Unit IV:

• 4.1 Performance of contract

• 4.1.1 Who can demand performance?

• 4.1.2 By whom it can be performed

• 4.1.3 Performance of joint promise

• 4.1.4 Assignment of contract

• 4.1.5 Appropriation of payment

• 4.1.6 Time and place of performance

• 4.1.7 Contracts which need not be performed

• 4.2 Discharge of Contract

• 4.2.1 By Performance

• 4.2.2 By mutual consent or agreement

 

Unit IV: Performance & Discharge of Contract

1. The “Plain English” Intro

Performance is the act of doing exactly what you promised in the agreement, which officially completes your legal duty. Discharge is the legal term for “releasing” the parties from their obligations, meaning the contract is now over and no one owes anything further.

2. Day-to-Day Analogy

Performance: You hire a painter to paint your house for ₹10,000. He paints (performs), you pay (perform), and the contract is discharged by performance. Mutual Consent: Before the painter starts, you decide you’d rather keep the house the current color, and he is busy with another job. You both agree to cancel the deal—this is discharge by mutual agreement.

3. The Legal Backbone

Section (Indian Contract Act)	What it says in Simple Terms
Section 37	Obligation to Perform: Parties must either perform or offer to perform their promises.
Section 40	Who Performs: If the contract involves personal skill (like painting a portrait), only the promisor can do it.
Section 42	Joint Liabilities: When two or more people make a promise, they are all responsible together.
Section 59	Appropriation: If a debtor owes multiple debts, he can choose which one he is paying off first.
Section 62	Novation: Replacing an old contract with a new one by mutual agreement.
Section 63	Remission: Accepting a lesser performance or extending the time to perform.

4. The “Checklist” (Essentials)

Who can perform the contract?

• The Promisor: Always.
• Agent: Unless the contract requires personal skill.
• Legal Representative: If the promisor dies (only for financial/property obligations, not personal skills).
• Third Party: If the promisee accepts it, he cannot later sue the original promisor.

Methods of Discharge by Mutual Consent:

• Novation: New contract replaces the old one.
• Rescission: Cancelling the contract entirely.
• Alteration: Changing specific terms of the contract.
• Remission: Letting someone pay ₹800 instead of the ₹1,000 they owe.

5. Landmark Case Laws (The Story Method)

Devi Prasad v. Lucky Bharani (1972)

• The Conflict: A party owed money under a contract and sent a check for a smaller amount, stating it was “full and final settlement.” The other party cashed it but then sued for the remaining balance.
• The Verdict: The court held that if a party accepts a smaller amount as full satisfaction (Remission under Section 63), they cannot later sue for the balance.

Lala Kapurchand Godha v. Mir Nawab Azam Jah (1963)

• The Conflict: A creditor agreed to take a smaller sum of money from a third party to settle the debtor’s massive debt. After taking the money, the creditor tried to sue the debtor for the rest.
• The Verdict: The Supreme Court ruled that once you accept performance from a Third Party (under Section 41), the debt is discharged, and you lose the right to sue the original debtor.

6. Comparison Table: Novation vs. Alteration

Feature	Novation (Sec. 62)	Alteration (Sec. 62)
Change	The whole contract or the parties may change.	Only some terms of the contract change.
Parties	Parties can be substituted (New person enters).	The parties must remain the same.
Effect	The old contract is completely dead.	The old contract lives on with changes.

7. Visual Flowchart Description

1. Step 1: Offer of Performance → Does the promisor try to perform at the right time and place?
2. Step 2: Actual Performance → Is the act completed as promised?
   • If YES → Contract is Discharged by Performance.
3. Step 3: Check for Mutual Agreement → Did the parties agree to change (Novation) or cancel (Rescission) the deal?
   • If YES → Contract is Discharged by Consent.
4. Step 4: Breach or Death → If personal skill was involved and the person dies, the contract is Discharged by Operation of Law.

8. Exam “Golden Key”

Latin Maxim: Promissio juris vel facti

(A promise of law or fact). When discussing Section 37, remember that “the representatives of the promisors in case of the death of such promisors before performance, are bound by such promises, unless a contrary intention appears from the contract”.

Master Tip: Use the term “Tender” when referring to an “Attempted Performance.” If I try to pay you and you refuse to take the money, I have made a valid “Tender,” and I am no longer responsible for the delay.