Performance of Contract and Circumstances in Which a Contract Need Not Be Performed
Meaning of Performance of Contract
Performance of a contract means the fulfillment or carrying out of the promises made by the parties to the contract. When the parties perform their respective obligations according to the terms of the contract, the contract is said to be performed.
Under the Indian Contract Act, 1872, the parties to a contract are required to either perform or offer to perform (tender) their respective promises, unless such performance is legally excused.
Example
A agrees to sell 100 bags of rice to B for ₹2,00,000. A delivers the rice and B pays the agreed price. Both parties have performed their contractual obligations.
Circumstances in Which a Contract Need Not Be Performed
Although contracts generally create an obligation to perform, the law recognizes certain circumstances in which the parties are discharged from the obligation to perform.
1. Mutual Agreement
The parties may mutually agree to cancel, alter, or replace the original contract.
Example:
A owes B ₹50,000. Both agree that A will instead provide goods worth ₹50,000. The original obligation may be discharged according to their new agreement.
This includes concepts such as novation, rescission, and alteration under the Contract Act.
2. Impossibility of Performance
If performance becomes impossible because of an event beyond the control of the parties, the contract may be discharged.
Example:
A agrees to perform at a particular theatre, but the theatre is destroyed by fire before the performance. Performance may become impossible.
This is commonly associated with Section 56 of the Indian Contract Act, 1872.
3. Operation of Law
A contract may be discharged by operation of law in circumstances recognized by law.
Examples include:
- Death in contracts involving personal skill or services.
- Insolvency in appropriate circumstances.
- Merger of rights.
- Material alteration of a contract without proper authority.
4. Lapse of Time
If a party does not enforce a contractual right within the period prescribed by the Limitation Act, the remedy may become barred by limitation.
Thus, after the expiry of the legally prescribed limitation period, a party may not be able to enforce the contractual obligation through a court.
5. Breach of Contract
When one party refuses to perform the contract or fails to perform its promise as required, it may constitute a breach of contract.
Example:
A agrees to deliver goods to B on 10 October but refuses to deliver them without lawful justification. A may be liable for breach.
The innocent party may have remedies such as damages, subject to the applicable law and circumstances.
6. Remission or Waiver by the Promisee
Under Section 63, the promisee may:
- dispense with or remit performance,
- extend the time for performance, or
- accept a different satisfaction instead of the original promise.
Example:
A owes B ₹20,000. B agrees to accept ₹15,000 in full satisfaction of the debt. Subject to Section 63, the promisee’s remission can discharge the original obligation.
7. Rescission of Contract
Where a contract is validly rescinded, the parties are discharged from future performance of their contractual obligations, subject to the consequences prescribed by law.
Example:
If a contract is rescinded according to law because of a valid ground, the parties are no longer required to continue performing the contract.
8. Failure of a Contingent Event
In a contingent contract, performance may depend upon the happening or non-happening of a particular uncertain event.
If the event on which the contract depends becomes impossible or does not occur in circumstances covered by the Contract Act, the parties may no longer be required to perform.
Difference Between Performance and Discharge
Basis Performance Discharge Meaning Fulfilment of contractual promises Ending of contractual obligations Result Contractual duties are fulfilled Parties are released from their duties Example Seller delivers goods and buyer pays Contract is cancelled by mutual agreement
Conclusion
Performance of contract means fulfilling the promises and obligations undertaken by the parties. However, a contract need not be performed when the obligation has been legally discharged—for example, through mutual agreement, impossibility of performance, operation of law, lapse of limitation, breach, remission, or valid rescission. Thus, the law balances the principle that contracts should be performed with situations where continuing performance is no longer legally required.
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