PERFORMANCE OF CONTRACT

Contract is an agreement creating and defining legally binding obligations between the parties which recognises some remedies in case of non-performance of those defined obligations. In other words, a valid contract always creates an obligation between the parties that it must be performed. Therefore, the parties of a contract are bound to fulfill their respective obligations under the contract. It is rightly said that all contracts are made for the performance. The performance is very concern of the parties because their expectations can be fulfilled if the obligations under the contract are discharged. The performance is only the way to realize the future planning and achieve the benefits from the contract. The law, therefore, provides various provisions for the effective performance of contract and imposes penalty to the party failing to perform it. In simple words, the performance of contract means the fulfillment of contractual obligations by the contracting parties as per the way and manner or terms and condition of agreement. Therefore, if the obligations are discharged and benefits of rights are obtained by the contracting parties called the performance of contract ‘A’ and ‘B’ enter into a contract to supply 10 tons of rice for Rs. 5 lakhs on 27″ of this month. When ‘A’ supplies rice and ‘B’ pays the price as per the terms and conditions of agreement, the contract is said to be known as performed. The performance of contract either actual or offer to perform it must be exact or in accordance with the way and manner of performance. Similarly, it must be made on or within the time fixed or at the fixed or reasonable place. The promisor is bound to perform and promisee can demand for the performance of contract. After the performance, the contract comes to an end or terminated.

CONTRACTS NEED NOT BE PERFORMED

In general, all the contracts are made for performance. Therefore, if a contract is made which cannot be performed or need not perform compulsorily, is not a valid contract. But there are various circumstances where contracts need not to be performed. These cases can be described as follows:

1. When contract has been cancelled by the mutual consent of the parties: The contracting parties are free to make and terminate the contract by their mutual consent. When the contract is cancelled the parties becomes free from their respective obligations. And they need not to perform the contract.

2. When the performance becomes impossible to perform: If the performance of contract is impossible or becomes impossible due to some event rendering the contract impossible to perform, it comes to an end. Impossible contract cannot be possible even by the order of court.

3. In case of novation of contract:

When an existing contract has been replaced by a new contract between the original parties or with new parties, the original contract need not be performed by the parties as it is terminated immediately at the time of new contract.

4. When the performance of contract becomes illegal: The performance of illegal contract is also illegal and punishable by law. When a contract is of becomes illegal due to some reasons it comes to an end and the parties not to perform the contract.

5. When contract is declared as void: 

A void contract does not create valid and binding obligations between the contracting parties. The performance becomes impossible when it is declared as void. There is no legal obligation to the parties to perform the contract which is declared as void.

6. When a contract is entered in to through agent beyond the limit of his authority: The rule of agency is that the acts of agent bind the principal. But when agent acts in the business of agency beyond the limit of authority, the principal is not bound to perform the contract with third parties. Therefore, all the contracts entered in to by agent by exceeding the limit of authority given to him need not be performed by the principal.

7. When the contract is unequal to the parties: Those agreements which are made in equal footings and provide equal benefits are enforceable by law. If a contract confers unnecessary benefit to one party and imposes unreasonable hardship to another, the court may refuse to issue order for the performance of such contract. Such unequal contracts do not create binding obligation to perform the contract.

8. When the performance becomes immoral: If the performance of contract is opposite to the public morality or it effects negatively the norms and values or a society or a particular community, religion, sex or ethnicity, the performance does not becomes binding to the contracting parties.

9. When contract entered in to by a trustee in breach of his trust: Where a contract is entered in to by a trustee of a trust in breach of his legal or fiduciary duties of take care of the benefit of the beneficiary of such trust, the trust is not necessary to perform the obligations by the acts of such trustee. The acts of trustee in breach of his trust do not bind the trust and beneficiary as well lawful contract, besides complying a number of elements, needs to be within the capability of performance of parties to the contract. In the light of the given statement, discuss the importance and rules regarding the performance of contract.