Executive Summary:

In this report, elements of Performance of Contract were explained with

reference to business law. This study starts with the definition of performance of
contract. It mentions two types of contracts: a) single promise contract; and b)
joint promise contract. Further, people who are responsible for the execution of
the contract and those who having the authority to demand the performance of
contract are discussed. The assignment of contract is further described by
mentioning the participants involved in the assignment as well as its procedure.
After that, it points out the requirements for an effective assignment.
Performance of reciprocal contract is discussed. Performance of reciprocal
contract and the significance of time (which is the essence of contract) is cited.
Later, we discuss the circumstances of appropriation of payments along with the
description of contracts that don’t need to be performed. Each aspect of
performance of contract in this reported is supported by adequate examples in
addition to the law cases.
 PERFORMANCE OF CONTRACT

INTRODUCTION:

A contract places a legal obligation upon the contracting parties to perform their mutual
promises, and it carries on until the discharge or termination of the contract. The most natural
and usual mode of discharging a contract is to perform it. A person who performs a contract in
accordance with its terms is discharged from any further obligations. As a rule, such
performance entitles him to receive the other party’s performance. Exact and complete
performance by both the parties puts an end to the contract. In expecting exact performance, the
courts mean that, performance must match contractual obligations. In requiring a
contract to be complete, the law is merely saying that any work undertaken must be carried out
to the end of the obligations.

A contract should be performed at the time specified and at the place agreed upon.
When this has been accomplished, the parties are discharged automatically and the contract is
discharged eventually. There are, however, many other ways in which a discharge may be
brought about. For example, it may result from an excuse for non-performance. In certain cases
attempted performance may also operate as a substitute for actual performance, and can result
in complete discharge of the contract.

Definition
The term “Performance of contract” means that both, the promisor and the promisee have
fulfilled their respective obligations, which the contract placed upon them. For instance, A visits
a stationery shop to buy a calculator. The shopkeeper delivers the calculator and A pays the
price.
Case # 1:
Cutter v Powell [1795] EWHC KB J13
The claimant's husband agreed by contract to act as a second mate on the ship the 'Governor
Parry' on a return voyage to Jamaica. The voyage was to take eight weeks and he was to be paid
on completion. A term in the contract stated:
"Ten days after the ship 'Governor Parry,' myself master, arrives at Liverpool, I promise to pay to
Mr. T. Cutter the sum of thirty guineas, provided he proceeds, continues and does his duty as
second mate in the said ship from hence to the port of Liverpool. Kingston, July 31st, 1793."
Six weeks into the voyage the claimant's husband died. The claimant sought to claim a sum to
represent the six weeks work undertaken.
Held: The wife's action failed. Payment was on condition that he worked the ship to Liverpool,
since he did not fulfill this condition the widow was entitled to nothing.
Case # 2
Ritchie v Atkinson (1808) 10 East 295
By contract the claimant agreed to carry a cargo of specified quantity of hemp and iron. The
price agreed was £5 per ton for the hemp and 5 shillings per ton of iron. The claimant only
carried a part of the agreed quantity. The defendant argued the contract had not been fully
performed and therefore no payment was due.
Held: The contract could be divided into separate parts as the parties had agreed a price per
ton. The claimant was thus entitled to payment for the amount carried although the defendant
was entitled to damages for non performance in relation to the amount not carried.

DEMAND FOR PERFORMANCE (SINGLE PROMISE)

1. The promisee:
The promisee is primarily the person who can demand the performance of the promise,
according to the terms of the contract, irrespective of the fact that the promisee is to benefit the
promise or any other person.
For example: Amar promises Akbar to pay Rs 500 to Anthony. Amar does not pay the sum to
Anthony. Here Anthony cannot bind Amar for the payment. It is only Akbar who can demand
the performance and not Anthony.

2. The legal representative:

In case of death of the promisee before the performance of an impersonal contract, the
contractual rights may pass to the legal representative and such a person may demand the
performance of the contract.

3. Third Party:
In certain cases even third person can demand performance of the promise. Such is generally
seen in cases where the beneficiary claims the performance of the promise.
For Example in case of contracts regarding insurance the legal assignee of the deceased person
can claim from the insurance company.
PERFORMANCE OF THE CONTRACT (SINGLE PROMISE)
1. By the promisor himself:
In the case of a contract involving personal skill, taste or credit, e.g., a contract to paint a
picture, a contract of agency or service; the promisor must himself fulfill the contract. Section 40
states thus, "if it appears from the nature of the case that it was the intention of the parties to
any contract that any promise contained in it should be fulfilled by the promisor himself, such
promise must be performed by the promisor."
Illustration: A promises to paint a picture for B. A must fulfill this promise personally
[Illustration (b) to Section 40].
2. By the promisor or his agent:
In the case of a contract of impersonal nature; e.g., a contract of sale of goods or a contract to
lend a sum of money; the promisor himself or his agent may fulfill the contract [Section 40
Clause (2)].
Illustration: A promises to pay B a sum of money. A may fulfill this promise, either by personally
paying the money to B or by causing it to be paid to B by another [illustration (a) to Section 401].
3. By the legal representatives:
In case of the death of the promisor before performance, the liability of performance falls on his
legal representatives, unless a contrary intention appears from the contract [Section 37]. Thus,
in the case of contracts involving personal skill, the heir or legal representatives of a deceased
promisor are not bound to perform the contract. Such contracts come to an end on the death of
the promisor.
The rule of law is: "a personal cause of action comes to an end with the death of the person
concerned." In the case of contracts not involving personal considerations, the legal
representatives are bound to fulfill the contract. But their liability is limited to the estate of the
deceased which has come to their hands, in case of breach of contract. They are not personally
liable.
Illustrations:
(a) A promises to paint a picture for B by a certain day at a certain price. A dies before the day.
The contract cannot be enforced either by A's representatives or by B.
(b) A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that
day. A's representatives are bound to deliver the goods to B, and B is bound to pay the Rs. 1,000
to A's representatives.
 4. Performance by a third person:
Section 41 lays down that if a promisee accepts performance of the promise from a third person,
he cannot afterwards enforce it against the promisor. Thus, where a promisee accepted lesser
amount from a third party in full satisfaction of his claim, it was held that he cannot enforce the
promisee against the promisor (Lala Kapurchand vs Mir Nawab Azamjah). Notice that under
this Section performance of the promise by a stranger, once accepted by the promisee,
discharges the promisor, although the latter has neither authorized nor ratified the act of the
third party.

PERFORMANCE OF A JOINT PROMISE

A joint promise is where more than one person has become a party to the agreement on the
either side i.e. as promisors or as promises. So there may be joint promisors or joint promises or
both in a joint promise. For instance, A, B & C may jointly purchase goods from D on credit. The
three persons shall be joint promisors to pay to D.

But if A owes B money; A can repay the money personally or cause the money to be replayed to B
through another person or associate of A. And if A dies before the fulfillment of the promise, the
next of kin or the family of A or a pre-appointed person must repay the money back to B. “When
a promisee accepts performance of the promise from a third person, he cannot afterwards
enforce it against the promisor"

PERFORMANCE OF CONTRACT (JOINT PROMISE):

Performance of Contract means the fulfillment of legal obligations created under the contract by
both the promisor and the promise. When a Contract is duly performed by both the parties to
the contract, the contract comes to an end.
1. All promisors:
When two or more persons have jointly entered into into a contract with one or more persons
then all joint promisors need to perform their promise together or if any one of the person dies
then his legal representative must fulfill the promise.
Example: A,B & C owe 10,000 to D. All three need to jointly perform their obligations. If C dies,
then legal representations of C are liable to pay the money along with A & B.
2. Any One of Promisor
 When two or more persons make a joint promise, the promisee may, in the absence of
express agreement to the contrary, compel any one or more of such joint promisors to
perform the whole of the promise.
Example:
 A, B and C jointly promise to pay D 3,000. D may compel either A or B or C to pay him
3,000
3. Demand of Contribution:
If one of the joint, Promisors is compelled to perform the whole contract, he can ask for equal
contribution to the others, unless a contrary intention appears from the contract.
Example:
 If A is compelled to pay the entire amount of Rs.3000 he can recover from B and C
Rs.1000 each.
4. Default In Contribution
When a joint promisor fails to make his contribution the other joint promisor will have to share
this loss equally even if there was a ratio to divide the main liability.
Example:
 If A is compelled to pay the whole Rs.3000 and C is unable to pay anything. A is entitled
to receive Rs.1500 from B. If C’s estate is able to pay one half of his share, A is entitled to
receive Rs.500 from C’s estate and Rs.1250 form B.
5. Release Of Promisor
Where two or more persons have made a joint promise, a release of one of such joint promisors
by the promisee does not discharge the other joint promisor or joint promisor neither does it
free the joint promisors so released from responsibility to the other joint promisor or joint
promisors.
Example:
 A,B and C took a joint loan from D for Rs 30,000 and decided to share equally. D releases
A from his liability and sues B and C for payment. Here, neither B nor C is released from
their liability to D. Also A is liable to B & C for contribution. Thus, B & C can claim R5000
each for A.

ASSIGNMENT OF CONTRACT:
An assignment of contract occurs when one party to an existing contract (the "assignor") hands
off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor
wants the assignee to step into his shoes and assume all of his contractual obligations and rights.
A party can also assign only the benefits of the contract, and retain the obligations. This is called
an assignment of rights. Assignments involve at least three parties. These parties are the
assignee, the assignor, and the obligor. In order to do that, the other party to the contract
must be properly notified.
It encompasses the transfer of rights held by one party—the assignor—to another party—
the assignee. It can also be a transfer of a benefit, including an equitable interest, according to
established rules (at Common Law or in Equity). The rights may be vested or contingent. The
details of the assignment determine some additional rights and liabilities (or duties).
For example, let's say that I sell my TV to Red for $2,000. Red doesn't have $2,000 right now,
so he executes an agreement to pay me $100 a month for the next 20 months. I owe Green
$1,000, so after the first 10 months I assign this contract to Green. I am the assignor, Green is
the assignee, and Red is the obligor.

Assignee
The assignee is the party that receives the rights and obligations under the contract, but
wasn't an original party to the contract. An assignee usually receives the contract rights and
obligations directly from an original party to the contract. An assignee can be an individual, a
group, or a business.
An assignee can be assigned anything. This includes such things as real property, real estate,
and intellectual property. The benefit can be something tangible, like an antique clock, or
something intangible, like life insurance benefits.
Generally, after a valid assignment, all the rights and obligations of the assignor pass to the
assignee. The assignee steps into the shoes of the assignor. The assignee is now responsible for
fulfilling any remaining obligations under the contract, and the assignee will reap the benefits of
the contract. The assignee won't be required to go through the assignor when asserting legal
rights under the contract. This means that the assignee can generally sue the other party to the
contract if that party doesn't fulfill the contract.
For instance, let's say Red stops making payments. Green can sue Red for the payments. Green
doesn't have to ask me first, or ask me to do it for him.

Assignor
An assignor can be an individual, a group, or a business. The assignor is the party that
transfers its contractual rights to another party. In a contract assignment, this means that the
assignor transfers both the contractual obligations and the contractual benefits. In an
assignment of rights, this means that the assignor transfers just the contractual benefits. In
either situation, the assignor transfers to the assignee.
In our scenario, I assign my right to receive payments to Green. I am the assignor.
The assignee steps into the shoes of the assignor, but this doesn't mean that the assignor then
walks away with no obligations or liabilities. An assignment doesn't always completely relieve
the assignor. Some contracts include an assurance that the original parties guarantee contract
performance. This means that the original parties will fulfill the terms of the contract. So, if the
assignee fails to perform the contract, the assignor must step back in and do so. Also, remember
that an assignment can be only an assignment of rights. In that case, the assignor retains the
obligations of the contract even though the assignee reaps the benefits.
For example, let's say I haven't delivered the TV to Red yet. I told him he had to pay for it in full
before I'd deliver it. If Red completes his payments to Green, then I still have the obligation to
deliver the TV to Red.

Obligor
An obligor is a party that is obligated to do something under the terms of a contract. An
obligor can be an individual, a group, or a business. You might be familiar with the term 'obligor'
because it's often used to describe a 'borrower' or a 'debtor'. This is because many contracts are
debt contracts. In our scenario, Red is a debtor. But obligors can be obligated to duties other
than repaying debt. Obligors can be obligated to perform a particular task or to refrain from a
particular activity.
Whenever we have an obligor, we will have an obligee. An obligee is the party who will benefit
from the obligor's fulfillment of the contract. If the assignment is made to profit another party,
then that party is the obligee. In our scenario, Green is the obligee. It's common for the obligee
to also be the assignee.

Procedure
The assignment does not necessarily have to be in writing; however, the assignment agreement
must show intent to transfer rights. The effect of a valid assignment is to extinguish privity (in
other words, contractual relationship, including right to sue) between the assignor and the third-
party obligor and create privity between the obligor and the assignee.

1. Assignment by Act of Parties:

Assignment of rights under a contract is the complete transfer of the rights to receive the
benefits accruing to one of the parties to that contract. For example, if Party A contracts with
Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the
contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is
the obligee/assignor, Party B is an obligor, and Party C is the assignee. Such an assignment may
be donative (essentially given as a gift), or it may be contractually exchanged for consideration.
It is important to note, however, that Party C is not a third party beneficiary, because the
contract itself was not made for the purpose of benefitting Party C. When an assignment is
made, the assignment always takes place after the original contract was formed. An Assignment
only transfers the rights/benefits to a new owner. The obligations remain with the previous
owner.
Contractual Liabilities:
The rules for assigning contractual liabilities are:
The general rule applicable to assignments of choses in action is that an assignment, unless
there is a contract to the contrary, carries with it all securities held by the assignor as collateral
to the claim and all rights incidental thereto and vests in the assignee the equitable title to such
collateral securities and incidental rights. An unqualified assignment of a contract or chose in
action, however, with no indication of the intent of the parties, vests in the assignee the assigned
contract or chose and all rights and remedies incidental thereto.
More examples: In Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist.
1998), the court held that the assignee of a party to a subordination agreement is entitled to the
benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno, 99 Fla.
887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates
no different or other liability of the owner to the assignee than that which existed from the
owner to the assignor.
And note that even though an assignment vests in the assignee all rights, remedies, and
contingent benefits which are incidental to the thing assigned, those which are personal to the
assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc., 519 N.E.2d
153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only
be provided to X, X cannot assign that right to Y.
Therefore, Section 40 states that any contract that is subject to the realization of ability or talent
of the person involved; such a contract cannot be assigned by any party.
Similarly, the transfer of assignor’s own promise is not eligible that if an assignment of contract
occurs the contract must not be subject to the transfer of owes of the assignor itself.
Contractual Rights:
Generally, the law allows the assignment of a contractual right unless the substitution of rights
would materially change the duty of the obligor, materially increase the burden or risk imposed
on the obligor by the contract, materially impair the chance of obtaining return performance, or
materially reduce the value of the performance to the obligor.
If the contract specifically precludes assignment, the contractual right is not assignable.
Whether a contract is assignable is a matter of contractual intent and one must look to the
language used by the parties to discern that intent.
In the absence of an express provision to the contrary, the rights and duties under a bilateral
executory contract that does not involve personal skill, trust, or confidence may be assigned
without the consent of the other party. But note that an assignment is invalid if it would
materially alter the other party’s duties and responsibilities. Once an assignment is effective, the
assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a
valid assignment, the assignor’s right to performance is extinguished, transferred to assignee,
and the assignee possesses the same rights, benefits, and remedies assignor once possessed.
Unless the contractual agreement states otherwise, the assignee typically does not receive
greater rights than the assignor, and the assignor may remain liable to the original counterparty
for the performance of the contract. The assignor often delegates duties in addition to rights to
the assignee, but the assignor may remain ultimately responsible.
The power of the contract to restrict assignment is broad. Usually, contractual provisions that
restrict assignment of the contract without the consent of the obligor are valid and enforceable,
even when there is statutory authorization for the assignment. The restriction of the power to
assign is often ineffective unless the restriction is expressly and precisely stated. Anti-
assignment clauses are effective only if they contain clear, unambiguous language of
prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction
between the assignee and assignor. Thus, any assignment of contractual rights is bound to be in
writing and with the consent of all concerned parties.
Case:
Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a
contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a
proposed sublease. The Supreme Court noted that the contract specifically gave Shoney’s the
right, in its sole discretion, to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would
indeed be judged by a commercial-reasonableness standard. But, the supreme court said,
“[w]here the parties to a contract use language that is inconsistent with a commercial-
reasonableness standard, the terms of such contract will not be altered by an implied covenant
of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be
construed as written.”
2. Assignment by Operation of Law:
Transfers by operation of law are generally considered involuntary transfers. They include court-
ordered property transfers, bankruptcy-related transfers, and transfers to or from an executor or
an administrator.

The phrase "by operation of law" is a legal term that indicates that a right or liability has been
created for a party, irrespective of the intent of that party, because it is dictated by existing legal
principles. For example, if a person dies without a will, his or her heirs are determined by
operation of law. Similarly, if a person marries or has a child after his or her will has been
executed, the law writes this pretermitted spouse or pretermitted heir into the will if no
provision for this situation was specifically included. Adverse possession, in which title to land
passes because non-owners have occupied it for a certain period of time, is another important
right that vests by operation of law.

Events that occur by operation of law do so because courts have determined over time that the
rights thus created or transferred represent what the intent of the party would have been, had
they thought about the situation in advance; or because the results fulfilled the settled
expectations of parties with respect to their property; or because legal instruments of title
provide for these transfers to occur automatically on certain named contingencies.

Rights that arise by operation of law often arise by design of certain contingencies set forth in a
legal instrument. If a life estate is created in a tract of land, and the person by whose life the
estate is measured dies, title to the property reverts to the original grantor – or, possibly, to the
grantor's legal heirs – by operation of law. Nothing needs to be put in writing to affirm that this
will happen. Joint tenants with rights of survivorship create a similar situation. Joint tenants
with rights of survivorship deeds are always taken in equal shares, and when one joint tenant
dies, the other tenants equally acquire title by virtue of the terms of the conveyance itself, by
operation of law.

Rights or liabilities created by operation of law can also be created involuntarily, because a
contingency occurs for which a party has failed to plan (e.g. failure to write a will); or because a
specific condition exists for a set period of time (e.g. adverse possession of property or creation
of an easement; failure of a court to rule on a motion within a certain period automatically
defeating the motion; failure of a party to act on a filed complaint within a certain time causing
dismissal of the case); or because an existing legal relationship is invalidated, but the parties to
that relationship still require a mechanism to distribute their rights (e.g. under the Uniform
Commercial Code, where a contract for which both parties have performed partially is voided,
the court will create a new contract based on the performance that has actually been rendered
and containing reasonable terms to accommodate the expectations of the parties).
Because title to property that arises by operation of law is usually contingent upon proof of
certain contingencies, and title records may not contain evidence of those contingencies, legal
proceedings are sometimes required to turn title that arises by operation of law into marketable
title.
Thus, the clauses subject to assignment by operation of law are death and insolvency of the
parties for which rights and liabilities are transferred to the assignee by law.
CASE: Court of Appeal case highlights important issues relating to assignments.

Bell Gully
United Kingdom May 21 2013
A recent Court of Appeal decision (Kakara Estate Ltd v Savvy Vineyards 3552 Ltd [2013] NZCA
101) highlights how important it is for parties to be aware of all of the legal consequences of a
unilateral assignment of an agreement. The decision also demonstrates the risks of relying on a
party's conduct to argue that a contract has been novated and not assigned.
The facts of the case and the issues under consideration
In this case, the appellants (Kakara and Weta) were parties to identical management and supply
agreements with Goldridge. Goldridge 'transferred' the agreements with Kakara and Weta to two
separate related companies (Savvy 3552 and Savvy 4334). The 'transfers' did not require the
consent of Kakara or Weta as the Savvy companies were permitted assignees as related
companies of Goldridge. However, Goldridge purported to treat the 'transfers' to the Savvy
companies not as assignments under the terms of the agreements, but as novations under which
the respective Savvy company was to substitute Goldridge as a party to the relevant agreement.
Goldridge argued that this was evidenced in a 'deed of novation' (signed by both Goldridge and
Savvy 3552) which was sent to Kakara for execution but was never acknowledged or executed by
Kakara, and Kakara's subsequent dealings with Savvy 3552.
The issues before the Court of Appeal arose because Kakara and Weta wanted to rely on
Goldridge's subsequent liquidation (which had occurred 15 months after it had 'transferred' the
agreements to the Savvy companies) as a ground for issuing termination notices under the
management and supply agreements. Kakara and Weta had to show that:
 there was no novation of the relevant agreements; and
 under the terms of the original agreements, Goldridge, as an original contracting party,
remained as a 'party' to the respective agreements in addition to the Savvy companies for
the purposes of the termination provisions.
The Court of Appeal's decision
Were the transfers novations or assignments?
A novation is a transaction that creates a new contract that is substituted for the original
contract. The court confirmed that, to be effective, a novation requires:
 the consent of all parties (that is, the original parties, and the new party), which may be
inferred from conduct and need not be express; and
 consideration (which may be in the form of mutual promises).
On the facts, the High Court had found that Kakara's conduct following the receipt of the deed of
novation had amounted to consent to the novation. However, Kakara argued that its consent to
the novation could not be properly inferred from the factors relied on by the High Court given
that its conduct could be construed as being consistent with both a novation and a simple
assignment.
The Court of Appeal agreed, particularly in light of the contractual framework set by Goldridge
and Savvy 3552 through the presentation of the deed of novation to Kakara for execution.
The court noted that the orthodox position is that "where a party has declined to execute a
written contract sent to it by the other party, the normal inference is that the declining party did
not [intend] to be bound, unless there was clear evidence to the contrary". It went on to note
that "a party that chose not to execute an agreement has a strong argument that it should not be
bound to that very agreement because of its later conduct".
The court disagreed with the significance the High Court placed on Kakara's failure to sign the
deed of novation but not inform Goldridge that it regarded Goldridge still as a party to the
agreements. Unlike the High Court, the Court of Appeal saw this as evidence that Kakara, when
asked to accept the novation, did not do so. The Court of Appeal also did not consider that the
fact that Saavy 3552 was a member of the Goldridge corporate group and not an "outsider"
lowered the bar of what is required for a novation. The only conduct the court considered as
having relevance to the High Court's finding was the fact that Kakara had issued notices to Savvy
3552 to remedy defaults under the agreements after it had received the deed of novation. The
notices were formal legal agreements prepared by lawyers and referred to Kakara and Savvy
3552 as "the present parties" without reference to Goldridge. However, ultimately the court did
not see the features of the notices as sufficient to constitute agreement to the deed of novation
and concluded that Goldridge had not been substituted as a party to the agreements under a
novation.
Did Goldridge remain as a party to the agreements for the purposes of the termination clauses?
The termination clauses in the agreements provided that "either party" had the right to
terminate the agreements if the "other party" was placed in liquidation.
Savvy 3552 argued that the reference to 'party' in these clauses was limited to the "active" parties
under the agreement, namely Kakara and Savvy 3552. It argued that for the court to hold that
the assignor remained as a party to the agreements would lead to an outcome that "flouts
business common sense" noting that "it would be absurd if the liquidation of the [assignor]
could give rise to a right of termination".
However, the court held that there was nothing in the original supply and management
agreements that revealed an intention to create an exception to the general rule that
assignments do not remove the assignor as a contracting party. The wording of the
interpretation clauses in the respective agreements provided that "assigns" were included in
addition to, and not in substitution for, the original named parties. The court noted that if it was
intended that references to 'party' in the agreement were to have excluded the 'assignor', the
assignment clause would have provided for full substitution of the assignor by the assignee.
As a result, the court was in agreement with the High Court that the interpretation clause did
not limit the class of parties to only the successors or assigns, or to the currently "active" parties.
The Court of Appeal issued a declaration in favour of Kakara and Weta that their notices of
termination were valid.

Requirements for an effective assignment

For assignment to be effective, it must occur in the present. No specific language is required to
make such an assignment, but the assignor must make some clear statement of intent to assign
clearly identified contractual rights to the assignee. A promise to assign in the future has no legal
effect. Although this prevents a party from assigning the benefits of a contract that has not yet
been made, a court of equity may enforce such an assignment where an established economic
relationship between the assignor and the assignee raised an expectation that the assignee
would indeed form the appropriate contract in the future.

A contract may contain a non-assignment clause, which prohibits the assignment of specific
rights and some various rights, or of the entire contract, to another. However, such a clause does
not necessarily destroy the power of either party to make an assignment. Instead, it merely gives
the other party the ability to sue for breach of contract if such an assignment is made. However,
an assignment of a contract containing such a clause will be ineffective if the assignee knows of
the non-assignment clause, or if the non-assignment clause specifies that "all assignments are
void".

RECIPROCAL CONTRACT

Performance of Reciprocal Promises

Promisor not bound to perform, unless reciprocal promisee ready and willing to perform. -
(Section 51) When a contract consists of reciprocal promises to be simultaneously performed,
no promisor need perform his promise unless the promisee is ready and willing to perform his
reciprocal promise.

Section 52 states that where the order in which reciprocal promises are to be performed is
expressly fixed by the contract, they shall be performed in that order; and where the order is not
expressly fixed by the contract, they shall be performed in that order which the nature of the
transaction requires.

Section 53 states that when a contract contains reciprocal promises, and one party to the
contract prevents the other from performing his promise, the contract becomes voidable at the
option of the party so prevented; and he is entitled to compen-sation1 from the other party for
any loss which he may sustain in consequence of the non-performance of the contract.

Effect of default as to that promise which should be first performed, in contract consisting of
reciprocal promises (Section 54) When a contract consists of reciprocal promises, such that
one of them cannot be performed, or that its performance cannot be claimed till the other has
been per¬formed, and the promisor of the promise last mentioned fails to perform it, such
promisor cannot claim the performance of the reciprocal promise, and must make compensation
to the other party to the contract for any loss which such other party may sustain by the non-
performance of the contract.

Effect of failure to perform at fixed time, in contract in which time is essential.- (Section 55)
When a party to contract promises to do a certain thing at or before a specified time, or certain
things at or before specified times, and fails to do any such thing at or before the specified times,
the contract, or so much of it as has not beer performed becomes voidable at the option of the
promisee, if the intention of the parties was that time should be of the essence of the contract.

Effect of such failure when time is not essential.- If it was not the intention of the parties that
time should be of the essence of the contract, the contract does not become voidable by the
failure to do such thing at or before the specified time; but the promisee is entitled to
compensation from the promisor for any loss occasioned to him by such failure.

Effect of acceptance of performance at time other than that agreed upon.- If, in case of a contract
voidable on account of the promisor’s failure to perform his promise at the time agreed, the
promisee accepts performance of such promise at any time other than that agreed, promisee
cannot claim compensation for any loss occasioned by the non-performance of the promise at
the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his
intention to do so.

Section 56 states that an agreement to do impossible act in itself is void.

A contract to do an act which, after the contract is made, becomes impossible, or, by reason of
some event which the promisor could not prevent, unlawful, becomes void when the act
becomes impossible or unlawful. Where one person has promised to do something which he
knew, or, with reasonable diligence, might have known, and which the promisee did not know,
to be impossible or unlawful, such promisor must make compensation to such promisee for any
loss which such promisee sustains through the non-performance of the promise.

Section 57 - Reciprocal promise to do things legal, and also other things illegal.- Where
persons reciprocally promise, firstly to do certain things which are legal, and, secondly, under
specified circumstances, to do certain other things which are illegal, the first set of promises is a
contract, but the second is a void agreement.

Section 58- Alternative promise, one branch being illegal.- In the case of an alternative
promise, one branch of which is legal and the other illegal, the legal branch alone can be
enforced.

Case law: Reciprocal Promise

I.C.M. Airport Technics vs International Airport Authority

3 January, 2006
The plea of the respondent before the Arbitrator was that in view of certain conditions contained
in the contract between the parties, no amount was payable to the petitioner on account of
hindrance in the execution of work for any reason whatsoever. The contract also provided that if
for reasons beyond the control of the respondent including for preparation of site, there was any
requirement, the delivery date could be suitably amended.

The Arbitrator has analysed the terms and conditions of the contract and has come to the
conclusion that a distinction must be made between a hindrance in the execution of the work
and the handing over of site to the petitioner for execution of the work at the very inception of
the contract. The petitioner could not be expected to complete the work in time if there was
delay on the part of the respondent and, thus, the respondent must compensate the petitioner
for any losses suffered on account of such delay. In this behalf, the Arbitrator, in my considered
view rightly so, has considered the effect of the provisions of Section 52 of the Indian Contract
Act, 1872 (hereinafter to be referred to as, 'the Contract Act') to the come to the conclusion that
the nature of transaction has to be determined by the order in which promises had to be
performed as there were reciprocal promises. The respondent had to give the site to the
petitioner to install the equipment and in the alternative had to provide for storage space as per
clause 3.1.3(b)(i). The Arbitrator found although 15 months' time for completion started from
31.03.1984, the storage space as an alternate to the completed cargo building was provided on
27.08.1984 and further space could be made available on 20.11.1984. The supply of steel
structure was completed by December, 1984. The site where the installation had to take place
was handed over partly in February, 1985 and the remaining incomplete site in April, 1985. It is
in view thereof that the Arbitrator rightly came to the conclusion that the petitioner could not be
expected to perform its promises until and unless the respondent was willing to perform
its reciprocal promises. In view of the provisions of Sections 54 and 55 of the Contract Act,
the petitioner was entitled to claim compensation for any loss which it may have sustained,
especially when the petitioner had given written notices in the form of numerous letters to the
respondents informing the respondent that the petitioner will be claiming all losses sustained by
it due to delay in handing over of the site. These letters have been produced on record and have
been considered by the Arbitrator.

At this stage, it may be noticed that Section 51 of the Contract Act provides that a promisor is
not bound to perform, unless reciprocal promise is ready and willing to perform
his promises.
Section 52 provides that where the orders in which reciprocal promises are to be performed
is expressly fixed by the contract, then they shall be performed in that order which the nature of
transaction requires. Section 53 provides for liability of a party in case of a contract
containing reciprocal promises and one party to the contract prevents the other to perform
its promises. Section 54 provides for compensation to the affected party in case of
such reciprocal promises.

TIME AND PLACE FOR PERFORMANCE:

Performance of contract Section 46 to 50 . It is for the parties of the contract to determine the
time and place of contract. Time and place of performance While making contract the parties ,
by mutual agreement decide about time and place of contract. .and both are expected to perform
their respective promises accordingly

1. Reasonable time:

Where no time is specified: Where by the contract, a promisor is to perform his promise without
application by the promises, and no time for performance is specified, the engagement must be
performed within a reasonable time. What is the ‘reasonable time’ is, in each particular case, a
question of act (Sec46). Reasonable time depends on the special circumstances of the case, the
usage of the business and the facts and the intention of the parties at the time when the contract
was entered into.

EXAMPLE:

X promise to deliver car at Y’s house on 1 july before 12pm .X deliver car before time .X has
performed the contract.

2. Specified time:

Where time is specified: When a promise is to be performed on a certain day and the promisor
has undertaken to perform it without application by the promisee, the promisor may perform it
at any time during the usual hours of business on such day and at the place at which the promise
ought to be performance (Sec 47)

EXAMPLE:
A agrees to supply 200 bags of sugar to B on 1st october at a particular price . A should deliver
these bags to B during usual business hours on 1st october .

3. Proper time and place:

When , the place of performance is not fixed and promisor has to perform his promise without
application or request of promisee . Thus it is duty of promisor that he must contact with
promisee as to decide about place of performance and accordingly perform the promise .

EXAMPLE:

X promise to deliver 100 bags to Y ON 1 AUGUST.Y agree to specify the place of delivery later .Y
must apply to X to decide a reasonable place for performance of contract.

4. Reasonable place:

When a promise is to be performed without application by the promise, and no place is fixed for
the performance of it, It is the duty of the promisor to apply to the promise to appoint a
reasonable place for the performance of the promise, and to perform it at such place

EXAMPLE:

A undertakes to deliver a 1000 maunds of jute to B on a fixed day. A must apply to B to appoint a
reasonable place for the purpose of receiving it , and must deliver it to him at such place

5. Prescribed by promise:

Section 50 According to this rule, the promisor must perform his promise in any manner and at
any time, being prescibed by the promise.

EXAMPLE:

B owns to A, Rs 10000. A ask B to deposit this amount in A’s bank account. B deposit the
amount in A’s account after some time banks fails and A has no information regarding transfer
of money to his account. There had been good payment by B and in this way he is discharged
from obligation.

Case law:

In the case of Haryana Telecom Ltd. V. Union of India7

, it was held that one of the clauses of contracts stipulated that deliveries made after stipulated
delivery period will not deprive party of its right to recover liquidated damage, reading of all
clauses showed that time was essence of contract.

The well known authority is Bhudra Chand v. Betts 9 (.In this case The plaintiff stipulated
with the defendant to engage his elephant for the purpose of Kheda operations (to capture wild
elephants). The contract provided that the elephant would be delivered on the 1st October ,1910;
but the defendant obtained an extension of time till the 6th October and yet did not deliver the
elephant till the 11th. The plaintiff refused to accept the elephant and sued for damages for the
breach.

In the case of Mahabir Prasad v. Durga Rungta Datt 10 the Supreme Court held on the
facts of the case that time of payment was of the essence of the contract. The facts of the case
were that a transport coal from a colliery to the railway station. The colliery-owner had to keep
the road in repair and to arrange for petrol. He had also to pay for the transportation of the 10th
of the next month. It was alleged that these things were not go on with his work. The transporter
rescinded the contract and brought an action for damages. It was held that in commercial
transactions‟s time is ordinarily of the essence of the contract. In this contract time of payment
and of arranging other things was, particularly, such an important condition of the contract that
section 55 could be invoked by the aggrieved party and the transporter was entitled to rescind
the contracts.

In the case of Trailakyanath Maity v. Provabati Santra 11

The Calcutta High Court observed: "…..Whether or not the time is the essence fo the contract
must depend on the facts and circumstances of each case having regard to the provisions of
section 25 of the Indian Contract Act. It is well established that the intention of the parties
together with the circumstances has got to be looked into to ascertain whether the parties
intended that in the agreement for sale in question in a given case the time would be essence of
the contract.....even though the cancellation of the contract is not embodied in the document in
so many words, by the terms provided therein for forfeiture of the earnest money the agreement
for sale in case of such forfeiture would automatically lapse by necessary implications".

In case of sale of immovable property, the general presumption is that time is not the essence of
the contracts. In Mangalram Namasudra v. Permanand Namsudra 12
Wherein the contract was relating to the sale of land , the Assam and Nagaland High Court while
holding "time was not the essence of the contract" observed.

TIME IS OF THE ESSENCE OF CONTRACT:

Section55. Intention of parties is clear that the time is the essence of the contract and if the
promisor fails to perform the obligation in the fixed time. The contract becomes voidable at the
option of the promisee and he can avoid contract

1. Essence of contract:

Time as the essence of contract Section 55 . when the party to a contract , promises to do certain
things at or before the specified time and fails to do any such thing at or before the specified
time the contract or so much of It , has not been performed , becomes voidable at the option of
the promisee , if the intension of the parties was that , the time should be of the essense of the
contract .

EXAMPLE:

A agreed to deliver 100 books to B on 1 may2o17 .A failed to deliver on time. The contract is
voidable at the option of B.

2. Not the essence of contract:

If the intentions of the parties is such that the time is not as the essence of contract.time does
not make the contract voidable.

EXAMPLE:

X promise to bike to Y on 1 june. A deliver it on 10 june .Y will have to accept the delivery. Y can
claim damages only.

3. Delayed performance:

When the promisee accepts performance of a promise at any time other than that agreed , the
promisee cannot claim compensation for any loss caused by the non performance of the
promisee unless at the time of such acceptance he gives notice to the promiser of his intention so
to do.
EXAMPLE:

A promise to deliver car to B on 5may .A deliver on 10may .A accepts the delayed delivery .A
cannot claim damages.

Case Law:

In Startups v. Macdonald, S agreed to sell 10 tons of oil to M and to deliver it to him within
the last 14 days of March. Delivery was rendered at 8:30 pm on 31st March. M refused to accept.
It was held that the tender of the oil was in the circumstances equivalent to performance and
that S was entitled to recover damages for non-acceptance.

In the case of Bishamber Nath Agarwal v. Kishan Chand 6 ,

It was held that if any agreement states that a particular act relating to the contracts is to be
done within the particular time or manner , it should be done in that manner or time and it is
not the rights of the parties to perform it is own his manner or time according to them.

In the case of Devender Singh v. State of U.P.13,

Where an application for extension of time was rejected after a long gap, the contractor was not
allowed compensation for the waiting period. In hire installments is of the essence.

In the case of Swarnam Ramchandram v. Aravacode Chakungal Jayapalan 8

It was held that the parties , may make time of the essence either expressly in terms which
unmistakably provide that they intended to do so. Alternatively, making of time as the essence of
a contract may be inferred from the nature of the contract , the property or the surrounding
circumstances.

APPROPRIATION OF PAYMENTS

Each debtor, who owes several debts to the creditor, has a right to instruct his creditor to which
particular debt, the payment is to be appropriated or adjusted. Therefore, when the debtor
expressly states that the payment is to be applied to the discharge of a particular debt,
the payment must be applied accordingly.

Appropriation means ‘application’ of payments. In case of a creditor and a debtor, Section 59 to

61 lay down certain rules regarding the appropriation of payments. When a debtor pays an
amount to the creditor, the creditor is to take note of these sections before applying the payment
to a particular debt, because the creditor would be inclined to appropriate the payments to the
debt which is not likely to be realized easily.

Sections 59 to 61, of the Contract Act, embody the general rules as to appropriation of payments
in cases where debtor owes several distinct debts to one person and voluntarily makes payments
to him.

It was observed that “When money is paid, it is applied according to the express will of the payer
and not the receiver. If the party to whom the money is offered does not agree to apply it
according to the express will of the party offering it, he must refuse it and stand upon the rights
which the law gives him.

Appropriation is therefore, a primary right of a debtor. Appropriation rules apply only in case of
several and distinct debts and do not apply where there is only one debt, though payable by
installments.

Appropriation of payments is referred to in the Contracts Act 1950. In fact, three

sections deal with the subject of appropriation of payments.

Rules:
Where payment of debt to be discharged is indicated: (Sec.59)

Section 59 of the Contracts Act 1950 reads: “Where a debtor, owing several distinct debts to one
person, makes a payment to him, either with express intimation, or under circumstances
implying that the payment is to be applied to the discharge of some particular debt, the
payment, if accepted, must be applied accordingly.”

Illustrations

(A) A owes B, among other debts, 1,000 Rupees upon a promissory note which falls due on the
first June. He owes B no other debt of that amount. On the first June A pays to B 1,000 Rupees.
The payment is to be applied to the discharge of the promissory note.

(b) A owes to B, among other debts the sum of 567 Rupees. B writes to A and demands payment
of this sum. A sends to B 567 Rupees. This payment is to be applied to the discharge of the debt
of which B had demanded payment.
However, when it is not stated how or to which debt the payment is to be applied, then the law
allows the creditor to choose how the payment received is to be treated.

SECTION 59

Where payment of debt to be discharged is indicated

Tamil Nadu Generation and Distribution Corporation Ltd Vs. Ppn Power
Generating Company Pvt Ltd and Another - Court Judgment

LegalCrystal legalcrystal.com/1115417
Citation

Court Appellate Tribunal for Electricity APTEL Appellate Jurisdiction

Decided On Feb-22-2013

Case Number Appeal No. 176 of 2011

Judge M. KARPAGA VINAYAGAM, CHAIRPERSON & THE HONOURABLE

MR. RAKESH NATH, TECHNICAL MEMBER

Appellant Tamil Nadu Generation and Distribution Corporation Ltd

Respondent Ppn Power Generating Company Pvt Ltd and Another

Excerpt:

m. karpaga vinayagam, chairperson 1. tamil nadu generation and distribution corporation

limited is the appellant herein. 2. aggrieved by the order dated 17.6.2011, directing the appellant
to pay the amount to be calculated by the generator, the 1st respondent, after working of the
invoices from the year 2001 to 2006, the appellant has filed this appeal. 3. the short facts are as
follows: (a) ppn power company private limited, the 1st respondent, is a generating company.
the said power company entered into a power purchase agreement with tamil nadu electricity
board, the predecessor of the appellant, on 3.01.1997 for sale of the entire energy generated by
the power generating station pursuant to the terms and conditions of the power purchase
agreement.

Where payment of debt to be discharged is not indicated: (Sec.60)

This is on the basis of Section 60 of the Contracts Act which reads:

“Where the debtor has omitted to intimate, and there are no other circumstances indicating to
which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful
debt actually due and payable to him from the debtor, whether its recovery is or is not barred by
the law in force for the time being as to the limitation of suits.”

Thus a debtor could, where there are two debts, specify that payment is for the rental and escape
repayment of the loan. Of course this may not be morally the right thing to do, but this is how
the law provides for the parties to deal with the appropriation issue.

But what if neither party pays attention to the payment sent and received? The sender does not
state which debt it is for and the recipient does not state to which debt the payment has been
applied. In such a case Section 61 of the Contracts Act 1950, which is somewhat self-explanatory,
will apply.

Where the debtor does not intimate and the creditor fails to appropriate: (Sec.61)

It reads: “Where neither party makes any appropriation the payment shall be applied in
discharge of the debts in order of time, whether they are or are not barred by the law relating to
the limitation of suits. If the debts are of equal standing, the payment shall be applied in
discharge of each proportionally.”

Of course there are cases where the right to apply the payment received may have been agreed to
very much in advance. This is the case with the documents involving financial institutions,
where clauses are formulated to give very broad rights to the lender.

So it was in Ambank (M) Berhad v. Peter Marajin @ Peter Marazing & Ors which arose out of
the manner in which the bank had treated payments that had been made and received.
The bank, the plaintiff, had granted a housing loan to the defendant with a monthly installment
payment of RM1,115.00 for the first year. The defendants had not failed to pay the monthly
installment amounts provided for in the loan agreement.

However, the plaintiff used part of the installment payment made by the defendant to pay for
insurance premium paid on the defendants’ behalf and legal fees incurred by the plaintiff, thus
causing arrears in payment. In this connection, the bank relied on Section 14.08 in the loan
documentation, which provided:

“The Chargee may apply any payment received from the Chargor(s) or any party towards
satisfaction in whole or in part of the principal, interest or other sum then due and payable from
the Chargor(s) under this instrument in any order that the Chargee deems fit, and the
Chargor(s) hereby waive his/their right of appropriation under Section 60 of the Contracts Act,
1950.”

The objection of the borrower was that the section in question was invalid because it amounted
to contracting out of Section 60 of the Contracts Act 1950.

However the Court took the view that Clause 14.08 was not invalid.

The Court decided that despite what was provided for by the Contract Act 1950 as to
appropriation of payments, it was possible for both parties to contractually agree – meaning
contract out of the Contracts Act 1950 – so that the bank could in principle apply the payment
received towards payment of legal fees and interest.

CASE LAWS:

Where the debtor does not intimate and the creditor fails to appropriate: (Sec.61)

Benton v. State Farm Mutual Automobile Ins. Co., 306 F.2d 179 (6th Cir.1962)

Complainants cite Benton v. State Farm Mutual Automobile Ins. Co., 306 F.2d 179 (6th
Cir.1962) wherein a seller delivered possession of a truck to the buyer but retained the certificate
of title until a substantial amount should be paid. The district court found, and the appellate
court agreed that the seller deliberately retained the ownership and that the seller's insurer was
liable. This case is distinguishable from the present case because no evidence of transfer was
executed and delivered as in the present case; the parties expressly agreed that ownership was
not to pass, which agreement did not occur in the present case; and the appellate court was
affirming a finding of fact by a trial court, whereas this Court is asked by the complainants to
reverse the finding of the trial court.

This Court cannot agree with the Benton opinion that "ownership could not pass without
compliance with Section 59-319 (T.C.A.)". On the contrary, under suitable circumstances, a
transfer of ownership may occur without compliance with the requirements of the Motor Vehicle
Title and Registration Law.

Where the debtor does not intimate and the creditor fails to appropriate: (Sec.61)

109 T.C. 463 (1997)

DAVID A. AND NANCY J. HEPBURN, PETITIONERS v. COMMISSIONER OF

INTERNAL REVENUE, RESPONDENT

Docket Nos. 10031-95, 10032-95.

United States Tax Court.

Filed December 30, 1997.

Gregory W. MacNabb, for petitioners.

Ann M. Welhaf, for respondent.

HALPERN, Judge:

In these consolidated cases, respondent determined deficiencies in the Federal income tax of
petitioners Dudley and La Donna Merkel and David and Nancy Hepburn for their 1991 taxable
(calendar) years in the amounts of $115,420 and $116,347, respectively. Both cases involve
similar circumstances and require us to determine whether petitioners in the two cases (the
Merkels and the Hepburns, respectively) may exclude under section 108(a)(1)(B) certain
464*464 income from the discharge of indebtedness. Unless otherwise noted, all section
references are to the Internal Revenue Code in effect for the year in issue, and all Rule references
are to the Tax Court Rules of Practice and Procedure.

Contracts Which Need Not be performed

A contract would not require performance under circumstances spelt out in section 62 to 67 of
the Act. These circumstances are i) Novation, ii) rescission iii) alteration and iv) remission.

SECTION 62

Section 62 of the Act provides that “if the parties to a contract agree to substitute a new contract
for it or to rescind or alter it, the original contract need not be performed”

A) Effect of novation: Novation means substitution. Where a given contract is substituted

by a new contract it is novation. The old contract, on novation ceases. It need not be
performed. Novation can take place with mutual consent. However novation can take
place by substitution of new contract between the same parties or between different
parties. Novation result in discharge of old contract. This can be illustrated as follows.

A owes money to B under a contract. It id agreed between A,B and C that B shall thenceforth
accept C as his debtor, instead of A. the old debt of A to B is at an end, and a new debt from C to
B has been contracted.

B) Effect of rescission: in case of rescission, the old contract is cancelled and no new
contract comes in its place. A contract is also discharged by rescission sometimes parties
may enter into an agreement to rescind the previous contract. sometimes the contract is
rescinded by implication or by non- performance for a long time without each other
complaining about it.

Difference between novation and rescission: while novation involves rescission, there is no
novation in rescission. Both in novation and rescission the contact is discharged by mutual
agreement. In both cases parties enter into a new contact to come out of the old contract.

The new agreement is consideration for rescission.

C) Effect of alteration: where the contract t is altered, the original is rescinded. Hence the
old one need not be performed whereas the new one has to be performed. Alteration
involves both rescission and novation. The line of difference between alteration and
novation is very thin. While there can be very minor alteration, there cannot be unilateral
material alteration to a contract. If it is done it will be void.

Novation and alteration: Both in novation and in alteration the old contract need not be
performed.
SECTION 63

Remission means waiver. Section 63 of the Act deals with remission. It provides that “every
promise may dispense with or remit wholly or in part, the performance of the promise made to
him or may extend the time for such performance or may accept instead of it any satisfaction
which it thinks fit”. Thus the promise can waive either in full or in part the obligation of the
promisor or extend the time for performance. For example where A owes B a sum of 1 lakh, B
may accept a part of it in full and final settlement of the due or waive his entire claim.

While granting the time to the promisor, the promisee cannot do so for his benefit but can do so
only for the benefit of the promisor. For example where A promises B that he would deliver
certain goods by a certain date B can extend the time but they cannot take advantage to charge
interest on the extended time.

Similarly a promisee can accept any other performance to his satisfaction instead of the specified
stipulated performance.

For example where A promises to sell his horse for a consideration of 5000/- to B , A may
instead of cash consideration of 5000/- may accept jewellery worth Rs 5,000/- in full
satisfaction of the consideration. In a situation like this the essential element of satisfaction is
that the promisee must accept the consideration unequivocally. If a promisor tenders some thing
in full satisfaction but the promisee doesnot accept it or accepts in part performance such
satisfaction will fall outside the ambit of section 63 of the Act. ( shyamnagar tin factory vs snow
white food products, A.I.R (1965) cal 54)

Effect of notation, rescission and alteration of contract. If the parties to a contract agree to
substitute a new contract for it, or to rescind or alter it, the original contract need not be
performed.

Illustrations

(A) A owes money to B under a contract. It is agreed between A, B and C that B shall thenceforth
accept C as his debtor, instead of A. The old debt of A to B is at an end, and a new debt from C to
B has been contracted.
(b) A owes B 10,000 Rupees. A enters into an arrangement with B, and gives B a mortgage of his
(A's) estate for 5,000 Rupees, in place of the debt of 10,000 Rupees. This is a new contract and
extinguishes the old.

(C) A owes B 1,000 Rupees under a contract. B owes C 1,000 Rupees. B orders A to credit C with
1,000 Rupees in his books, but C does not assent to the arrangement. B still owes C 1,000
Rupees, and no new contract has been entered into.

Promise may dispense with or remit performance of promise.

Every promise may dispense with or remit, wholly or in part, the performance of the promise
made to him or may extend the time for such performance, or may accept instead of it any
satisfaction which he thinks fit.

Illustrations

(a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound
to perform the promise.

(b) A owes B 5,000 Rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000
Rupees paid at the time and place at which the 5,000 Rupees were payable. The whole debt is
discharged.

(C) A owes B 5,000 Rupees. C pays to B 1,000 Rupees, and B accepts them, in satisfaction of his
claim on A. This payment is a discharge of the whole claim.

(d) A owes B, under a contract, a sum of money, the amount of which has not been ascertained.
A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of
2,000 Rupees. This is a discharge of the whole debt, whatever may be its amount.

(e) A owes B 2,000 Rupees and is also indebted to other creditors. A makes arrangement with
his creditors, including B, to pay them a composition of eight annas in the Rupees upon their
respective demands. Payment to be of 1,000 Rupees is a discharge of B's demand.

Consequences of rescission of voidable contract. Section 64

When a person at whose option a contract is voidable rescinds it, the other party thereto need
not perform any promise therein contained in which he is promisor. The party rescinding
voidable contract shall, if he have received any benefit there under from another party to such
contract, restore such benefit, so far as may be, to the person from whom it was received.

Obligation of person who has received advantage under void agreement or

contract that becomes void. Section 65

When an agreement is discovered to be void, or when a contact becomes void, any person who
has received any advantage under such agreement or contract is bound to restore it, or to make
compensation for it to the person from whom he received it.

Illustrations

(a) A pays B 1,000 Rupees in consideration of B's promising to marry C, A's daughter. C is dead
at the time of promise. The agreement is void, but B must repay A the 1,000 Rupees.

(b) A contracts with B to deliver to him 250 maunds of rice before the first of May. A delivers
130 maunds only before that day, and none after. B retains the 130 maunds after the first of
May. He is bound to pay A for them.

(c) A, a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in
every week during the next two months, and B engages to pay her a hundred Rupees for each
night's performance. On the sixth night, A willfully absents herself from the theatre, and B, in
consequence, rescinds the contract. B must pay A for the five nights on which she had sung.

(d) A contracts to sing for B at a concert for 1,000 Rupees which are paid in advance. A is too ill
to sing. A is not bound to make compensation to B for the loss of the profits which B would have
made if A had been able to sing, but must refund to B the 1,000 Rupees paid in advance.

Mode of communicating or revoking rescission of voidable contract. Section 66

The rescission of a voidable contract may be communicated or revoked in the same manner, and
subject to the same rules, as apply to the communication or revocation of a proposal.

Effect of neglect of promise to afford promissory reasonable facilities for

performance. Section 67

If any promise neglects or refuses to afford the promissory reasonable facilities for the
performance of his promise, the promissory is excused by such neglect or refusal as to any non-
performance caused thereby.
Illustration A contracts with B to repair B's house. B neglects or refuses to point out to A the
places in which his house requires repair. A is excused for the non-performance of the contract if
it is caused by such neglect or refusal.

PROBLEMS DURING THE REPORT:

Some of the major problems faced during the report were, firstly; finding data related to some
topics was thorny and due to lack of accurate information we were unable to provide valuable
facts. On the other hand, an Unavailability of Pakistani case study was another drawback. Lastly,
performance of contract laws varies from country to country due to which different opinions and
judgments in cases were a cause of confusion during the report.

RECOMMENDATION:

The Contract Act 1872 pertains on all of the above sections, however; no such precise application
of all performance of contact sections is observed. Thus, it would be more legitimate for
individuals and organization to take into account all sections of the law while performing a
contract.

CONCLUSION:

Performance of contract is the fulfillment of the obligations by the parties. The parties who make
the contract must fulfill their obligations according to the terms laid down in the contract.
Promisee, legal representative and the third party can make a valid demand for performance.
Performance of a contract takes place when the parties to the contract fulfill their obligations
arising under the contract within the time and in the manner prescribed. Performance of a joint
promise can be in the absence of any contrary intention appearing from the contract the right to
claim performance, that is, the right of joint promisee to claim performance is a joint right. An
assignment of a contract is when typically a third-party is involved in a contract with the
assignor, and the contract is in effect transferred to the assignee. A contract in which the parties
enter into agreements mutually, or reciprocally thus making the obligation of one party
correlative to the obligation of the other are Reciprocal contract. Reasonable time, specified
time, proper time and place are the essentials for the performance because time leads to the
essential of a contract.