Succession To Benefit Of Contract

Introduction

An agreement enforceable by law becomes a contract. A contract involves both rights and obligations because a contract is an agreement enforceable by law. An agreement involves promises from both sides and thus, there is the creation of both rights and obligations. For instance, X promises to sell his car to Y and Y promises to pay Rs. 5,00,000 for his car. There is a valid contract between X and Y. Here, the right on the part of X is to get Rs. 5,00,000 as consideration for selling his car and the obligation for X is to deliver the car to Y as consideration for Rs. 5,00,000 paid to X by Y for selling his car. Similarly, the right on the part of Y is to get the car delivered as consideration for Rs. 5,00,000 paid and the obligation for Y is to pay Rs. 5,00,000 as consideration for the car. If either X or Y fails to discharge their obligation, there will be a breach of contract. In this way, a contract leads to the creation of both rights and obligations for both parties.

Performance of Contract & Succession to Benefit of Contract 

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.

There are two kinds of performance: The Actual Performance of the Contract and The Attempted Performance of the Contract. In both cases, the contract needs to be performed by both parties in order to discharge their respective liabilities. 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, a 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.

If a party to a contract dies or becomes incapable before he/she has performed the contract that, by itself, does not put an end to the obligation and liability to perform the same. The Promisee has the right to bind the representatives of the promisor in case of the death or incapacity of that promisor before the discharge of liabilities on their part, that is, the performance of the contract, unless the contrary intention appears from the contract. The binding of the legal representatives of the promisor for the performance of the contract basically depends on the nature of the contract.

If the contract is based on the personal skills, expertise, or the personal capacity of the promisor, then the death or incapacity of the promisor puts an end to the contract and the representatives of the promisor are not bound by the contract. The case of Robinson v Davison is important case law in this regard. In this case, the defendant’s wife promised to play piano at a particular concert. She was unable to discharge her liability, that is, to play piano at the concert because of her illness. In this case, it was held that the contract was directly dependent on the good health and the personal skill of the wife of the defendant and the illness of his wife discharged the contract. It was also stated that the defendant cannot be made liable to pay compensation for the non-performance of the contract.

But if the contract is not based on the skills, expertise, or personal expertise of the promisor, then after the death or incapacity of the promisor, the representatives of the promisor can be bound by the conditions of the contract. For instance, X promises to deliver goods to Y at a certain price on a specific date after the payment of the price. X dies before the performance of the contract. In this case, Y can bind X’s representatives and X representatives are bound to deliver goods to Y, and Y is bound to pay that certain price to X’s representatives. This process of binding the representatives of the deceased/incapable party to perform the contract is known as succession. When the benefits of a contract are succeeded by a process of law, both the burden and the benefit would sometimes devolve on the legal representatives of the deceased/incapable party.
The main discussion regarding the concept of succession to benefit of contract arises because of the fact that the obligations of a promisor would bind the legal representative also (only) to the extent of the value of property inherited by them. 

In case, the promisor dies without leaving behind any legal representative, then, in that case, the liability to perform the contract on the behalf of the promisor would automatically fall upon the individual who will acquire interest over the subject matters of the contract through that deceased/incapable party. This view was stated in the case of Basant Bai v Sri Prafulla Kumar Routari. In this case, however, The Cuttack High Court held that in the present case, the plaintiff was not able to enjoy the above-mentioned legal proposition as she was unable to prove the existence of the agreement which was alleged by her.

Conclusion

From the above discussion, it is clear that the concept of succession to benefit of a contract is like a double-edged sword. On one hand, it can bind the successor, that is, the legal /representative of the promisor to the liabilities of the promisor in case of death/incapacity of the promisor before the performance of the contract. At the same time, the legal representatives of the promisors are also entitled to avail the benefits of the contract and sue the other party in case of default or breach of contract. The concept of succession to benefit of contract states that: If a party to a contract dies or becomes incapable before he/she has performed the contract that, by itself, does not put an end to the obligation and liability to perform the same. The Promisee has the right to bind the representatives of the promisor in case of the death or incapacity of that promisor before the discharge of the liabilities on their part, that is, performance of the contract, unless the contrary intention appears from the contract.

References:

  1.  The Indian Contract Act, 1872, No. 2(h) (Indian).
  2. Dr. R.K. Bangia, The Indian Contract Act, 2 (12th Edition, 2005), Allahabad Law Agency, Haryana.
  3.  Id., at 220.
  4.  The Indian Contract Act, 1872, No. 37 (Indian).
  5. Srishti Arora, Performance of a Contract – Indian Contract Act, 1872 LegalBites (Feb. 18, 2019) https://www.legalbites.in/performance-of-contract-3/#:~:text=The%20basis%20of%20a%20contract,contractual%20obligations%20by%20the%20parties.
  6. BANGIA, supra note 1, at 226.
  7. Id., at 226.
  8. Srishti, supra note 5.
  9. Robinson v Davison, (1871) L.R. Ex. 269.
  10. BANGIA, supra note 1, at 255.
  11. The Indian Contract Act, 1872, No. 37 Illustration (a) (Indian).
  12. Manish Jain, Distinction between Succession and Assignment Taxdose (Apr. 1, 2020) https://www.taxdose.com/distinction-between-succession-and-assignment/