Ch 2 Classification Of Contracts

Performance/ Discharge and Classification of Contracts or Agreements PUTTU GURU PRASAD INC GUNTUR

Discharge of Contract Discharge of contract

By performance

By Impossibility of performance

By agreement

By Breach

Discharge of Contracts : How? • By performance Performance of contingent contracts – Condition needs to be fulfilled in order to ask for the performance of the contracts (E.g. In case the ship is lost I will pay the loss, To pay for the missing dog) Condition precedent – a condition, which is collateral to the performance of contract. The rule of performance is first satisfy and ask for performance. If the event becomes impossible then the contract becomes void

Impossibility of Performance • An agreement to do impossible things is by itself a void agreement E.g. – To get a magic treasure

• But if a subsequent impossibility arises? Ans- Even in this situation the contract becomes void (E.g. When the singer becomes ill as not to sing, and in case of marriage, if the party turns mad) (Where import and export of goods and services are prohibited by the government and transactions that occur between the parties of these States are void)

Doctrine of Frustration Doctrine of frustration• • • • • • •

Destruction of subject matter Change in the circumstances Non-occurrence of the contemplated event Death or incapacity Government or Legislative intervention Intervention by war Application of lease agreement E. g. Coronation of the procession cancelled- the contract becomes frustrated because of non happening of event. The Consequences of application of this doctrine is- The dissolution of contract happens automatically

Discharge by Agreement • Novation- Change of parties, substitution of agreement with a new one • Remission of performance- e.g. Tells to paint the picture but later says no.

• Waiver, Extension of time etc • Accord and satisfaction, Abandonment • Material Alteration

Based on Enforceability • Valid- All essentials being fufilled • Voidable- Few contracts where the aggrieved party can ask it to be declared either as void as valid • Void and Void abinitio- Unsound, Minor etc • Unenforceable- Cannot be enforced ( Social contracts, Domestic Contracts) • Illegal-Either because of consideration or by object

Method of Formation • Formal and simple Method Formal

Implied

Method Expressed

Implied

Quasi

Standard form contracts

Contingent contracts

Extent of Performance / Obligation Based on Performance Extent of performance Executed

Executory

Obligation to Perform Unilateral

Bilateral

• •

• • • •

• b)

Performance

Duty to perform Offer to perform/ Tender to perform Unless and until the performance has been excused under any Act or provision of law Therefore there must be Actual performance ( when both the parties have completed their perforce of the contract) It ends the contract In case of death to be sued by the legal representative It has to be performed by the promisor or his legal representatives or any competent party authorized to perform ( legal reps liability is only to the extent of the property which they inherit) Even a third party can perform if authorised Attempt or offer or tender to perform Doctrine of vicarious performance also exists

Effect of Incomplete Performance By a Party When do we say that there was a breach of contract? Promisor may be in breach of the performance• When he refuses to perform • He renders himself disabled to perform his obligation • He fails to perform • By his conduct or action or words it becomes an impossible performance

Effect of Prevention of Performance

• • • • •

What do you understand by prevention of performance? A performance is said to be prevented: When an offer is made unconditionally It must be made in proper time and place Under reasonable circumstances and opportunity Able to do and perform the whole of what is bound to do If offer is made to the promisor to have reasonable opportunity of seeing it.

Doctrine of Substantial Performance • When substantially performed the party has a right to claim either for • The court says that it is substantial performance if actual performance does not fall short of required performance • If the cost of the remedy is not as great to be compared with the cost of price There is no discharge from paying for the price But the party can take the defence of set off or counter claim

Time as an Essence of Contract • During the performance, time will be given priority • Parties may agree that time is the essence of contract • It has to be performed within the stipulated time • If specified -it gives an opportunity to avoid the contract • It completely depends on the intention of the parties- Hadley V. Baxendale

Privity of Contract and Consideration • India-- Promise to pay-- Must be by the person who contracts or any other person- Still followed • But English law- consideration must move from the party to the contract only • Dutton V Poole – Consideration moved from the father (Valid) But later after 200 yrs the law changed in Tweddle V Atkinson- Where it was held that consideration must move from the parties to the contract only otherwise it cannot be enforced even if it was made for their benefit Case-Dunlop Pneumatic Tyre Co V. Selfridge & Co ( Undisclosed principal- If no Consideration moved from the defendant therefore the contract was not enforceable

Privity of Contract

Stranger cannot sue

Though criticized,… the Rule of Privity of Contract is followed in England In India- The same is the position based on the decision in Tweddle v Atkinson----

But there are many exceptions to this rule e) f) g) i)

Benefiaries under trust or charge or other arrangement can sue Marriage settlement, partition or other family arrangements Acknowledgement or estoppel- Promissory estoppel ( exception applicable under consideration) Covenants running with the land ( past consideration – Past act at the request a good consideration)

Privity of Contract- Exceptions •

Past Services (Position in India) – Without any request or promise and if there is a subsequent promise to pay for the sameIf X has drowned and Y saves him, and X promises to pay – in India it is a good consideration

e) Past Service at Request- Upton Rural district Council case.

Forbearance to sue also becomes a valid consideration Compromise on a pending suit is a good consideration