Performance of Contracts/Notes of Business Law for BBS/BBS TU

What is the performance of the contract? Explain the importance of the performance of the contract.

Answer: 

Meaning of Performance of Contract

Possibility to perform is one of the essential elements of a valid contract. It means an agreement must be made in respect of a thing which can be performed or capable of being performed is an essential element for the formation of a valid contact. 

The formation of contract creates lawful responsibilities for the parties involved on the contract and accordingly, they have to perform their mutual promises and thereby their part of duties will be discharged or terminated.

Performance of contract, therefore, means to fulfill or execute something. 

Thus, the performance of the contract means fulfillment of the terms of the contract by the respective parties to it. The performance of the contract is regarded as a supreme, usual, and customary manner of discharging a contract.

The individual engaged in the contract if he performs a contract or his part of obligations under contract according to the terms and conditions of the contract then he will be discharged from any further obligations. 

The performance of obligations exactly correspondent to the terms of puts an end to the contract. The court always expects the exact performance of the contract.

Actually, a contract is formed for fulfillment not to breach. After the formation of the contract, the stage of fulfillment comes before the parties. The contract is said to be performed when both the parties do what they had agreed to do in the contract paper. 

This is named the performance of responsibilities by its parties. When both of the parties fulfill their respective performance then the contract is said to be discharged by performance. Parties bound to perform only those obligations as specified by the contract paper.

For instance, A visits a stationery shop to buy a computer. The shopkeeper delivers the computer and A pays the price. In such cases, the contract is said to discharged by the performance of the part of liability by the respective parties of the contract.

According to Section 37 of the Indian Contract Act, 1972, 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 any other law.

Section 521 of the Civil Code, 2074 states that each party to a contract shall fulfill his/her obligation under the contract. It means, the parties involved in the contract if perform the terms and conditions accepted by them exactly without amending them is the performance of the contract.

Therefore, it is the key and chief responsibility of the parties engaged in the contract is to either perform or offer to perform their respective promises made in contract. For any performance to be effective and valid, the legal system imagines the performance by the parties is the same and correspond to the agreed terms and conditions. 

Essential elements of valid performance

The valid performance of the contract consists of the following elements.

• Performance of the contract should be unconditional
• It must be completed or performed by the promisor or by his/her legal representative
• It must be completed or performed at a right or suitable time stated in the agreement or in case of no specification it should be performed inside or within a rational time
• It must be completed or performed at a residence or place which is stated in the agreement
• The promisee must have a reasonable opportunity to ascertain the things offered for the execution of whether the performance of the whole or of a part

Importance of performance of the contract

There are general and specified or specific contracts to follow them according to terms and conditions and that subscribe to great importance. For not breaking the contract, it must be performed completely and in accordance with the terms and conditions mentioned or greed in contract paper. 

Each party must fulfill his obligation and duty under the contract. If the parties fulfill their respective obligations according to terms and conditions they agreed to do, the performance of the contract takes place and the contract comes to a happy ending. 

Thus, the importance of the performance of the contract is wider. Following are the major importance of the performance of the contract:

• Happy ending: The parties of the contract get a happy ending and it creates a healthy and fair environment between them.
• Encouragement and inducement: The good performance encourages them for further future transactions. Thus, it builds goodwill.
• Create a good environment: The accurate performance of the contract or contractual obligations promote the atmosphere of mutual faith that helps to create a contract with other parties.
• Timely completion: The performance of the contract ensures the job is done within the specified time frame when there is the performance of the contract held from both parties.
• Reduce risk and ensure justice: The performance of the contract stops them from any unjust situation and losses. There is no need to take the help of court and other legal authorities. It minimizes extra expenses.
• Fulfillment of objectives of the parties: By the performance of the contract both of the parties of the contract get their objective to be fulfilled.
• Continuing good relationship: The performance of the contract helps to continue their business relationship for the future and gives further opportunities for new business relationships.
• Fulfillment of the purpose: The performance of the contract fulfills the specific purpose of the formation of the contract at a particular point in time.

References

Mishra B.P. (2006), Mercantile Law, Kathmandu: Asia Books Distributers

Upreti Shreepraksh. (2018), Business Law, Kathmandu: Samjhana Publication Pvt Ltd

Panday Yugraj. (2019), Business Law, Kathmandu: Asmita Books Publisher & Distributors Pvt Ltd

Kalika S.N. (2013), The Law of Contract, Kathmandu: Prithivi Prakashan