CA Foundation Business Laws Unit 4: Performance of Contract Notes

01Chapter Overview 02Performance of Contract 03Valid Tender 04By Whom Performed 05Succession and Assignment 06Joint Promisors and Promisees 07Time and Place 08Reciprocal Promises 09Time as Essence 10Impossibility and Frustration 11Legal and Illegal Promises 12Appropriation of Payments 13Contracts Need Not Be Performed 14Restoration and Facilities 15Discharge of Contract 16Case Law Bank 17Quick Revision

FoundationChapter Overview

Performance of contract means fulfilment of contractual obligations, either by actual performance or by a valid offer to perform.

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Core logic The chapter moves in sequence: perform the promise, offer to perform, decide who may perform, fix time/place, handle reciprocal promises, deal with impossibility, appropriate payments, and finally discharge the contract.

Complete Unit Map

“The parties to a contract must either perform, or offer to perform, their respective promises unless such performance is dispensed with or excused.” — Section 37

1. Performance of Contract (Sec. 37)

Meaning: fulfilment of contractual obligations.
Actual performance: promise is actually fulfilled.
Tender performance: promisor offers to perform but promisee refuses.

2. Conditions for a Valid Tender Performance

Must be unconditional.
Must be at proper time and place.
Must give reasonable opportunity to examine goods.
Must be for the whole obligation.

3. By Whom a Contract May Be Performed (Secs. 40, 41 & 42)

Promisor himself, if personal skill or confidence matters.
Agent, where personal consideration is not the foundation.
Legal representative, except in personal contracts.
Third person, if accepted by promisee.
Joint promisors must perform jointly.

4. Liability of Joint Promisor & Promisee (Secs. 42–45)

Joint promisors are jointly liable unless contract says otherwise.
On death, legal representatives join surviving promisors.
One promisor paying can claim contribution.
Release of one does not discharge others.
Joint promisees claim performance jointly.

5. Time, Place and Manner of Performance (Secs. 46–50): follow the contract first; otherwise use reasonable time, usual business hours, proper place and manner sanctioned by promisee.

6. Performance of Reciprocal Promises (Secs. 51–55)

Mutual and concurrent: promises performed simultaneously.
Mutual and dependent: one promise must be performed first.
Mutual and independent: each party performs without waiting for the other.
Time essential: late performance makes contract voidable.
Time not essential: contract not voidable, but compensation may be claimed.

7. Appropriation of Payments (Secs. 59–61)

By debtor: creditor must apply payment as indicated.
By creditor: if debtor is silent, creditor may choose any lawful debt due.
By law: if both are silent, oldest debt first; equal debts proportionately.

8. Contracts Which Need Not Be Performed (Secs. 62–67)

Novation, rescission or alteration by mutual consent.
Remission, waiver, extension of time or satisfaction accepted.
Rescission of voidable contract.
Promisee refuses necessary facilities.
Performance becomes illegal or impossible.

9. Novation (Sec. 62)New contract substituted for old; original need not be performed.

10. Rescission (Sec. 62)Contract cancelled by parties; performance no longer required.

11. Alteration (Sec. 62)Terms changed by mutual consent; altered contract governs.

12. Remission etc. (Sec. 63)Promisee may waive, remit, extend time or accept lesser satisfaction.

13. Restoration (Secs. 64 & 65)Benefits received under rescinded, void, or void-becoming contracts must be returned or compensated.

14. Communication of Rescission (Sec. 66)

Rescission becomes effective only when communicated in the manner required by law.

15. Refusal of Facilities (Sec. 67)

Promisee’s refusal to give access, instructions, drawings or inspection opportunity excuses the promisor to that extent.

16. Discharge of Contract

By performance, agreement, impossibility, lapse of time under the Limitation Act, operation of law or breach.

Section 37Performance of Contract

Section 37 — Obligation of Parties to Perform

The parties to a contract must either perform, or offer to perform, their respective promises, unless performance is dispensed with or excused under the Contract Act or any other law.

Performance is the fulfilment of the promise made under the contract. A promisor may discharge the obligation either by doing what was promised or by making a valid offer to do it. The law does not treat a promisor as a defaulter merely because the promisee refuses to accept a proper performance.

Type 1

Actual Performance

The party has done what he promised, within the time and manner prescribed. Example: X borrows ₹5,00,000 from Y and repays it on the due date.

Type 2

Attempted Performance / Tender

The promisor is ready and willing to perform, but the promisee refuses to accept. Example: seller brings goods at agreed place and time, but buyer refuses delivery.

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Cutter v. Powell

Complete performance and entire contract

Facts Cutter was employed as a sailor for a voyage from Jamaica to Liverpool. The contract promised him a lump-sum payment only if he served for the whole voyage. He worked for a substantial part of the journey but died before the ship reached Liverpool. His widow claimed payment for the work already done.

Issue Can payment be claimed for partial performance when the contract makes complete performance the condition for payment?

Held The claim failed. The contract was treated as an entire contract. Since the condition of completing the voyage was not fulfilled, the lump-sum wage did not become payable.

Principle and Exam Use Where the contract requires complete performance before payment, partial performance does not automatically create a right to payment. Use this under Section 37 when facts show an entire obligation and incomplete performance.

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Hoenig v. Isaacs

Substantial performance and defective work

Facts Hoenig agreed to decorate and furnish Isaacs’ flat for a lump sum. The work was mostly completed and Isaacs used the flat, but some defects remained. Isaacs tried to refuse the whole price.

Issue Does every defect allow the promisee to reject payment completely?

Held Hoenig could recover the contract price, but Isaacs could deduct the cost of correcting defects. The work was substantially performed.

Principle and Exam Use Distinguish incomplete performance from substantial performance with defects. Use this only where the promisee has accepted and used the benefit.

Attempted PerformanceValid Tender

A tender is an offer to perform. It becomes legally important when the promisor is ready to perform but the promisee refuses to accept. A valid tender protects the promisor.

Conditions of Valid Tender

Condition	Meaning	Simple Example
Unconditional	The promisor must not attach new conditions.	Offering only principal when interest is also due is not valid.
Proper time and place	Tender must be made at the agreed or reasonable time and place.	Delivery at 2 a.m. is not valid unless agreed.
Reasonable opportunity to inspect	The promisee must be able to check quality, quantity and identity of goods.	Buyer must be able to inspect whether goods match the contract.
Whole obligation	Partial tender is not valid unless accepted or agreed.	Offering 80 bales where 100 were promised is not valid tender.

Manufacturing Example

A supplier promised 1,000 machined bushes with heat-treatment certificate and inspection report. If he delivers 900 bushes without reports, it is not valid tender of the whole obligation.

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Startup v. Macdonald

Tender at proper time and manner

Facts Goods were to be delivered on a fixed day. The seller arrived very late in the evening and tendered delivery. The buyer refused to accept the goods.

Issue Is tender valid merely because it is made on the correct calendar date?

Held A tender must be made at a proper and reasonable time. A technically correct date is not enough if the time and circumstances make acceptance unreasonable.

Principle and Exam Use Use for the condition that tender must be at proper time and place and must give a real chance of acceptance or inspection.

Sections 40, 41 and 42By Whom Contract May Be Performed

The person who may perform depends on whether the promise is personal or commercial. If personal skill or confidence is the foundation, the promisor himself must perform. If not, performance may be through agents, representatives or even third persons if accepted by the promisee.

Performer	When Applicable	Legal Effect
Promisor himself	Personal skill, diligence, confidence or reputation matters.	Promise must be performed personally.
Agent	Personal consideration is not the foundation.	Competent agent may perform.
Legal representative	After death, unless contract is personal.	Liability limited to estate inherited.
Third person	Promisee accepts performance from third person.	Promisor discharged to that extent.
Joint promisors	Two or more persons make joint promise.	All must jointly perform unless contrary intention appears.

Section 40 — Personal Performance

If the nature of the contract shows that the parties intended performance by the promisor himself, the promisor must personally perform. This applies to painters, singers, doctors, consultants, artists and other skill-based obligations.

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Robinson v. Davison

Personal skill and incapacity

Facts A pianist agreed to perform at a concert. Before the concert she became seriously ill and could not perform. The organiser sued for non-performance.

Issue Can a contract based on personal skill be performed by someone else, or enforced despite illness?

Held The contract depended on the personal skill and ability of the specific performer. Illness excused performance because the foundation of the contract was personal capacity.

Principle and Exam Use Use under Section 40 for singer, artist, doctor, consultant, speaker or painter examples. Where identity and skill matter, the promisor himself must perform.

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British Waggon Co. v. Lea & Co.

Performance through agent

Facts A party undertook commercial work involving railway wagons and used another competent person to carry it out. The objection was that the original promisor had not personally performed.

Issue Must every contract be personally performed by the promisor?

Held If personal skill or personal confidence is not the foundation of the contract, performance through a competent agent or third person is valid.

Principle and Exam Use Use under Section 40 for ordinary commercial contracts where identity of performer is not material.

Section 41 — Acceptance of Performance from Third Person

Rule

When a promisee accepts performance from a third person, he cannot afterwards enforce the same promise against the original promisor to that extent.

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Hirachand Punamchand v. Temple

Third-party performance and remission

Facts Temple owed money to Hirachand Punamchand. Temple’s father paid a smaller sum to the creditor on the understanding that it would be accepted in full satisfaction of the debt. The creditor accepted the payment but later tried to recover the balance from Temple.

Issue After accepting payment from a third person as settlement, can the creditor still sue the original debtor for the balance?

Held The creditor could not recover the balance. Acceptance of third-party payment in satisfaction discharged the debtor to that extent.

Principle and Exam Use Place this under Section 41 for acceptance of third-party performance and under Section 63 for remission/acceptance of lesser satisfaction.

Legal ConceptsSuccession and Assignment

Succession and assignment both involve transfer of rights or obligations, but they operate differently.

Basis	Succession	Assignment
How it arises	By operation of law, usually death.	By act of parties.
Benefit	May pass to legal heir.	Can generally be assigned.
Burden / liability	May pass to legal representative, limited to inherited estate.	Cannot be assigned to force a new debtor on creditor.
Personal skill	Does not pass.	Cannot be assigned where personal confidence is involved.

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Exam Point A debtor cannot escape liability by assigning his obligation to another person without the creditor's consent. A creditor may generally assign the benefit of a debt unless the benefit is personal or coupled with liability.

Sections 42 to 45Joint Promisors and Joint Promisees

Section 42 — Devolution of Joint Liabilities

When two or more persons make a joint promise, all must jointly fulfil the promise unless a contrary intention appears. If one dies, his legal representative joins the surviving promisors. If all die, representatives of all must fulfil the promise jointly.

Section 43 — Any One Joint Promisor May Be Compelled

The promisee may compel any one or more joint promisors to perform the whole promise. The promisor who pays can claim contribution from the others. If one co-promisor defaults in contribution, the remaining promisors share the loss equally.

Section 44 — Release of One Joint Promisor

Release of one joint promisor does not discharge the others. The released promisor also remains liable to contribute to the other joint promisors.

Section 45 — Rights of Joint Promisees

When a promise is made to two or more promisees jointly, the right to claim performance rests with all of them jointly during their joint lives. After death, legal representatives join with survivors.

Section 42All joint promisors must jointly perform.

Section 43Promisee can recover whole from any one.

ContributionPaying promisor can recover shares.

Section 44Release of one does not release others.

Section 45Joint promisees claim jointly.

Example

A, B and C jointly promise to pay D ₹9,00,000. D may compel A alone to pay the full amount. A may then recover contribution from B and C.

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Kendall v. Hamilton

Joint promisors and contribution

Facts The dispute involved recovery of a debt from persons who were connected with a joint obligation. The case became important because older English law treated joint liability technically, sometimes creating difficulty for the creditor.

Issue How should liability be enforced when more than one person has promised the same obligation?

Held The case highlights the need to treat joint liability carefully. Indian law under Section 43 gives the promisee a stronger position by allowing recovery of the whole promise from any one or more joint promisors, unless the contract provides otherwise.

Principle and Exam Use Use for Section 43: creditor may recover from one joint promisor; the paying promisor then claims contribution from co-promisors.

Sections 46 to 50Time and Place for Performance

Sections 46 to 50 supply default rules where the contract does not completely specify time, place or manner of performance.

Section	Situation	Rule
46	No application by promisee and no time specified	Perform within reasonable time.
47	Certain day fixed and no application required	Promisor may perform during usual business hours at proper place.
48	Certain day fixed and promisee must apply	Promisee must apply at proper place and usual business hours.
49	No place fixed and no application required	Promisor must ask promisee to appoint a reasonable place.
50	Promisee prescribes or sanctions manner/time	Performance may be made in such manner or at such time.

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Practical Rule “Reasonable time” is a question of fact. It depends on nature of goods, trade practice, distance, transport, business hours and conduct of parties.

Sections 51 to 54Performance of Reciprocal Promises

Reciprocal promises are promises that form consideration for each other. Most commercial contracts are built on reciprocal promises: goods against payment, work against price, construction against instalments, security against loan.

Section	Rule	Example
51	In simultaneous promises, no party need perform unless the other is ready and willing.	Cash against delivery.
52	If order is fixed, follow it. If not fixed, follow the nature of transaction.	House must be built before payment if contract so requires.
53	If one party prevents the other from performing, contract becomes voidable at the option of the party prevented, with compensation.	Owner prevents contractor from entering site.
54	If the party who must perform first fails, he cannot demand performance from the other and must compensate.	Charterer fails to provide cargo; shipowner need not carry it.

Section 51 — Ready and Willing Rule

Where promises are to be performed simultaneously, each side must be ready and willing. A seller need not deliver goods unless the buyer is ready to pay. A buyer need not pay unless the seller is ready to deliver.

Section 52 — Order of Performance

If the contract fixes the order, that order must be followed. If the contract is silent, the order is decided from the nature of the transaction.

Section 53 — Prevention by One Party

If one party prevents the other from performing, the innocent party may avoid the contract and claim compensation.

Section 54 — Failure of First Promise

If one promise must be performed first and the promisor fails to perform it, he cannot demand performance of the reciprocal promise.

Manufacturing Example

A buyer promises to supply free-issue casting to a CNC vendor, and the vendor will machine it within 7 days. If the buyer never supplies the casting, he cannot blame the vendor for non-performance.

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Mackay v. Dick

Prevention of reciprocal performance

Facts Machinery was sold subject to testing. The buyer’s cooperation was necessary for the test, but he did not allow the test to be completed properly.

Issue Can a party rely on non-fulfilment of a condition when he himself prevented fulfilment?

Held No. A party cannot take advantage of his own prevention. If cooperation is necessary, refusal to cooperate may make the contract voidable at the option of the prevented party and may create liability for compensation.

Principle and Exam Use Use under Section 53 for site access, inspection, testing, approval, supply of drawings, raw material or any cooperation required for performance.

Section 55Time as Essence of Contract

Section 55 deals with failure to perform at or before the specified time. The legal consequence depends on whether time was intended to be the essence of the contract.

Situation	Consequence	Exam Point
Time is essence	Contract becomes voidable at option of promisee for the unperformed part.	Promisee may rescind if performance is late.
Time is not essence	Contract does not become voidable only because of delay.	Promisee can claim compensation for loss caused by delay.
Late performance accepted	Compensation for delay can be claimed only if notice is given at the time of acceptance.	Acceptance without notice may waive compensation.

Common Mistake Students write that every delay makes the contract voidable. Wrong. It becomes voidable only when time was intended to be essential.

Example

A agrees to deliver wedding decorations on the wedding date. Time is likely essential. If delivery happens after the event, the purpose is defeated. But if A agrees to deliver ordinary raw material and delay causes production loss, the contract may continue, with compensation for delay.

Section 56Impossible Acts and Frustration

Section 56 is one of the most important parts of Unit 4. It deals with agreements that are impossible from the beginning and contracts that become impossible or unlawful after formation.

1. Initial Impossibility

If the act promised is impossible in itself at the time of agreement, the agreement is void. The impossibility may be known to both parties, unknown to both, or known only to the promisor.

Type	Effect	Example
Known to both parties	No real enforceable agreement; void.	Promise to swim across the Indian Ocean within a week.
Unknown to both parties	Agreement is void.	Agreement to sell a horse already dead, both unaware.
Known only to promisor	Promisee may claim compensation if promisor knew or should have known.	Promisor agrees to sell goods he knows have already been destroyed.

2. Subsequent or Supervening Impossibility

Sometimes performance is possible when the contract is made, but later an unexpected event makes performance impossible or unlawful. The contract then becomes void from the point of impossibility.

Common Grounds of Frustration

Destruction of Subject Matter

The thing essential for performance is destroyed without fault.

Death or Personal Incapacity

In personal skill contracts, death or incapacity discharges performance.

Change in Law

Performance becomes illegal due to new law or government order.

Failure of Foundation Event

The event forming the basis of contract does not happen.

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Important Limit Mere commercial hardship, rise in cost, shortage, inconvenience or reduced profit is not frustration. The performance must become impossible, unlawful, or radically different from what was agreed.

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Taylor v. Caldwell

Frustration by destruction of subject matter

Facts A music hall was hired for concerts. Before the date of performance, the hall was accidentally destroyed by fire without fault of either party.

Issue Must the parties still perform when the very subject matter necessary for performance no longer exists?

Held The parties were discharged. The contract was based on the continued existence of the hall, and its destruction made performance impossible.

Principle and Exam Use Use under Section 56 for destruction of specific goods, venue, machinery, factory or other essential subject matter.

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Krell v. Henry

Frustration of common purpose

Facts A room was hired to view the coronation procession of King Edward VII. The procession was cancelled. The room still existed, but the event forming the basis of the contract did not happen.

Issue Can a contract be frustrated where physical performance is still possible but the foundation purpose has failed?

Held The contract was frustrated because the common foundation of the contract was viewing the procession.

Principle and Exam Use Use carefully. It applies only when the common foundation of both parties fails, not when one party’s private motive fails.

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Satyabrata Ghose v. Mugneeram Bangur & Co.

Leading Indian case on Section 56

Facts Land development was delayed because the land was requisitioned during wartime. One party argued that the contract had become impossible and therefore frustrated.

Issue Does “impossible” under Section 56 mean only literal physical impossibility?

Held The Supreme Court held that impossibility is not limited to literal physical impossibility. It may include cases where performance becomes impracticable or radically different. But mere delay, difficulty or inconvenience is not enough.

Principle and Exam Use This is the strongest Indian authority for Section 56. Use it to balance both sides: frustration is wider than physical impossibility, but narrower than commercial difficulty.

Sections 57 and 58Legal and Illegal Reciprocal Promises

Section 57 — Legal and Illegal Sets of Reciprocal Promises

If parties make reciprocal promises where the first set is legal and the second set is illegal, the legal set is valid but the illegal set is void.

Example

A agrees to sell a house to B for ₹50,00,000 and also agrees that if B uses it as a gambling house, B will pay ₹75,00,000 more. Sale of house is valid. The gambling-related promise is void.

Section 58 — Alternative Promise, One Branch Illegal

If an alternative promise has one legal branch and one illegal branch, only the legal branch can be enforced.

Example

A agrees to pay B ₹1,00,000, and B will deliver either rice or smuggled opium. The promise to deliver rice can be enforced; the opium branch is void.

Sections 59 to 61Appropriation of Payments

Appropriation means adjustment of payment against a debt. This becomes important when a debtor owes several distinct debts to the same creditor and makes a payment insufficient to clear all debts.

Section	Who Decides?	Rule
59	Debtor indicates	Creditor must apply payment to the debt indicated by debtor.
60	Debtor does not indicate	Creditor may apply payment to any lawful debt actually due and payable, even if time-barred; but not to a disputed debt.
61	Neither party appropriates	Payment is applied in order of time, oldest debt first. If debts are equal in time, proportionately.

Example

A owes B three debts: ₹10,000 from January, ₹15,000 from March and ₹20,000 from June. A pays ₹10,000 and says “adjust against March debt”. B must apply it to March debt.

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Clayton's Case

Appropriation by law — oldest debt first

Facts The case dealt with a running account where payments and withdrawals occurred over time. The court had to decide which debt was discharged first when no specific appropriation was made.

Issue If neither debtor nor creditor appropriates payment, which debt is treated as paid first?

Held Payments are applied in chronological order: the earliest debt is discharged first.

Principle and Exam Use Use under Section 61. Memory rule: debtor decides first, creditor second, law last; when law decides, oldest debt first.

Sections 62 and 63Contracts Which Need Not Be Performed

Some contracts need not be performed because the parties themselves change, cancel, replace, waive or remit the obligation.

Section 62 — Novation, Rescission and Alteration

Concept	Meaning	Effect	Student Example
Novation	Substitution of a new contract for the old contract, either by change of parties or essential terms.	Old contract is discharged; only the new arrangement is enforceable.	Old loan replaced by a fresh settlement or a new debtor accepted by the creditor.
Rescission	Cancellation of the contract by mutual consent.	Future performance is no longer required.	Buyer and seller agree to cancel a pending supply order.
Alteration	Change in contract terms by mutual consent.	Contract continues, but as altered; original terms need not be performed as first written.	Delivery date, quantity or payment schedule is changed by agreement.

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Scarf v. Jardine

Novation by substitution

Facts A business arrangement changed after a partner retired and another person continued the business. The question was whether the creditor had accepted the new arrangement in substitution of the old liability.

Issue When does a new contract replace an old one?

Held Novation requires consent of all necessary parties. There must be a clear substitution of a new contract for the old one.

Principle and Exam Use Use under Section 62 for substitution of debtor, creditor, parties, partnership liability or restructuring of contract.

Section 63 — Remission, Waiver and Extension of Time

Every promisee may dispense with or remit performance wholly or partly, extend time for performance, or accept any satisfaction he thinks fit.

Term	Meaning	Example
Waiver	Promisee gives up the right to demand performance.	Landlord waives late fee.
Remission	Promisee accepts lesser performance or lesser amount.	B accepts ₹2,00,000 in full satisfaction of ₹5,00,000 debt.
Extension of time	Promisee allows more time.	Creditor extends due date by one month.
Accord and satisfaction	Promisee accepts some other satisfaction.	Creditor accepts goods in settlement of money debt.

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Indian Position Under Section 63, remission does not require fresh consideration. This is different from the strict English rule on part payment by debtor.

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Practical Clarity Section 62 needs agreement of parties because the contract is replaced, cancelled or altered. Section 63 can operate by the promisee accepting less, extending time or waiving performance; fresh consideration is not necessary under Indian law.

Sections 64 to 67Restoration, Rescission and Facilities

Section 64 — Restoration under Voidable Contract

When a person at whose option a contract is voidable rescinds it, the other party need not perform his promises. But the rescinding party must restore any benefit received under the contract.

Example

A buys a machine under a contract induced by misrepresentation and later rescinds it. A must return the machine, and the seller must return the price received, subject to the facts.

Section 65 — Advantage under Void Agreement or Contract Becoming Void

When an agreement is discovered to be void or a contract later becomes void, any person who has received an advantage must restore it or compensate the person from whom it was received. This prevents unjust enrichment.

Section	Situation	Duty
64	Voidable contract rescinded by the party entitled to rescind	Benefits received under the contract must be restored.
65	Agreement discovered void or contract becomes void later	Advantage received must be restored or compensated.

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Fibrosa Spolka Akcyjna v. Fairbairn Lawson

Restitution after frustration

Facts A buyer paid money in advance for machinery. Due to war, performance became impossible. The buyer sought recovery of the money paid.

Issue When a contract becomes void or frustrated, can a party retain money or benefit received without giving the promised performance?

Held The advance payment was recoverable because the basis of retaining it had failed.

Principle and Exam Use Use with Section 65: when an agreement is discovered void or a contract becomes void, advantage received must be restored or compensated.

Section 66 — Communication of Rescission

Rescission of a voidable contract must be communicated in the same manner as a proposal. A party cannot silently rescind and later claim that the other party should have understood it. Revocation of rescission follows similar communication rules.

Example

If a buyer rescinds a contract due to fraud, he should clearly communicate the rescission to the seller instead of merely remaining silent.

Section 67 — Promisee Refuses Facilities

If the promisee neglects or refuses to afford reasonable facilities for performance, the promisor is excused only for the non-performance caused by such neglect or refusal. This does not excuse the promisor’s own independent delay or default.

Example

A contracts to repair B's house. B refuses to point out the damaged areas. A is excused for non-performance caused by B's refusal.

Manufacturing Example

A CNC vendor must machine components as per customer drawings. If the customer does not provide drawings, tolerances or inspection standards, the vendor is excused for delay caused by that refusal.

ConclusionDischarge of Contract

A contract is discharged when the obligations created by it come to an end. Discharge may happen by performance, agreement, impossibility, lapse of time, operation of law or breach.

Mode	Meaning	Example	Exam Note
Performance	Parties fulfil their obligations.	Goods delivered and price paid.	Actual performance is the normal completion of contract.
Attempted performance	Valid tender refused by promisee.	Seller brings goods properly; buyer refuses.	Promisor is protected if tender is unconditional, complete, timely and at proper place.
Mutual agreement	Novation, rescission, alteration or remission.	Old loan replaced by new settlement.	Section 62 covers novation/rescission/alteration; Section 63 covers remission, waiver and extension of time.
Impossibility	Performance becomes impossible or unlawful.	Specific venue destroyed by fire.	Mere difficulty, higher cost or lower profit is not enough.
Lapse of time	Legal remedy becomes time-barred under the Limitation Act, 1963.	Suit not filed within limitation period.	For ordinary contract claims, the usual period is 3 years from when the right to sue arises.
Operation of law	Death, merger, insolvency or other legal event.	Personal skill contract ends on death.	Death discharges only personal skill contracts; ordinary company contracts continue.
Breach	One party refuses or fails to perform.	Supplier refuses to deliver goods.	Innocent party may claim damages and, in proper cases, treat contract as terminated.

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Lapse of Time — Limitation Act Reference Limitation does not usually destroy the debt itself; it bars the legal remedy. For most ordinary contractual claims such as price of goods sold, unpaid invoices, money due under contract, or compensation for breach of contract, the practical exam answer is 3 years from the date the cause of action arises. Some claims, especially immovable property or mortgage-related claims, have longer periods such as 12 years depending on the article of the Limitation Act.

Business Example

Goods are supplied on 1 April 2023 with 60 days credit. Payment becomes due on 31 May 2023. The usual 3-year limitation for a money recovery suit starts from the due date, not from the order date. Written acknowledgement or part payment before expiry can give a fresh limitation period, subject to legal requirements.

CompactCase Law Bank

Case	Topic	Principle
Cutter v. Powell	Complete performance	Entire contracts may require complete performance before payment.
Hoenig v. Isaacs	Substantial performance	Substantial performance may allow payment with deduction for defects.
Startup v. Macdonald	Tender	Tender must be at proper time and in proper manner.
Robinson v. Davison	Personal skill	Personal contracts require personal performance; incapacity may discharge.
British Waggon Co. v. Lea	Agent performance	Non-personal contracts may be performed through competent agents.
Hirachand Punamchand v. Temple	Third-party payment / remission	Acceptance of third-party satisfaction may discharge debtor.
Scarf v. Jardine	Novation	New contract replaces old only with consent.
Mackay v. Dick	Prevention	No party can benefit from preventing performance.
Taylor v. Caldwell	Frustration	Destruction of essential subject matter discharges contract.
Krell v. Henry	Frustration of purpose	Failure of foundation purpose may frustrate contract.
Satyabrata Ghose v. Mugneeram Bangur	Indian frustration rule	Impossibility includes radical change, not mere difficulty.
Clayton's Case	Appropriation	If neither party appropriates, oldest debt is discharged first.
Fibrosa Case	Restitution	Benefits received under frustrated contracts may need restoration.

Exam FocusQuick Revision

One-Line Revision

Section 37: Perform or offer to perform.
Tender: Must be unconditional, timely, proper, inspectable and complete.
Section 40: Personal skill must be personally performed.
Section 41: Acceptance from third person discharges promisor to that extent.
Section 43: Promisee may recover whole from any joint promisor.
Sections 46-50: Time, place and manner depend on contract and reasonableness.
Sections 51-54: Reciprocal promises depend on readiness, order and prevention.
Section 55: Delay makes contract voidable only when time is essence.
Section 56: Impossible or unlawful performance discharges contract.
Sections 59-61: Debtor decides first, creditor second, law last.
Section 62: Novation, rescission and alteration discharge original contract.
Section 63: Promisee may waive, remit, extend time or accept satisfaction.
Sections 64-65: Benefits must be restored in rescission, void agreement or contract becoming void.
Section 67: Promisee refusing access, instructions or facilities excuses promisor only to that extent.

High-Frequency ICAI Traps

Do not treat partial delivery as valid tender unless accepted.
Do not say agent can perform personal skill contracts.
Do not say release of one joint promisor releases all.
Do not treat every delay as making contract voidable.
Do not confuse hardship with impossibility.
Do not forget notice when accepting late performance and claiming compensation.
Do not confuse novation with alteration; novation substitutes, alteration modifies.
Do not require fresh consideration for remission under Section 63.
Do not say limitation destroys the debt; it mainly bars the court remedy.

Unit 4: Performance of Contract

Contents

Conditions of Valid Tender

Section 40 — Personal Performance

Section 41 — Acceptance of Performance from Third Person

Section 42 — Devolution of Joint Liabilities

Section 43 — Any One Joint Promisor May Be Compelled

Section 44 — Release of One Joint Promisor

Section 45 — Rights of Joint Promisees

Section 51 — Ready and Willing Rule

Section 52 — Order of Performance

Section 53 — Prevention by One Party

Section 54 — Failure of First Promise

1. Initial Impossibility

2. Subsequent or Supervening Impossibility

Common Grounds of Frustration

Section 57 — Legal and Illegal Sets of Reciprocal Promises

Section 58 — Alternative Promise, One Branch Illegal

Section 62 — Novation, Rescission and Alteration

Section 63 — Remission, Waiver and Extension of Time

Section 64 — Restoration under Voidable Contract

Section 65 — Advantage under Void Agreement or Contract Becoming Void

Section 66 — Communication of Rescission

Section 67 — Promisee Refuses Facilities

One-Line Revision

High-Frequency ICAI Traps