Rules regarding the performance of the contract

Rules regarding the performance of the contract

(For the introduction to the performance of the contract please click here)

There are certain rules for the performance of the contract. Some of which are secured under the Civil Code, 2074. The major rules regarding the performance of the contract are as below:

• Time and manner to performance of the contract

While performing the contract, time and manner of performance is very important factors. A person who is bound to perform the contract must be ready to perform it at the time when he has agreed to do the same.

When there is any specification of time and manner to perform the contract then a person is bound to perform accordingly and if the contract does not contain any time for performance, the promisor must perform it within a reasonable time.

Section 523 of the Civil Code, 2074 lays down under different subsections the rules regarding the time and manner of performance:

Sub-section 1 reads: “In case the time and the procedure of performance of the contract have been mentioned in the contract. It shall be performed within a specified time and according to the specified procedure.”

Sub-section 2 follows: “In case no time or the procedure of performing the work mentioned in the contract has been specified, in case the work can be performed only at any specified time, the contract shall be deemed to have been concluded so as to perform the work at that time and according to that procedure.”

Sub-section 3 reads: “Except in the circumstances mentioned in Sub-section (2), in case the time and procedure of performing the contract has not been mentioned in the contract, the contract shall be performed within a reasonable time by adopting a reasonable procedure.”

Reasonable time and procedure are based on nature, the necessity of the contract, situations of the parties, circumstances of the case, and so on.

• Place of performance

If the place is given in the contract then the performance of the contract should be done at such a prescribed place. If there is not prescribed the place in the agreement, the contract should be performed at a reasonable place or the place where the goods are stored.

Regarding the place of performance Section 524 made certain provisions. The general principle laid down under section 524(1) is that the contract must be performed at the same place if any place has been specified in the contract. 

When it is not specified the place for performance, it depends upon the intention of the parties as indicated by the other terms and conditions of the contract and other circumstances related to the case.

In such a case, the party performing the contract shall inform the related party about the place of performance. In the case of Indian law, in case of non-specifying the place to perform then the promisor must ask the promisee about the place of performing the work.

• Manner and way of Performance

The general rule is that the performance of a contract must be precise and exact. It means a party performing his obligations under a contract must perform according to the manner specified in the contract paper.

Section 523 made the following provisions regarding manner and way of performing the contract:

• It any specific manner and method of performance of works are mentioned in the contract then the parties must perform their work accordingly.
• In case no methods of performance specified in the contract and the performance follow any specific procedure then the promisor should follow such special procedure to perform.
• If the contract has not mentioned any methods of performance then it should follow proper methods based on nature, case, circumstances of the contract, parties, and other related factors.

• A person bound to perform/who are the responsible persons to perform the contractual obligations?

The person who has the legal obligation must perform the contract as mentioned in Section 529 of the Civil Code, 2074. The following people are to do so:

Contracting parties should perform: The promisor and promisee are the parties of any contract and they must perform the contract as they are legally bound primarily. 

These parties may involve two or more than two and such number is based on the nature of the contract. These parties subscribe to rights, as well as liability, resulting from the contract.

Section 521 said that “Each party to a contract shall fulfill his obligation under the contract”.

• Promisor (Sec. 529): Generally, the promisor has primary and absolute obligation to perform the contract as he has taken the responsibility to perform. Thus, in the case when there is no specification of whom to be performed first, then the primary responsibility is of promisor as promisor is the person to whom the promisee has got trust and confidence.

Section 529 mentions following are the responsible persons to perform the contract other than promisor himself:

• Agent (Section 529(1)): In some cases, an agent or other people can perform s contract. Except for the contract based on personal nature and matters, the agent or a person appointed by the promisor can also perform on behalf of the promisor.
• Legal representatives or Hairs (Section 528): Except for the contract based on personal matters, personal qualification, and skills, if the promisor dies or becomes insane then the part of his liability may be performed by his legal representative or hairs.
• Another third person (Section 529(3)): In some cases, any third party not directly related to the contract can also perform the contract on behalf of the promisor. In the case of promisee accept such performance then it is possible.
• Joint promisor (Section 529(4)): In case of promise is made by two or more than two persons jointly, it is known as a joint promise. In such a case, the promisors are bound to perform their promise jointly. Thus, if anything otherwise not mentioned in the contract, the joint promisors must fulfill their promise jointly or must arrange for fulfillment of the promise under the contract.

Aa per Section 42 of the ICA, in case of joint promisors, unless and otherwise is not mentioned in the contract, the following persons must perform the contract;

Circumstances	Persons responsible to perform
If all promisers are alive	Jointly all the promisors.
Death of one of the joint promisors	All the promisors including legal representative or heir of the deceased promisor.
Death of all the promisors	Legal representative or heir of all the promisors jointly.

Therefore, the chief duty to perform the obligations created by the contract primarily lies on the part of the promisor himself and apart from that agent of the promisor, his legal representative, heir, any third persons can also perform if anything otherwise is not mentioned in the contract and the contract should not be based on personal attributes and skills.

• Who can demand the performance or person entitled to demand for the performance of the contract?

In the case of the non-fulfillment of obligation by the promisor, the counterparty can demand the performance of the obligations. Generally, promisee only can demand the performance of the contract. It means, except for the promisee himself/herself any third-party stranger to the contract cannot demand the performance of the contract.

The right to demand performance of the contract also remains with promisor but in general, it is understood that the promisor has an obligation to perform his duties first. Thus, the promisee only can demand performance.

• Promisee (Sec. 530(1)): The promisee is the person who has the chief right to demand the performance of the contract. Section 530 regarding these states:

Only the party to contract can demand the performance of the contract in general. However, if the contract is formed for the benefit of others than any the third party related to contract indirectly and not involved in the contract can also be made the demand for the performance of the contract. 

In case of having two or more promisee, until and unless any specification mentioned in the contract, all the promisee jointly should demand performance even the consideration has paid by single does not affect this.  

Therefore, the following are the persons apart from promisee who can demand the performance: 

• Legal representative/ Heirs (Sec. 528): If in the case of death or insanity of the promisee, his legal representative or heirs can demand the performance of the contract except for the contract based on personal qualifications and attributes.
• Third-person obtaining benefit from the contract (Sec. 530(1)): In case if the contract is formed for the benefit of the third innocent party then such third the party can also demand the performance of the contract even though he is not an original party to the contract. 

For example, M agrees to transfer Rs. 20,000 to N a guardian of innocent party O and for the benefit of O. Here in case of non-fulfillment of the promise by M, O can demand the performance of such promise to M.

• Joint Promisee (Sec. 530 (2)): If there are two or more than two promisees in the contract then except otherwise mentioned in the contract, they all combinedly have to demand the performance of the promisor. 

In this regard following provision has made by law;

Circumstances	The person entitled to demand
If all promisees are alive	All the promise jointly
In case one of the joint promisees dies	All the joint promisee with the legal representative or the heir of the deceased promisee.
In case all the promisee die	Heirs or legal representatives of all the promisee jointly.

Therefore, the primary right to demand the performance of the contract is on the hand of the promisee and indifferent cases other persons are also entitled to demand for the performance of the nature and terms of the contract that allows them to do so.

• Performance in case of Reciprocal Promise

In most commercial contracts, two or more parties typically undertake to perform certain obligations reciprocally related to each other. The performance of one party's obligation is dependent upon the other party fulfilling its expressed or implied obligation then it is called reciprocal promise.

When a contract consists of reciprocal promise to be simultaneously performed no promisor needs to perform his promise unless the promisee is willing and ready to perform his reciprocal promise.

In the case of reciprocal promise, each party to the contract is a promiser as well as promisee too. For example, A and B enter into a contract that A will deliver goods to B, and B will make certain payments before delivery. 

Now A is not bound to deliver the goods to B unless B is ready and willing to pay the amount. Similarly, B is also not bound to make payment of goods until A is ready and willing to deliver the goods.

        Types of performance of reciprocal promise (Section 522)

The major types are mentioned below;

• Mutual and independent reciprocal promise

If the performance of one party is independent and irrespective to the performance of another part then it is called mutual and independent reciprocal promise. For example, A agrees to Y to supply daily newspaper and Y agrees to pay the price of the newspaper at the end of every month. Here the promises of both are mutual and independent. 

• Conditional and dependent reciprocal promises

If the performance of the promise of the one-party directly depends on the performance of the promise of another party then such a promise is called conditional and dependent reciprocal promise.

For example, M promises to make the furniture to N, and to construct the furniture N has to give Rs. 5,000 in advance. Here the promise of M to build furniture is based on the performance of the premise of payment of advance by N. If N fails to fulfill his promise then M does not need to fulfill his promise as well. This is called conditional and dependent reciprocal promise.

• Mutual and concurrent or simultaneous reciprocal promise

It is the situation in which the promises of both of the parties are performed concurrently. For example, all the sales and purchases with cash are an example of mutual and concurrent or simultaneous reciprocal promise.

        Rules regarding the Performance of Reciprocal Promise

Section 522 of the Civil Code, 2074 mentioned the following rules regarding the performance of the reciprocal promise.

• In case of performance of the simultaneous reciprocal promise, if one party is fundamentally ready to perform his obligations but the next party shows the intention of not fulfilling his obligations, then the party who is ready to perform shall not be required to fulfill his promises again.
• If the order of performance of a reciprocal promise is determined or specified in the contract then performance should be accordingly and if not specified then it should be on the basis of nature and the necessity of the contract.
• In the performance of the reciprocal promise, one party is not able to fulfill his promises because of the obstruct from another party then the party who is not in fault can cancel and recover the loss suffered from such a cancelation of the contract.
• In case of one promise cannot be fulfilled without fulfilling another promise(the promise of another party) then the party who cannot execute the contract because of the failure of the other party to fulfill his promise, may recover losses caused by such failure.

References

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

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