Meaning and definition of performance of contract

A contract is formed for fulfillment not to breach. After the formation of a contract, the stage of fulfillment
comes before the parties. The contract is performed when both the parties do what they had agreed to
do in the contract. This is called the performance of obligations by its parties. When both the parties have
performed their respective obligations, the contract is said to be discharged by performance. This is the
most usual and expected mode of termination of contract since parties wanted to perform it at the time
of inception. Parties are bound to perform only those obligations as specified by the contract. So, they are
supposed to fulfill their respective obligations. Therefore, fulfillment of respective promises by the
concerned parties in a manner as designed in the contract without making any variation in its terms and
conditions is called the performance or execution of a contract. If one party performs his promise under
the contract, he alone is discharged from his liability and acquires the right of action against the other non-
performing party. But it is a minimum condition to take action against the other non-performing party. But
it is a minimum condition to take action against the other party that the claiming party has to perform or
is willing to perform his promise on his side. The Civil code has made provision relating to the performance
of a contract in Chapter 4 under its part 5.

The Indian Contract Act, Section 37 has laid down the following provision:

“The partis to a contract must either perform, or offer to perform their respective promises, unless such
performance is dispensed with or excused under the provisions o this Act, or of any other law.”

The importance of the performance of the contract can be mentioned as:

i. Performance promotes a good relationship between the parties.

ii. The good performance encourages the parties to further transactions.
iii. Both the parties feel greater profit and lesser loss from the consequence of performance.
iv. The parties have no further risk of disputing and invoking remedies.
v. Both the parties are standing in a winning position since they get what they want
vi. The performance opens the further opportunity of exploring new areas of transactions.
vii. The purpose of making a contract is fulfilled by the performance as expectation, and nothing
remains to do between its parties.

Types of Performance of Contract

i. Actual performance: A party to a contract is said to have actually performed his promise when
s/he has fulfilled all his/her obligations under the contract. When both the parties have
performed their respective promises, a contract is said to have been actually performed.
Actually, performance brings the contract to an end. In case of death of the promisors, the
legal representatives are bound to perform the contract.
 ii. Attempted or tender of performance: It is clear that the parties to a contract must either
perform or offer to perform their respective promises. The offer to perform is called tender of
performance. If the promise does not accept performance, the promisor is not responsible for
nonperformance. It rather entitles the promisor to sue the promise for breach of contract.
This is made clear by Section 38 of the Indian contract Act, 1872 as “where promisor has made
an offer of performance to the promise, and the offer has not been accepted, the promisor is
not responsible for nonperformance, nor does he thereby lose rights under the contract.
“Tender of Performance is further divided into two categories.
A. Tender of goods/services: It can be promised to give goods also, in a contract of sale of
goods, where the seller satisfies all requirements of a valid delivery and the buyer refuses
to accept the goods, the seller is discharged by such a tender of performance, Moreover,
he can bring an action against the other party.
B. Tender of Money: It is the duty of the debtor to find a creditor and pay the money to him.
If the creditor refuses to accept the money it does not, however, give any right to the
debtor to release him from making payment of the debt. He must be ready and willing to
pay the debt to the creditor at any time. In an action by the creditor, he can plead having
tendered the amount. The debtor is not liable for interest, damages, loss, etc.

Essentials of a Valid Tender

i. It must be unconditional: A tender becomes conditional when it is not in accordance with the
terms of the contract. So, a tender of an amount less than what is due is not a valid tender.
ii. It must be made at the proper time and place: The tender of performance should be made at
the time and place fixed by the parties, if any. If not agreed the place of business of the
promise shall be the proper place to make tender of performance.
iii. Reasonable opportunity must be given to the promise: if a tender is to give delivery of
anything, reasonable opportunity must be given to the promise to examine the goods or thing
offered to delivery, which was as promised. There is no valid tender if the things are locked in
the box and he is not allowed to open if for the purpose of the examination.
iv. Whole obligation: Tender must be with regard to the whole obligation and not only of the
part. But minor deviation from the terms of the contract may not affect the validity of the
tender.
v. Proper Person: Tender must be made to the proper person i.e. the promise or his legal agent.
A tender made to a third party would be invalid.
vi. Joint promises: In the case of joint promises, it is not necessary that the promisor should give
the offer to perform to all of them. A tender may be made to any one of them.
vii. Proper form or manner: It is necessary to make tender in the proper form. The tender of
money should be made as to the current coins. A person is not compelled to accept a cheque
but tender by cheque is valid when the person to whom it is tendered is willing to accept such
payment. It is noted that a tender of money must be (a) of the exact amount and (b) in legal
tender.

Rules regarding performance of contract

i. It may be actual or attempted: Performance of contract may be either in form of actual
performance or in form of attempted to perform. It is discussed under the types of
performance of a contract.
ii. Person bound to perform a contract (Sec. 521): Although a contract creates rights and
obligations to both parties, so they must fulfill their respective promises as prescribed in the
contract but, generally, the obligation to perform the contract falls upon the promisor firstly.
The persons who must perform the contract are as follows:-
a. Promisor (Sec. 529): It is the nature of the contract which determines the person by whom
it should be performed. If it appears from the nature that the intention of the parties was
that promise should be performed by the promisor himself then it should be performed
by him. Such contracts are usually those where the personality of the promisor is a vital
element like a contract to sing, paint, etc. Such contracts come to an end if the promisor
dies.
b. The agent (Sec. 529.1): In some cases, an agent or other persons can perform a contract.
Except for the contract of personal nature, the promisor can cause the contract to be
performed by his agent or a person appointed by him, or any other person on his behalf.
c. Heirs (sec.528): Except the contract based on the personal skills, qualifications, or interest
as regards any other contract, if the promisor dies or becomes unsound mind before
fulfilling his obligations under it, the obligations to be fulfilled on his part delivers on his
heir and such heir must perform the contract. But the liability under such a contract is
limited to the extent covered by the property received from the deceased.
d. Third person (Sec.529.3): In certain cases, promises may also be performed by a third
party. When a promise accepts the performance from a third person, he cannot afterward
enforce it against the promisor. In such cases, the contract comes to an end and the
promisor is discharged from the further liability.
e. Joint promisor (Sec.529.4): When a promise is made by two or more person jointly, it is
called a joint promise, and the promisors re known as joint promisors.
iii. Person entitled to demand to perform contract: Each party to contract is bound to fulfill his
obligations. Firstly, the promisor has to fulfill his obligations but when he fails to do so, the
promise can make an offer to perform his obligation. In addition to the promise, some other
persons are also entitled to demand the performance of the contract. They are as follows:
a. Promisee (Sec. 530.1): The promise is the person to whom a promise is made and is
entitled to demand the performance of the contract.
Example: A promise to B to sell a piece of land for Rs. 300,000/- A fails to sell the land.
Here, B has the right to enforce the promise against A.
b. Heirs (Sec.528): In the case of death or loss of sound mind of the promise, his heirs or legal
representatives can demand performance of a contract, except the contract of personal
nature.
c. Third Party (Sec.30.1):: As an exceptional case, an irreverent third party is also entitled to
demand the performance of a contract. Where the contract is made for the benefit of a
third party, he can demand the performance, even though he is not an original party to
the contract.
 d. Joint promise (Sec.530.2): There may be more than one promise in one contract. In such cases,
except when otherwise provided for in the contract they can demand the performance of a
contract.
iv. Things to be performed: The parties are bound to perform their promises as determined at
the time of the formulation of the contract. The promisor is not entitled to fulfill his obligation
by doing other things than the promise. When the party does or attempt to do a different
thing than the contract, the contract is not said to have been performed duly. Thus, the
performance of a contract is necessary to do the same thing as promised at the time of
entering into the contract.

Modes of Performance of contract

The mode of performance plays a vital role in the performance of a contract. When, how, and
where is the contract to be performed? It is determined by the contract itself. If a contract
does not mention it then the recognized rules must be applied. Therefore, the rules as to the
mode of performance are significant in this connection. These are as follows: -
i. Time and manner of performance (Sec.523): In this regard, the rules of time and
manner of performance of contract have embodied by the Civil Code as follows: -
a. Within the fixed time and manner (Sec.523.1): Where it is determined by the
contract itself, it must be performed within the time and in the manner as
determined.
b. Within and according to particular time and manner (Sec.53.2): Although the time
and manner are not determined in the contract, but if the work is required to be
accomplished at a particular time and manner, the work must be performed
accordingly, For example, in case of worship materials have been demanded in
order to sell in the Dashain festival and even though the time when the materials
are to be supplied has not been fixed in the contract, they must be supplied before
the Dashain takes place and according to a particular manner.
c. Within a reasonable time and by a reasonable manner (Sec.523.3): Where the
time and manner are not determined in the contract, the contract must be
performed within a reasonable time and by a reasonable manner. The
reasonableness depends in every particular case and it is a question of fact. It may
depend upon the special circumstance of the case, the usage of the business, the
facts of the contract, and the intention of the parties at the time of formulation
of the contact.
ii. Place of performance (Sec.524): Place is also important to the performance of a
contract. It provides a solution to the question. Where the contract is performed? The
Civil Code, 2017 has laid down the following rules in this respect:
a. At the fixed place (Sec.524.1): If the place of performance is mentioned in the
contract, the work must be accomplished at the mentioned place, No variation is
possible.
 b. At the place of store of goods (Sec.524.2): When the place to hand over or deliver
goods has not been determined in the contract, the goods must be handed over
or delivered at the place where the goods are placed or stored.
c. At a particular place (Sec. 524.3): Where the place of performance of a contract is
not determined in the contract but the nature of the contract is of such which can
be performed only at a particular place or according to the general practice and
custom or the nature of the work, such work must be performed accordingly at
the particular place.
d. At a reasonable place (Sec.524.4): If the place of performance of the contract is
not determined in the contract and it is not determined as mentioned above no.
(c ) and (d), then the reasonable place of performance is determined by the
performing party through informing other party. After the determination of the
place, the party has to perform it at such place.

Conditions of Contract need not to be performed

The contract is made by the parties to do or not to do something and the obligations of such contract must
be performed by the same person. They are bound to perform it but it is not an absolute rule and there
are some conditions where the contract need not be performed. Such conditions are mentioned under
section 527 of the Civil Code. They are as underneath:

i. In the case of relief (Sec.527.a): In the case, where the party to a contract relieves the other
party from performing his obligations wholly or partially, a contract need not be performed
by the excused party to the extent of excused.
ii. In the case of voidable contract (Sec. 527.b): A contract without the free consent o the party
is voidable at the option of such an aggrieved party. If the aggrieved party rescinds the
contract through legal action, the other party is also immune from performing the contract.
iii. In the case of breach (Sec.527.c): If one party to the contract breaches the contract, the other
party is discharged from performing his promise as a consequence of breaking off the former
party.
iv. In case of application of any legal provision (Sec.527.d): When a contract becomes
unnecessary to perform due to the application of any provisions of the law in force, the
contract need not be performed.
v. In the case of subsequent impossibility (Sec.527.e): Where a contract becomes impossible to
perform subsequently due to the changes in law or circumstances as prescribed under section
531 of the Civil Code, it is no need to further performance. The destruction of subject matter,
subsequent illegality, death, or personal incapacity may be illustrations.