Performance of Contract

1
Performance of Contract

• Chapter 10 and 11 (Sections 71-81) of the
  Contract Act of Nepal.
• Performance of a contract takes place when the
  parties to the contract fulfil their obligations
  arising under the contract within the time and in
  the manner prescribed.
• Section 74 of the Contract Act Each party to a
  contract has to fulfil its obligations under the
  contract.
• General Rule The parties to a contract must
  perform or offer to perform their respective
  promises.
• Rules Regarding the Performance of Contract
• The parties must carry out precisely what they
  agreed under their contractnot something less
  than, or different from, that agreed.
• Bolton v. Mahadeva (1972) (Bolton installed
  a central heating system in Mahadevas house for
  an agreed price of 560 Pound. The work was
  carried out defectively and it was estimated that
  it would cost 179 Pound to put the matters right.
  The Court of Appeal held that since Bolton had
  not performed his side of the contract, he could
  recover nothing for the work he had done).

2
Rules contd.

• Exceptions Doctrine of Substantial Performance
  If the terms of the contract are substantially
  carried out, the contract may be deemed to have
  been performed. Hoenig v. Isaacs (1952).
• Acceptance of Partial Performance If one of the
  parties only partially fulfils its obligation
  under the contract and the other party accepts
  the benefit of the partial performance, the other
  party is liable for the benefit received.
• Prevention of Performance by the Other Party If
  a party is prevented from carrying out its side
  of the contract by the other party, it can bring
  an action to recover for the work it has done.
  Plancé v. Colburn (1831).
• Divisible Contracts The issue is whether a
  contract is entire or the obligations under the
  contract can be split up into stages or parts.

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Offer to Perform (Attempted Performance or Tender)

• 2. A valid offer or tender of performance is
  equivalent to the performance of the contract.
• Rules 1.Offer must be unconditional.
• 2. It must be made at a proper time and place.
• 3. It must be of the whole obligation (but minor
  deviation is excused).
• 4. It must be made to a proper person (including
  duly authorized agent). If there are joint
  promisees, it may be made to any one of them.
• 5. It must provide reasonable opportunity (to
  inspect or verify) to the other party.

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Attempted Performance Continue

• 6. It must be made in a proper form.
• 7. The person making an offer must be able and
  willing to perform his/her obligation.
• 3. Time, Manner and Place for Performance
  Sections 71 and 72 of the Contract Act.
• If the time and manner of performance is
  mentioned in the contract, the contract must be
  performed within the prescribed time period and
  in the manner as specified.

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Time and Manner of Performance Continue..

• Even if no time or manner is prescribed to carry
  out the work under the contract, if such work can
  only be performed in a specific time or in a
  specific manner, then the work under the contract
  must be carried out within such specific time or
  in such specific manner.
• In other circumstances where no time or manner is
  prescribed to perform the contract, the contract
  should be performed within a reasonable time
  period and in a reasonable manner. Reasonableness
  in time or manner depends upon the factual
  situation of each case.
• Time as the Essence of the Contract
• 1. When the parties have expressly agreed to
  treat the time as of the essence of the contract.
• 2. Where the delay in performing the contract
  operates as an injury to the party.
• 3. Where the nature and necessity of the contract
  requires that time to be the essence of the
  contract.
• Usually in commercial contracts, time is
  considered as the essence of the contract.

6
Place of Performance

• If a specific place of performance is mentioned
  in the contract, the contract must be performed
  at the specified place.
• If a party is required to deliver goods and
  materials to the other party and no place for
  such delivery is specified in the contract, it
  will be deemed that the contract requires such
  delivery to be made at the place where such goods
  and materials are located or stored.
• Even if no specific place is mentioned in a
  contract to carry out the work under the
  contract, if the work to be carried out is of
  such type that it can only be carried out in a
  certain place or, because of prevailing customs
  and usages or its nature, it has to be carried
  out in a certain place, then the contract should
  be performed in such a place.

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Place of Performance Continue.

• In circumstances other than those mentioned
  above, if the place of performance is not
  mentioned in the contract, the party who needs to
  perform the contract should request the other
  party to prescribe a reasonable place for the
  performance of the contract, and the other party
  should prescribe a reasonable place for this
  purpose.
• 4. Reciprocal Performance of the Contract
  Section 75 of the Contract Act. When a contract
  consists of exchange of promises, the promises
  are called reciprocal promises. Reciprocal
  promises form the consideration or part of
  consideration for each other.
• Rules of Reciprocal Performance of a contract
• Rules 1. When a contract requires concurrent or
  simultaneous fulfillment of the respective
  obligations of both the parties, then a party is
  not required to fulfill its obligations if the
  other party is not ready or willing to fulfill
  its obligation under the contract.

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Rules of Reciprocal Performance continue

• 2. Where the order in which reciprocal promises
  are to be performed is expressly fixed by the
  contract itself, the promises must be performed
  in that order and where the order is not
  expressly fixed by the contract, they must be
  performed in the order which the nature of the
  contract requires.
• 3. In cases where the nature of reciprocal
  promises is such that one of them cannot be
  performed till the other party has performed
  his/her promise, then the party, who fails to
  perform his/her promise because of the other
  partys failure to perform the contract, will
  have the right to claim the compensation from the
  other party for the loss suffered by it on
  account of such non-performance of the contract.

9
Rules continue

• When a contract requires concurrent or
  simultaneous fulfilment of the reciprocal
  promises and a party prevents the other party
  from performing its promise, then the party, who
  is unable to perform its promise because of such
  prevention or obstruction, will have the right to
  make the contract void and also recover
  compensation from the other party for any loss
  suffered by it.
• 5. The persons who have to perform the contract
  Section 77 of the Contract Act. (a) The promisor
  him/herself
• If the contract indicates that it was the
  intention of the parties that the promise should
  be performed by the promisor him/herself, such
  promise must be performed by the promisor.
• The contract involving personal skill or personal
  consideration of the promisor must be performed
  by the promisor him/herself. E.g., a contract to
  paint or sing.
• (b) The agent or legal representatives of the
  promisor or the third person
• Except in cases mentioned above, the contract may
  be performed by the agent of the promisor, or by
  a person appointed by the promisor or by a third
  person on behalf of the promisor.

10
The Persons to Perform.

• However, without the consent of the other party,
  no party to the contract can transfer the
  obligation under the contract to any third
  person.
• Once a party accept the performance of the
  contract by a third person, he/she is not
  entitled, except otherwise provided in the
  contract, to claim later on that the contract
  should be performed by the promisor him/herself.
• Joint Promisors When two or more persons enter
  into a joint agreement with one or more persons,
  the promise is called a joint promise. Rule
  (i)Except otherwise provided in the contract, any
  one or all of the joint promisors may be
  compelled to perform the contract. (ii) When one
  of the joint promisor has been compelled to
  perform the whole of the promise, he may compel
  the other joint promisors to contribute equally
  with him/herself to the performance of the
  promise.

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Persons Entitled to Demand Performance

• 6. Persons entitled to demand performance
  Section 78 of the Contract Act. General Rule
  Only the party can demand the performance of the
  contract. In case of a joint promise, all of the
  joint promisees can demand the performance of the
  contract.
• However, a beneficiary can also demand such
  performance if the contract has been concluded
  for the benefit of such person.
• 7. When a contract need not be performed Section
  73 of the Contract Act.
• If one party releases the other party from
  contractual obligations.
• When a voidable contract is made void.
• If the contract can not be performed because of
  the breach of contract by the other party.
• If it is not required to be performed under the
  provisions of the Contract Act or it becomes
  impossible to perform the contract.