Q.

Discuss in detail, Performance Of Contracts under section 37 of the Indian

Contracts Act, 1872. What is actual and attempted performance?

The term 'performance' means that the parties to the contract have fulfilled or carried out their
respective obligations arising out of the contract. Under S. 37 of the Act, 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 provision of this Act, or any other law.

Performance can be either actual or attempted.

ACTUAL PERFORMANCE — When each party performs his obligations

exactly in the same manner in which it was intended in the contract. This brings
the contract to an end. After that, no claim would remain of one party against
another; this is known as actual performance.

ATTEMPTED PERFORMANCE — It may happen that the promisor offers

performance of his obligation under the contract at the proper time and place;
however, the promise refuses to accept the performance. This is known as ‘tender’
or ‘attempted performance’. It is then for the promisee to accept the performance.
If he does not accept, the promisor is not responsible for non-performance, nor
does he thereby lose his rights under the contract. Thus, a tender of performance
is equivalent to performance.

A tender or offer of performance to be valid should satisfy the following conditions:

a) It must be unconditional. For example, a tender of an amount less than what is due under the
contract is not an effective tender.
b) It must be created at a proper time and place, and under such circumstances that the person to
whom it's created could have a reasonable opportunity of ascertaining that the person by whom
it's created is able and willing to try and do the whole of what he's bound by his promise to do.
c) It must be made to the proper person.
d) It must be in relation to the whole of the obligations as contained under the contract.

Effect of refusal of party to perform promise wholly (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.
(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 theatre. B is at
liberty to put an end to the contract.

Effect of accepting performance from a third person. (Section 41)

When a promisee accepts performance of the promise from a third person, he cannot afterwards
enforce it against the promisor.

Q. What are the rules regarding Performance of Contracts as laid down by S.

46 to S. 50 of the Act?

1. Performance of a promise within a reasonable time (Section 46):

When no specific time is mentioned in the contract, the promisor must perform the
promise within a reasonable time without needing a request from the promisee. What
constitutes "reasonable time" depends on the facts and circumstances of each case. This
ensures that the absence of a specified time does not render the contract invalid or
uncertain.
2. Performance of a promise where time is specified (Section 47):
If the contract specifies the time for performance, the promisor must fulfill the promise
on that particular day during usual business hours and at the agreed location. Performance
outside these conditions, such as delivering goods after business hours, is not valid. For
example, if A promises to deliver goods to B's warehouse on January 1, but arrives after
the warehouse has closed, A's performance is invalid.
3. Performance of a promise on application by the promisee (Section 48):
In cases where the time for performance is specified, but the promisor is not required to
act without a request from the promisee, it is the responsibility of the promisee to make
 an application for performance. The request must be made at a proper location and within
the usual business hours to ensure the promisor can fulfill their obligation.
4. Performance where no place is specified and no application is needed (Section 49):
If no specific place is mentioned in the contract and the promisor is required to perform
without a request from the promisee, the promisor must ask the promisee to determine a
reasonable place for performance. The promise must then be performed at that place as
agreed.
5. Performance in the manner and time prescribed by the promisee (Section 50):
If the promisee prescribes how and when the promise should be performed, the promisor
must perform accordingly. Once the promisor complies with the prescribed manner and
time, they are discharged from their liability under the contract.
6. Time as the essence of the contract:
The importance of time in a contract depends on its nature and the parties' intentions:
1. Explicit agreement: Time is treated as essential if the parties have expressly agreed so.
2. Injury from delay: If a delay in performance causes harm to the promisee, time is
considered essential.
3. Nature of the contract: In mercantile contracts, where goods' prices fluctuate, timely
delivery is critical, and time is presumed essential. However, in the sale of immovable
property, time is generally not regarded as essential unless explicitly stated.

Consequences of failing to meet time obligations (Section 55):

If time is essential to the contract and the promisor fails to perform within the stipulated time, the
contract becomes voidable at the promisee's option, allowing them to cancel it. If time is not
essential, failure to perform on time does not void the contract, but the promisee can claim
damages for the delay. For instance, in mercantile contracts, timely delivery of goods is critical,
while for immovable property, delay might not void the contract unless explicitly agreed upon.
Q. What is Discharge of Contracts? What are the modes of discharge of
contracts?

Discharge of a contract refers to the termination of the contractual relationship between the
parties. It happens when the rights and obligations created by the contract come to an end,
effectively extinguishing the parties' responsibilities under the agreement.

Modes of Discharge of a Contract

There are several modes by which a contract can be discharged. The various modes of discharge
are:

1. Discharge by Performance
2. Discharge by Mutual Agreement
3. Discharge by Lapse of Time
4. Discharge by Operation of Law
5. Discharge by Breach
6. Discharge by Impossibility

1.2.1 Discharge by Performance

A contract is discharged by performance when each party fulfills their respective obligations
under the contract. There are two main types of performance:

● Actual Performance: This occurs when both parties fulfill their contractual obligations
completely. In this case, no party remains liable under the contract, and the contract is
considered fully discharged.
● Attempted Performance (or Tender of Performance): This occurs when a promisor offers
to perform their obligation under the contract but the promisee refuses to accept the
performance. Even though performance is offered, the contract is not discharged by
tender if the promisee does not accept the performance. This type of discharge is dealt
 with under Section 38 of the Indian Contract Act, which will be discussed later.

1.2.2 Discharge by Mutual Agreement

A contract can also be discharged by mutual agreement between the parties. There are several
ways through which this can occur:

● Novation (Section 62): Novation is the substitution of a new contract for the original
contract. The new contract replaces the old one, and the discharge of the original contract
serves as consideration for the new one. Novation can take place in two situations:
1. Between the same parties, where the terms of the contract are altered, or
2. Between different parties, where the terms may or may not remain the same.
● For novation to be valid, the following conditions must be satisfied:
1. All parties must consent to novation.
2. The novation must take place before any breach of the original contract.
3. The new contract must be valid and enforceable.
● Rescission (Section 62): Rescission refers to the cancellation of the contract by mutual
consent of all parties. If a party wishes to terminate the contract, they can do so by
rescinding it.
● Alteration (Section 62): Alteration refers to changing one or more of the terms of the
contract with the mutual consent of the parties. In this case, the parties involved in the
contract remain the same, but the terms are modified.
● Remission (Section 63): Remission means the acceptance of a lesser amount or a partial
performance than what was originally agreed upon in the contract. No fresh consideration
is required for remission, and the promisee may waive part of the performance or extend
the time for performance.
Remission occurs when a promisee:
1. Dispenses with the full performance of a promise (wholly or partly),
2. Extends the time for performance due by the promisor,
3. Accepts a lesser sum instead of the agreed amount, or
4. Accepts any other consideration in place of the original one.
 ● Waiver: Waiver refers to the voluntary relinquishment or abandonment of a right under
the contract.

1.2.3 Discharge by Lapse of Time

A contract is discharged if it is not performed or enforced within a specified period, known as the
period of limitation. The Limitation Act, 1963 prescribes different periods for different types of
contracts. For example, the period of limitation for recovering a debt is 3 years, while for the
recovery of immovable property, it is 12 years. After the expiry of the limitation period, the
contractual parties can no longer enforce their rights under the contract.

1.2.4 Discharge by Operation of Law

A contract may be discharged by operation of law in various circumstances:

● By Death of the Promisor: If the contract involves the personal skill or ability of the
promisor, it is discharged upon their death. For example, if A, a professional singer,
enters into a contract to perform at an event, and A dies, the contract is discharged due to
A’s death, as performance is impossible without A.
● By Insolvency: If a person is declared insolvent, they are discharged from liability for
obligations incurred up to the date of their insolvency.
● By Unauthorized Alteration: If any party makes a material alteration in the terms of the
contract without the consent of the other party, the contract is discharged. Material
alterations could include changes in the price or quantity of goods without mutual
agreement.
● By Merger (Identity of Promisor and Promisee): If the identity of the promisor and
promisee merges (i.e., the promisor becomes the promisee), the contract is discharged.

1.2.5 Discharge by Breach

A contract can also be discharged by breach, which occurs when one party fails to perform their
obligations or makes it impossible for the other party to perform their obligations. Breach can
occur in two ways:

● Actual Breach: This happens when the breach occurs either at the time when performance
is due or during the performance.
● Anticipatory Breach: This happens when one party renounces the contract before the due
date of performance or makes the performance impossible. The non-breaching party can
either:
1. Sue for damages immediately after the repudiation, or
2. Wait until the time for performance arrives and then sue for breach. If the
promisee waits, the contract remains in effect for both parties, and the promisor
may still perform the contract.

1.2.6 Discharge by Impossibility

A contract may be discharged if its performance becomes impossible. Impossibility can be

categorized into two types:

● Initial Impossibility: This refers to situations where the performance of the contract was
impossible right from the beginning. Such a contract is void under Section 56 of the
Indian Contract Act.
● Subsequent Impossibility: Sometimes, a contract is initially possible to perform, but due
to unforeseen events, it becomes impossible or unlawful to perform later on. Such
contracts are also void under Section 56.
○ Example: If a building under construction collapses due to an earthquake, making
the contract for its completion impossible, the contract is discharged due to
subsequent impossibility.
Q. What are the types of damages under the Indian Contracts Act, 1872?

Damages refer to the monetary compensation awarded to an injured party when the other party
fails to perform their obligations under the contract. The main purpose of awarding damages is to
compensate the injured party for the loss or harm caused by the breach of contract and to restore
them, as far as possible, to the position they would have been in had the contract been fully
performed.

1. Ordinary Damages

Ordinary damages, also known as general or compensatory damages, are awarded to compensate
for losses that naturally arise in the normal course of events from the breach of contract. These
are the losses that both parties would have foreseen at the time the contract was made as likely to
result from a breach. They do not cover remote or indirect losses, which would be deemed too
distant or speculative.
In Hadley vs. Baxendale, the claimant lost profit due to the delayed return of a crankshaft.
However, the court ruled that the defendant was not liable for the lost profits because the
defendant was not informed that the mill would be closed during the delay. Only the ordinary
damages were awarded for the direct loss caused by the delay, not the indirect loss of profits.

2. Special Damages

Special damages are awarded for losses that result from special circumstances specific to the
injured party. These losses are beyond what would be expected in the ordinary course of things
and arise from unique conditions that were communicated to the other party when the contract
was made. If the other party is aware of these special circumstances, they are responsible for the
resulting loss if the contract is not performed as expected.
In Simpson v. London & North Western Railway, the plaintiff had specifically told the railway
company that the delivery of goods must reach a particular destination by a certain time to be
exhibited at an event. The delay caused the plaintiff a loss of profit from the event, and the
railway company was held liable for the special damages, as it was aware of the specific
circumstances.
3. Vindictive or Exemplary Damages

Vindictive damages, also called exemplary damages, are awarded in exceptional cases where the
breach of contract not only causes financial loss but also results in significant emotional distress,
mental agony, or disappointment. These damages are intended to punish the breaching party and
deter them from similar actions in the future. They go beyond the usual compensation for
financial loss and focus on compensating for non-financial harm.

4. Nominal Damages

Nominal damages are awarded when a breach of contract has occurred, but the injured party has
not suffered any significant financial loss. These damages are symbolic, meant to establish that a
legal wrong has been committed, even if no substantial damage resulted. The amount awarded is
usually very small, often just a token sum such as a rupee or even less. Nominal damages are
more about recognizing the breach of the contract rather than compensating for loss.

Q. What is Breach of Contract? What are the remedies available under

Breach of Contracts as per the Act?

A breach of contract occurs when one party either renounces their obligations under the
contract, makes it impossible to perform their obligations, or fails to perform their obligations
either partially or fully. The breach may be either anticipatory or present:

● Anticipatory Breach: Occurs when one party notifies the other party in advance of their
intention not to perform their contractual obligations.
● Present Breach: Occurs when one party fails to perform their obligations at the time the
performance is due.

When a breach of contract happens, it leads to the infringement of the rights of the
non-breaching party. In such cases, the non-breaching party is entitled to a remedy to restore
their rights and seek reimbursement for the losses incurred. This is encapsulated by the Latin
maxim: "Ubi jus, ibi remedium" ("Where there is a right, there is a remedy"). Remedies for
breach of contract aim to restore the injured party to the position they would have been in if the
contract had been performed properly.

A remedy refers to the means by which a legal right is enforced or satisfied by a court when
harm or injury, which society recognizes as a wrongful act, is inflicted upon an individual.
Remedies aim to correct the legal wrong and ensure the injured party is compensated or restored.
In contract law, remedies generally involve actions or processes that enforce the contract or
address the breach.

1. Suit for Rescission of Contract (Section 39)

A suit for rescission of the contract is one of the remedies for breach, where the aggrieved party
seeks to cancel the contract and free themselves from any further obligations under it. This is
typically sought when the breach is significant enough to invalidate the contract, such as in cases
of fraud, misrepresentation, or failure to perform essential terms.

● Section 39 of the Indian Contract Act allows a party to rescind the contract if the other
party has committed a breach, either partial or total.
● A party may seek rescission when the breach goes to the root of the contract.

2. Suit for Damages (Sections 73 and 74)

Damages are a form of monetary compensation awarded to the aggrieved party for the loss
suffered due to the breach. The Indian Contract Act distinguishes between ordinary damages
(compensation for general loss) and special damages(compensation for specific losses arising
from special circumstances communicated to the other party).

● Section 73 provides that the party suffering from the breach is entitled to receive
compensation for any loss or damage caused by the breach, which naturally arose from
the breach or was within the contemplation of both parties at the time of making the
contract.
 ● Section 74 provides for liquidated damages (where a specific amount is agreed upon for
breach) or compensation for loss suffered, even if the actual damage may not be easy to
ascertain.

Damages under the Indian Contract Act:

● Ordinary (General) Damages: Compensation for losses that arise naturally from the
breach.
● Special Damages: Compensation for losses arising from special circumstances that were
known to both parties when the contract was made.
● Liquidated Damages: A pre-agreed sum specified in the contract for breach.
● Exemplary (Punitive) Damages: Awarded in cases where the breach involves bad faith,
or where the party’s conduct is outrageous.

3. Suit for Specific Performance (Section 10)

Specific performance is a remedy that requires the party in breach to perform the specific
obligations under the contract rather than simply paying damages. This remedy is typically
granted when the contract involves unique goods, property, or services, and damages would not
be an adequate remedy.

● Section 10 allows a party to seek specific performance of the contract, provided the
contract is:
○ Not for personal services.
○ Not related to contracts involving a continuous duty that would be difficult to
enforce.

Specific performance is not available in every case and is usually granted when the subject
matter of the contract is unique and damages would not suffice as compensation.

4. Suit for Injunction (Section 37)

An injunction is an order of the court that restrains a party from doing something that constitutes
a breach of the contract, or compels them to do something that is part of their obligation. It is
often sought in cases where there is a threat of future breach or where damages would not be an
effective remedy.

● Section 37 deals with contracts where the parties may seek an injunction to prevent or
compel performance of a contractual obligation, especially where the act to be restrained
or compelled is specific in nature and not capable of being adequately compensated by
money.

5. Suit for Quantum Meruit

A suit for quantum meruit (meaning "as much as he has earned") is an equitable remedy
available when part of the contract has been performed, but the other party breaches the contract
before full performance. Under this remedy, the injured party may claim compensation for the
work already done or services rendered.

● The remedy of quantum meruit is invoked when there is no existing contract (or a
contract is void) but services have been rendered or goods delivered, for which the
aggrieved party can claim compensation.
● It is governed by the principle that a person should not be unjustly enriched at the
expense of another.

6. Suit for Restitution (Section 64)

Restitution aims to restore the injured party to the position they were in before the contract was
made. If a contract is rescinded due to a breach, the aggrieved party may seek restitution to
return any benefits received from the contract.

● Section 64 of the Indian Contract Act provides that when a contract is rescinded, any
benefit conferred must be restored, and if a party has received anything by way of
performance, it must be returned.
● This remedy ensures that a party does not unjustly retain a benefit when the contract has
been voided or rescinded.