Every contract involves reciprocal promises and every party is bound to perform the promise made by him. It has been duly stated by section 37 of the Indian Contract Act, 1872 that the parties to a contract have a duty to perform or offer to perform, their respective promises. The performance of a contract is one of the methods of discharge of the contract. The parties to a contract have no further rights and obligations after the discharge of the contract. An offer of performance, just like an actual performance, discharges a promisor from his obligation /liabilities under a contract.
Offer of Performance/Tender
In case of an offer of performance of tender, the promisor is willing to perform the contract and offers the same, the promisee as an obligation to accept the same and in case, the promisee rejects the offer, then the promisor cannot be made liable for non-performance of the contract, nor does he lose his rights under the contract. The act of non-providing reasonable opportunities/facilities for the performance of the contract by the promisee to the promisor also excuses the promisor from the performance of the contract and the same has been upheld by section 67 of the Indian Contract Act, 1872. An offer of performance is also known as Tender. The essentials of a valid offer of performance/Tender are stated under section 38 of The Indian Contract Act, 1872.
Essentials of a Valid Offer of Performance/Tender
As stated above, the essentials of a valid tender are mentioned in section 38. These essentials are as follows:
1. The Tender must be unconditional: The tender must be unconditional. In the case of Sitaram v Ramrao, it was held that the offer of the promisor to pay only a fraction of the total sum and consideration of the part payment as full payment will amount to the imposition of a condition and thus, the tender was considered invalid. In the case of Navin Chandra v Yogendra Nath, it was held that payment by cheque is deemed to be subject to encashment and tender was considered a conditional tender and the promisee was given the right to lawfully refuse to accept the tender. Thus, the unconditional nature of tender is essential for a valid tender.
2. The Creation of the Tender at A Proper Place AND Time: Another important essential of a valid tender is the creation of the tender at a proper place and time, with the opportunity to the promisee to determine or establish the proper performance of the tender by the promisor in the future. If a place and time are determined and the contract is performed according to that place and time, then the contract is discharged, and both the parties are discharged from their obligation. The case of Demby Hamilton & Co. v Burden is important case law in this regard. In this case, a contract for the supply of 30 tons of apple juice was made. The juice was tendered, but the buyer refused to take delivery of some of the installments. This delay of acceptance of delivery made the apple juice putrid. It was subsequently held that it was the fault of the buyer for not taking the delivery of the goods when tendered, and he was made liable for compensating the seller for loss caused because of this delay.
3. The Opportunity to the Promisee to Ascertain/Establish that the Goods are in Accordance with the Contract: Another essential of a valid tender is the reasonable opportunity provided to the offeree/promisee to ascertain that the thing offered is the same thing which the promisor is bound by his promise to deliver. A similar provision is provided under Section 41(2) of the Sales of Goods Act, 1930 laying emphasis on the same point made above.
Types of Performance of the Contract
As mentioned above, it is section 37 of the Indian Contract Act, 1872 that parties to a contract have a duty to perform or offer to perform, their respective promises. Performance of a contract are of two types:
1. Actual Performance of the Contract– When, in accordance with the terms and conditions of a contract, a promisor to a contract has fulfilled his obligation, the promise is said to have been performed and discharged. Under this situation, the contract is said to be discharged and the liability of the promisor ceases to exist. For instance, X agrees to deliver 25 Kg. of basmati rice to Y’s storehouse and Y agrees to pay the price of rice on delivery. X delivers the rice on the due date at the prescribed place and Y pays X the price agreed. This is the actual performance of the contract.
2. Attempted Performance of Contract– When the performance has become due, it is sometimes sufficient if the promisor offers to perform his obligation under the contract. This offer made by the promisor is known as an attempted performance of the contract. Tender is also regarded as an attempted performance of the contract, where the promisor is willing to perform the contract and offers the same.
By whom should the contract be performed?
By whom should the contract be performed basically depends upon the nature of the contract. If the contract is based on the personal skill of the promisor, then it is the promisor who can specifically perform the contract. Whereas if the above-mentioned kind, that is, contract based on personal skill or expertise, is not there, then the contract may be performed by the agent of the promisor or the legal representatives of the promisor. The above-mentioned points have been upheld in Section 40 of the Indian Contract Act, 1872.
1. Contract to be Performed by Promisor Himself: If the nature of the contract is one which is based on the skill and expertise of the promisor such as painting, dancing, etc., then it could be done by promisor only. In case of the death of the promisor, his representatives will not be liable because of the nature of the contract. For instance, if A promises to paint a picture for B, A must perform the promise himself and in case of A’s death, A’s representatives will not be liable for the non-performance of the contract.
2. Contract to be performed by the Agent appointed by the Promisor or his Legal Representatives: When the contract is of a kind that does not involve the exercise of the personal skill or expertise of the promisor, then the promisor or his legal representatives can appoint a competent person as an agent and the agent can perform the contract on behalf of the Principal, that is, the promisor.
3. Contract to be Performed by the Representatives of the Promisor: As discussed above in case the contract is based on the personal skills, expertise, or the personal capacity of the promisor, then the death of the promisor puts an end to the contract and the representatives of the promisor are not bound by the contract. But if the contract is not based on the skills, expertise, or personal expertise of the promisor, then after the death of the promisor, the representatives of the promisor can be made bound by the conditions of the contract.
4. Contract to be Performed by the Third Party: In case of performance of the contract by the third party, the promisee must accept this condition when the contract is being made. By agreeing to the performance by a third person, the promisee is deemed to have waived his right of getting the performance personally from the promisor. In the case of Hirachand Punamchand v Temple, it was held that acceptance of a small sum from the debtor’s father in full settlement of debt given by the creditor to the debtor amounted to the wavier of right to get the debt paid back by the debtor and the debt was discharged.