Performance of a Indian contract notes – CSEET

Performance of a Indian contract:

ICSI CSEET: The Council of the ICSI has released a notice regarding CSEET on the day of the inauguration of ICSI Golden Jubilee Celebrations on 4th Oct 2017.

The Gazette Notification on the Company Secretaries (Amendment) Regulations, 2020 has been published on 3^rd February 2020 in the Official Gazette of India and the same shall be applicable from the said date of publication.

Now ICSI Published a notice regarding CSEET Test which going to start from 2020 May.

We are now going to discuss the details of CSEET Paper-2 Legal Aptitude and Logical Reasoning – Performance of a Indian contract notes.

Performance of a Indian contract

Performance of a Indian contract:

In general, an agreement between two parties that creates legal obligation and is enforceable by law is a contract. For entering into a contract, there are certain essentials-

1. Agreement between two parties
2. The intent of Legal obligation
3. Lawful consideration
4. The condition should be certain with a legal object
5. Free Consent
6. Competency of parties

The basis of a contract is that both the parties have to fulfill their part of the contract in order to give effect to it according to the stipulated terms. Performance of a contract is the fulfillment of the contractual obligations by the parties. It is one of the methods to discharge a contract. The parties have no further rights and liabilities once the contract is discharged. The obligation of parties to contract—The parties to a contract must either perform, or offer to perform, their respective promises unless such performance is dispensed with or excused under the provisions of this Act, or of any other law. Promises bind the representatives of the promisors in case of the death of such promisors before the performance, unless a contrary intention appears from the contract.

A contract being an agreement enforceable by law comprises of reciprocal promises. In order that a party can enforce the promises made to him, he should perform his promise or offer to perform his promise and it is after he has so performed, or offered to perform, his promise that he could ask the other party to carry out his promise. Either performance or readiness and willingness to perform the contract is the basic requirement.

The promisor must offer to perform his obligation under the contract. The offer to perform a contract is known as Tender. If one party does not accept, the other is not liable for non-performance nor does he lose his right under the contract. If the tender of performance is rejected by a party, it entitles other parties to sue for the breach of the contract. A valid tender must satisfy the following conditions:-

• It must be unconditional in nature- Unconditional means that neither should any extra conditions be attached to the contract nor should any existing condition be altered. Also, the conditions should remain the same as they were at the time of finalization of the contract.
• A tender must be made at a proper time and place- In most of the cases, the time and place of the tender are fixed. But if not, the time and place should be reasonable, for example, if goods are delivered at odd hours and such tender is refused, the promisor will not be discharged of his obligation.
• The offeree must be given a reasonable opportunity to ascertain the proposal- The offeree should have a reasonable time to ascertain that all the conditions have complied in the performance of the contract.

Who can perform a Contract?

1. Promisor himself: If the terms and conditions of the contract clearly specify that the conditions are as such that the promisor only can perform them, then it can be done by the promisor only. This means contracts which involve the use of personal skill and expertise, must be performed by the promisor himself.
2. Agent: When it is not separately mentioned that the promisor needs to complete the performance, then the agent can perform the contract on behalf of his principal i.e. the promisor.
3. Representatives: A contract which involves the use of personal skills of the promisor or is founded on personal consideration comes to an end on the death of the promisor. In such a condition, the legal representatives of the promisor are bound by the conditions of the contract entered into by him until contrary intention appears from the contract. But their liability will be limited to the share of the property they have inherited from the deceased promisor.              Sometimes the nature of the promise is an indication by itself that the promisor must perform the contract in his own capacity. This usually happens in cases where the use of the personal skills of the promisor is involved, for instance, a contract to paint, sing or marry and contracts to technical nature. In such cases, the death of the promisor puts an end to the contract. [4]
4. Third Persons: For performance by a third person, the promisee has to accept it when the contract is being made. Once the condition of performance by the third party is accepted, promisee cannot deny later. The contract performed in this case will be discharged on the part of the promisor if done by the decided third party, even if the promisor does not ratify the performance explicitly. In Hirachand Punamchand v Temple[5], a debt was held to be discharged when creditor accepted a smaller sun from debtor’s father in full settlement. Performance of the father (read the third party) in this case discharged the contract. Discharge of a contract by the third party’s performance can take place only when it is done with the intention of doing so.
5. Mercantile Agents: Section 2(9) of the Sale of Goods Act, 1930, defines a mercantile agent as “a mercantile agent having in the customary course of business as such agent authority either to sell goods or consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods”. This definition covers factors, brokers, auctioneers, commission agents etc.
6. Sub-Agent: A person who is appointed by the agent and to whom the principal’s work is delegated to known as sub- agent. Section 191 provides that “a sub-agent is a person employed by, and acting under the control of the original agent in the business of the agency.” So, the sub-agent is the agent of the original agent.

   As between themselves, the relation of sub-agent and original agent is that of agent and the principal. A sub- agent is bound by all the duties of the original agent. The sub-agent is not directly responsible to the principal except for fraud and wilful wrong. The sub-agent is responsible to the original agent. The original agent is responsible to the principal for the acts of the sub-agent. As regards third persons, the principal is represented by sub-agent and he is bound and responsible for all the acts of sub-agent as if he were an agent originally appointed by the principal.

The Standard of Performance

The general rule is that the performance obligation is strict so that the contractual obligation is precisely and completely performed. Some examples of strict obligations are the obligations as to description, fitness for purpose, satisfactory quality etc. The only exception to this is the de minimis rule i.e. only microscopic deviations. A legal term meaning very small to be meaningful or taken into consideration i.e. immaterial. As a matter of policy, the law does not encourage parties to bring legal actions for technical breaches of rules or agreements where the impact of the breach is negligible.

The term de minimis is taken from a longer Latin phrase which translates into “the law does not concern itself with trifles.” De minimis exceptions are commonly included in contracts to limit the application of covenants or other restrictions so that they do not apply in circumstances where the failure to observe the restriction has negligible impact. [6]If the rule of de minimis is not applicable in a particular situation then it constitutes a breach. Courts have applied the rule of de minimis often to ignore the minor transgressions of the law. As to what is a case deserving this benefit of the aforesaid rule is a question of fact to be decided in each case for which no rigid and exhaustive law can be laid down. The court ignores the shortfall and extends the benefit. [7]

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