescinds it.(S.64)
4) If the promisee neglects or refuses to afford the promisor , reasonable facilities for the performance of his
promise(S.67)

Performance of JOINT PROMISES:-

Devolution (passing of) joint liabilities:-

When two or more persons make a joint promise, the promisee may, in the absence of an express agreement
to the contrary, compel any(one or more) of such joint promisers to perform whole of the promise.(s.43)
eg. A,B and C jointly promise to pay D Rs.3,000/-. D may, compel either A or B or C or any two of them to pay him
Rs.3,000/-. Thus, in India the liability of the joint promisers is joint as well as several

Rights of contributors:- When a joint promisor has been compelled to perform the whole promise, he may compel
every other joint promisor to contribute equally with himself to the performance of his promise (unless a
contrary intention appears from the contract). If any one of the joint promisers makes default in such contribution,
the remaining joint promisers must bear the loss arising from such default in equal shares.

Release of joint promisor:-(S.44)

Where two or more persons have made a joint promise, a release of one such joint promisors by the promisee
does not discharge the other joint promisor or promisors, nor does it free him from responsibility to the other
joint promisor or promisors.

Devolution of Joint Rights(S.45)

When a person has made a promise to two or more persons jointly, then, unless a contrary intention appears from
the contract, the right to claim performance rests with all the joint promises and after the death of any of them
with the representatives of such deceased promisee jointly with the survivor or survivors and after the death of
survivors also, with the representatives of all jointly. Thus, unlike the case of joint promisors whose liability is
joint as well as several, the right of the joint promisees is only joint and thus any of them cannot enforce
performance UNLESS agreed.

TIME, PLACE, AND MANNER OF PERFORMANCE(Sections 46 to 50 and 55)

The rules laid down regarding the time, place and manner of performance are summed up here under:-
1) Where the time for performance has been specified and promisor has undertaken to perform it without
application by the promisee, the promisor must perform on the day fixed during the usual business hours and
at the place at which the promise ought to be performed.
2)But where the performance is not specified, and the promisor agreed to perform WITHOUT A DEMAND from
the promisee, the performance must be made within a reasonable time. What is a reasonable time is, in each
particular case, a question of fact.
3) Where a promise is to be performed on a certain day, and the promisor has not undertaken to perform it
without application by the promisee, the promisee must apply for performance at a proper place and within
the usual business hours. What is a proper time and place is , in each particular case, a question of fact.
4) When a promise is to be performed without application by the promisee and no place is fixed for its
performance, the promisor must apply to the promisee to appoint a reasonable place for the performance of
the promise and perform it at such place.
5) The performance of any promise may be made in any manner, or at any time which the promise prescribes or
Sanctions.
6)When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his
promise unless the promisee is ready and willing to perform his reciprocal promise.
eg. A and B contract that A shall deliver goods to B to be paid for by B on delivery.
A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for
the goods, unless A is ready and willing to deliver them on payment.
What is the effect of failure to perform at a fixed time, in contract in which time is essential?(S.55 of Contract Act)
(
When a party to a contract promises to do a certain thing/s at or before a specified time/specified times, and fails
to do any such thing at or before the specified time, the contract, or so much of it as has not been performed,
becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the
essence of the contract.

Where it was not the intention of the parties that time should be of the essence of the contract, the contract does
not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled
to compensation from the promisor for any loss occasioned to him by such failure.

What if the promisee accepts the performance done at a time other than that agreed upon?
If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the
promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim
Compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the
time of such acceptance he gives notice to the promisor of his intention to do so.

Assignment of contracts:-
Assignment means transfer. When a party to a contract transfers his right, title and interest in the contract to
another person or other persons, he is said to assign the contract. Assignment of a contract can take place by
operation of law(like in the case of insolvency the official assignee or the receiver acquires the interest in the
contract or the legal representative in case of death) or by an act of parties(like parties themselves making
assignment).

Rules regarding assignment of contracts are summarized below, namely:-

1) The obligation or liabilities under a contract cannot be assigned:-
Thus if A owes B, Rs.1,000/-, he cannot transfer his obligation to pay to C and compel B to collect his money
from C. But however, if the promisee agrees to such assignment, he will be bound by it. In such a case, a new
contract is substituted for an old one. This is called “novation”. Thus, in the above example, if B agrees to accept
payment from C, the assignment will be valid and A shall stand discharged of his obligation.
2) Rights and benefits under a contract may be assigned:-
For eg. where A owes B, Rs.1,000/-, B may assign his right to C. But even a right or benefit under a contract
cannot be assigned if it involves personal skill, ability, credit or other personal qualifications. For eg. a contract
to marry cannot be assigned.
3) The rights of a party under a contract may amount to “actionable claim” or “chose-in action”. According to
Section 3 of the Transfer of property Act, an “actionable claim” is a claim to any debt (except a secured debt)
or to any beneficial interest whether such claim or beneficial interest be existent, accruing , conditional or
contingent. Examples of such actionable claims are a) a money debt; the interest of buyer in goods in a contract
for forward delivery etc.
How an Actionable claim can be assigned?
Actionable claims can be assigned by a written document under S.130 of the Transfer of property Act. A notice of
assignment must be given to the debtor to make the assignment valid.

Appropriation of payment:-(Sections 59 to 61 of the contract Act)

Where a debtor owes several debts in respect of which the payment must be made(to the same creditor), the
question may arise as to which of the debts, the payment is to be appropriated. In England, the law on the subject
was laid down in Clayton’s case(1816).
In Clayton’s case it was decided that if the debtor owes several distinct debts to the SAME creditor and makes
payment, he has the right to request the creditor to apply the payment to the discharge of some particular debt.
If the creditor accepts the payment, he is bound by the appropriation. This principles applies to several distinct
debts and not to a single debt payable by instalments.
In India, the rules regarding appropriation of payments are contained in Sections 59 to 61 which in fact have
adopted with certain modification, the rules laid down in Clayton’s case. The provisions of these sections are
summarized below as follows, namely:-
Rule No. 1) Appropriation by Debtor:- Where a debtor owing several distinct debts to one person, makes a
payment to him with express intention that the payment is to be applied to the discharge of some particular debt,
the payment, if accepted, must be applied to that debt.(section 59)
Where, however, no express intimation is given but the payment is made under circumstances implying that it
should be appropriated to a particular debt, the payment, if accepted, must be applied to that debt.(Section 59).

Examples:-
1) A owes B, among other debts, Rs. 1,000/- upon a promissory note which falls due on the Ist June. He owes B no
other debt of that amount. On the 1st June, A pays B Rs.1,000/- the payment is to be applied to the discharge of the
promissory note.

2)A owes B, among other debts, the sum of Rs.567/-. B writes to A and demands payment of this sum. A sends to B
Rs. 567/-. This payment is to be applied to the discharge of the debt of which B had demanded payment.

Rule No.2) Appropriation by Creditor:-Where the debtor does not intimate and there are no circumstances
indicating to which debt the payment is to be applied, the creditor may apply it at his discretion for any lawful
debt actually due and payable to him from the debtor. The amount , in such a case, can be applied even to a
debt which has become ‘TIME BARRED’. However, it cannot be applied to a ‘disputed debt’.(S.60)
Example:- A obtains two loans of Rs.20,000/- and Rs.10,000/- respectively. Loan of Rs.20,000/- is guaranteed by B.
A sends the Bank, Rs. 5,000/- but does not intimate as to how it is to be appropriated towards the loans. The Bank
appropriates the whole of Rs.5,000/- to the loan of Rs. 10,000/-(the loan not guaranteed). The appropriation is
valid and cannot be questioned either by A or B.

Rule No.3)Where NEITHER party appropriates:- Where neither party makes any appropriation, the payment is to
be applied in discharge of the debts IN ORDER OF TIME INCLUDING TIME BARRED DEBTS. If such debts are of
equal standing, the payment is to applied proportionately.(Section 61).

A small additional note on Agency under Contract Act

Sub-agent:-S.190
An agent cannot delegate UNLESS a sub-agent must be employed DUE TO
a) Ordinary custom of trade or
b) from the nature of agency

S.191:- A sub-agent is a person employed by AND acting under the control of the original agent in the business of
agency.

S.192:-Representation of principal(to third persons) by sub-agent properly appointed. The principal is responsible,
so far as regards third persons and bound by the acts of the sub-agents AS IF THE SUB AGENT WERE THE
ORIGINAL AGENT.
-The agent is responsible to the principal for the acts of the sub-agent.
-The sub-agent is responsible for his acts to the Agent but NOT to the Principal EXCEPT in case of fraud or willful
wrong.

S.193:-Position in case of a sub agent appointed WITHOUT AUTHORITY:- Agent is responsible to the principal as
well as to the third parties. Principal is not represented by the sub-agent to third parties nor is he is responsible
for the acts of the sub-agent. Even sub agent is not responsible to the principal.

Substituted Agent:-S. 194:-

A person appointed by the agent under an express or implied authority from the principal to act for the
principal in the business of Agency, is called a Substituted Agent. He is an agent of the Principal(for such part of the
business of the agency) as is entrusted to him.
Eg. A directs B, his solicitor, to sell his estate by auction, and to employ an auctioneer for the purpose. B names C,
an
auctioneer , to conduct the sale. C is not a sub-agent but is A’s agent for the conduct of the sale.(bare Act Ilust)

S.195 stipulates that in selecting the substituted agent for the principal as in S.194, the agent is bound to exercise
the same amount of discretion as a MAN OF ORDINARY PRUDENCE WOULD EXERCISE IN HIS OWN CASE. And if
the agent does this, he is not responsible to the principal for the acts or negligence of the agent so selected.

S.196:- Right of person as to acts done for him without his authority-effect of ratification:-
Where acts are done by one person on behalf of another, but without his knowledge or authority, he may ELECT TO
RATIFY OR TO DISOWN such acts. If he ratifies them, the same effects will follow as if they had been performed by
his authority.
S.197 stipulates that the ratification mentioned in S.196 may be expressed or implied in the conduct of the person
on whose behalf the acts are done.
Eg. A, without authority, buys goods for B. Afterwards , B sells them to C on his own account; B’s Conduct implies a
ratification of the act of A in purchasing goods for him.
S.200 provides that the ratification of an unauthorized act cannot injure third person. An act done by one person
on behalf of another, without such other person’s authority, which, if done with authority would have the effect of
subjecting a third person to damages, or of terminating any right or interest of a third person, cannot by
ratification , be made to have such effect.
A, not being authorized thereto by B, demands, on behalf of B, the delivery of certain goods, the property of B, from
C who is in possession of it. This demand cannot be ratified by B, so as to make C liable for damages for his refusal
to deliver.(bare Act, Illust.)