Performance of Contracts: formula sheet

Key formulas

Basic rule of Section 37

Each party must perform OR offer to perform his promise

Applies unless performance is dispensed with or excused under the Contract Act or any other law.

Excuses from performance

Dispensed with (by agreement or waiver) OR excused by law

Examples: novation, rescission, remission, impossibility, void contract.

Legal representatives

Promise binds promisor + his legal representatives, unless a contrary intention appears in the contract

Liability is limited to the value of the estate received. In a contract of personal skill, the nature of the contract implies a contrary intention, so the legal representatives are not bound.

Tender

Valid offer to perform = unconditional + at proper time and place + (where goods are to be delivered) a reasonable opportunity for the promisee to see that the thing offered is the thing promised

A valid tender that is refused saves the promisor from being responsible for non-performance and from losing his rights under the contract (Section 38). The inspection condition applies only to delivery of goods, not to tender of money.

Meaning of valid tender

Valid tender = actual offer to perform + all required conditions met

A mere statement of readiness is not a tender.

Conditions of valid tender

Unconditional + proper time + proper place + proper person + whole performance + reasonable chance to inspect goods

Section 38(1) itself states the unconditional, time and place, and reasonable opportunity to ascertain conditions. Whole performance and the proper person are settled rules from case law. Learn all as a checklist. Most MCQs test one condition at a time.

Effect of valid tender refused (Section 38)

Promisee refuses valid tender → promisor not responsible for non-performance and does not lose his rights under the contract

The contract is not cancelled.

Tender of money

Exact amount + legal tender currency + unconditional

The exact-amount and legal tender rule comes from the general law on payment (Coinage Act, RBI Act), not from Section 38. A refused valid tender of money leaves the debt subsisting, but the debtor is not liable for non-performance.

Tender of goods

Goods must match contract + promisee gets reasonable chance to inspect

Tender of wrong quantity or quality can be rejected.

Section 38 rule

Valid tender + refusal by promisee = promisor not responsible for non-performance + promisor keeps his rights under the contract + contract not discharged (it remains in force)

Applies only when the tender is valid. A defective tender gives no protection.

Conditions of a valid tender (Section 38)

Unconditional + for the whole obligation + proper time and place + reasonable opportunity for the promisee to ascertain that the promisor is able and willing to perform the whole promise (and, for goods, that the thing offered is what was promised)

These are the conditions in the section itself. A conditional or partial tender is not valid, so the promisee may refuse it without penalty.

General rule on tender

Made to the right person

This comes from the general rules on tender, not from the wording of Section 38.

Tender of goods or services refused

Promisor is excused from liability, keeps his rights under the contract, and the contract remains in force

He may enforce those rights as the law allows.

Tender of money refused

Promisor not responsible for non-performance and keeps his rights; the debt continues to exist

A tender of money must be in legal tender, for the exact amount, and unconditional. Section 38 applies to any obligation tendered, but a refused tender of money does not by itself extinguish the debt.

Rule of Section 67

Promisee neglects or refuses to afford reasonable facilities → promisor is excused for non-performance caused by that neglect

The excuse is limited to non-performance caused by the neglect or refusal.

Conditions to apply the rule

Valid promise + facilities needed + facilities reasonable + promisee neglects or refuses + non-performance results

If any condition is missing, Section 67 does not protect the promisor.

Section 67 vs Section 38

Section 67: refusal of facilities for performance. Section 38: refusal to accept a valid tender of performance.

Tender has already been made in Section 38. In Section 67 performance is blocked before it can be offered.

Quick revision

• Section 37: parties must perform, or offer to perform, their promises.
• Performance can be excused by law or by agreement of the parties.
• A valid offer of performance is called a tender.
• Section 38, clause (1): a tender must be unconditional.
• Section 38, clause (2): a tender must be made at the proper time and place, so that the promisee can ascertain the promisor is able and willing there and then to do the whole of what he promised.
• Section 38, clause (3): for an offer to deliver goods, the promisee must have a reasonable chance to see that the thing offered is what the promisor is bound to deliver.
• Closing paragraph of Section 38: an offer to any one of several joint promisees has the same effect as an offer to all.
• Taught with tender from general principles: it is made to the promisee or his authorised person.
• For a tender of money, the exact amount due must be offered in legal tender.
• Opening part of Section 38: if a valid tender is refused, the promisor is not responsible for non-performance and does not lose his rights under the contract.
• A refused tender of money does not discharge the debt. The debtor remains liable to pay.
• Section 67: the promisee must give reasonable facilities for performance.
• If the promisee neglects or refuses to give such facilities, the promisor is excused for the non-performance caused by it. The contract is not ended by Section 67 alone.
• Always check whether the tender is valid before applying Section 38.

Common mistakes

• Thinking only actual performance satisfies Section 37. Fix: Remember the pair: perform or offer to perform. A valid tender counts.
• Believing performance can never be excused. Fix: Learn the exception: dispensed with or excused under the Act or any other law.
• Thinking that saying 'I am ready to deliver' is a valid tender. Fix: Remember a tender needs an actual offer to perform. Readiness alone does not count.
• Treating a conditional offer as valid. Fix: Look for words like 'only if' or 'provided that'. If the contract does not allow the condition, the tender fails.
• Saying the contract ends automatically when the promisee refuses a valid tender. Fix: Remember that Section 38 only excuses the promisor from liability. He keeps his rights under the contract, and the contract is not discharged. It remains in force.
• Applying Section 38 to a conditional or partial tender. Fix: Always test the tender first. Only a valid tender, unconditional and for the whole obligation, gives the protection.
• Saying the contract becomes void under Section 67. Fix: Section 67 only excuses the promisor for non-performance caused by the neglect. It does not declare the contract void.
• Mixing up Section 67 and Section 38. Fix: Section 38 needs a valid tender that is refused. Section 67 is about refusing facilities needed to perform.

Exam tips

• Expect MCQs testing the phrase 'perform or offer to perform' and the exceptions to it.
• Watch the words 'always', 'never' and 'only'. They usually make an option wrong.
• For death questions, first check whether the contract is personal.
• Link Section 37 with Sections 38 and 62 to 67. Questions may mix tender, novation and impossibility.
• Treat tender questions as a checklist. Find the one condition that fails.
• Remember that a refused valid tender excuses the promisor from responsibility for non-performance but does not cancel the contract.
• Watch for words like 'only if' and 'part' in the options. They often signal an invalid tender.
• Remember the Section 38 effect: the promisor is not responsible for non-performance and does not lose his rights under the contract.