Business Laws · The Indian Contract Act, 1872

Performance and Discharge of Contracts: CA Foundation Business Laws

Updated 4 October 2026 · Fact-checked

Performance means each party does, or offers to do, what the contract promises. Discharge means the contract ends. It ends by performance, agreement, impossibility (Section 56), lapse of time or breach. To solve questions, identify the rule, apply it to the facts, then state the legal result and any compensation or refund.

Understand Performance and Discharge of Contracts

A contract creates promises. Performance is the party doing what they promised. Under Section 37, parties must either perform or offer to perform, unless the Act or another law excuses them. If a promisor dies, the representatives are bound, unless the contract shows a contrary intention. But a contract for personal skill, like painting a picture, cannot be enforced after death (illustration (b) to Section 37).

Tender (offer of performance) protects a promisor whose offer is refused. Under Section 38, the promisor is then not responsible for non-performance and does not lose rights under the contract. The offer must be unconditional. It must be made at a proper time and place, so the other side can check that the promisor is able and willing there and then to do the whole of the promise. If goods are offered, the promisee must get a reasonable chance to see they are the contracted goods.

Time and place are covered by Sections 47 to 49. If a promise is to be performed on a certain day without the promisee applying, the promisor may perform at any time during usual business hours on that day, at the right place (Section 47). If application is needed, the promisee must apply at a proper place within usual business hours (Section 48). If no place is fixed and no application is needed, the promisor must ask the promisee to appoint a reasonable place, then perform there (Section 49).

Reciprocal promises are promises each side gives in return for the other. Section 52 says: if the order is fixed by the contract, follow it. If not, follow the order the nature of the transaction requires. Under Section 54, if one promise must be performed first (or the other cannot be claimed until it is) and that party fails, they cannot claim the other's performance and must compensate for loss.

Discharge means the contract comes to an end. The main modes are: performance, mutual agreement, impossibility under Section 56, lapse of time, and breach. Breach can be actual or anticipatory (the promisor declares before the due date that they will not perform). Under Section 56, an agreement to do an act impossible in itself is void. A contract to do an act that later becomes impossible, or unlawful because of an event the promisor could not prevent, becomes void when the act becomes impossible or unlawful. This is commonly called the doctrine of frustration.

Key rules to remember

Duty to perform (Section 37): Parties must perform or offer to perform, unless excused by the Act or another law; Representatives of a dead promisor are bound unless a contrary intention appears. Personal-skill contracts end with death.
Valid tender (Section 38): Unconditional + proper time and place + reasonable opportunity to check ability and goods; If refused, the promisor is not liable for non-performance and keeps contractual rights.
Time of performance (Section 47): Performance without application: any time during usual business hours on the day, at the proper place; Goods brought after closing hours are not performance (illustration to Section 47).
Application for performance (Section 48): Promisee must apply at a proper place within usual business hours; What is a proper time and place is a question of fact.
No place fixed (Section 49): Promisor applies to the promisee to appoint a reasonable place, then performs there; Applies when no application by the promisee is needed and no place is fixed.
Order of reciprocal promises (Section 52): Express order first; otherwise the order the nature of the transaction requires; Builder builds before owner pays.
Default in the first promise (Section 54): Defaulting party cannot claim the reciprocal promise and must compensate the other for loss; Use when one promise must be performed first.
Impossibility (Section 56): Impossible in itself: void from the start. Later impossible or unlawful (event the promisor could not prevent): void when it happens; If promisor knew or with reasonable diligence could have known, and promisee did not know, promisor compensates promisee.
Restitution (Section 65): Advantage received under a void agreement or contract that becomes void must be restored or compensated; Advance paid is refunded, but lost profits are not payable (illustration (d)).

How to solve Performance and Discharge of Contracts questions

Use the same path for any problem question. It keeps your answer in the provision-facts-conclusion shape that earns step marks.

1Read the facts and mark the issue: tender, time or place, reciprocal promises, impossibility, or breach.
2State the rule in plain words and give the section number only if you are sure of it.
3Apply the rule to the facts. Quote the key facts: dates, hours, place, who acted first.
4For impossibility, ask whether it was impossible from the start or became impossible later, and whether the promisor could prevent the event.
5Check consequences: is the contract void, can the other side refuse to perform, is compensation due, must money be refunded (Section 65)?
6Write a one-line conclusion starting with 'Hence'.

Quickest way: Provision-Facts-Conclusion in four lines

When to use it: Use this for short problem questions when you have only a few minutes.

Line 1: Name the issue and the rule, with the section number if sure.
Line 2: Pick the two or three facts that decide the issue.
Line 3: Link facts to rule using 'since' or 'because'.
Line 4: Conclusion: valid tender or not, void or not, who pays whom.
Memory aid for sections: 37 duty, 38 tender, 47-49 time and place, 52 order, 54 default, 56 impossibility, 65 refund.

Common mistakes in Performance and Discharge of Contracts

Treating every unexpected difficulty as frustration under Section 56.
Students read 'impossible' loosely.
Fix: Section 56 needs the act to become impossible or unlawful, not merely harder or costlier. Check that the event was beyond the promisor's control.
Forgetting Section 65 after a contract becomes void.
Students stop at 'the contract is void'.
Fix: Add that any advantage received, such as an advance, must be restored or compensated.
Calling a tender valid when it is conditional or at the wrong time.
Students skip the three conditions of Section 38.
Fix: Tick off each condition: unconditional, proper time and place, reasonable chance to check goods.
Saying the promisor's death always ends the contract.
Students remember only the painter illustration.
Fix: Representatives are bound unless a contrary intention appears or the contract depends on personal skill.
Mixing up who must apply in Sections 47, 48 and 49.
The sections look alike.
Fix: Ask first: does the promisor perform without application? If yes, Section 47 or 49. If no, the promisee applies under Section 48.
Ignoring the order of reciprocal promises.
Students treat both promises as simultaneous.
Fix: Check the contract for an express order, then the nature of the transaction (Section 52). Apply Section 54 to the party who defaults first.

Worked examples

Example 1

A agrees to deliver 100 bales of cotton at B's warehouse on 1st March. A reaches the warehouse at 8 pm, after closing time, and B refuses to accept. Can A say he made a valid offer of performance?

Show the solution

Issue: time and place of performance, and tender.
Rule: where a promise is to be performed on a certain day without application, the promisor may perform at any time during usual business hours on that day at the proper place (Section 47).
A tender must also be made at a proper time and place so that the promisee has a reasonable opportunity to check (Section 38).
Application: A came after the usual hour for closing, so the offer was not at a proper time.
Conclusion: A has not performed and has not made a valid tender, so he cannot claim protection under Section 38.

Answer: No. The offer was made after business hours, so it is neither performance nor a valid tender.

Example 2

X contracts to sing at Y's concert for ₹1,000, paid in advance. X falls too ill to sing. Y claims the ₹1,000 and also the profit he would have made. Advise.

Show the solution

Issue: illness makes the act impossible, so the contract becomes void.
Rule: a contract to do an act that becomes impossible after the contract is made becomes void when the act becomes impossible (Section 56).
Rule: when a contract becomes void, a person who received an advantage must restore it (Section 65).
Application: X's illness is an event he could not prevent. The contract is void, and X must refund the ₹1,000 advance.
Loss of profit: per illustration (d) to Section 65, X is not bound to compensate Y for profits Y would have made.
Conclusion: Y gets the ₹1,000 back but not the lost profits.

Answer: X must refund ₹1,000 to Y. He is not liable for Y's lost profits.

Exam tips

In problem questions, write the section number only when certain. A correct rule in plain words still earns marks.
Always finish with a clear conclusion. Examiners reward 'the contract is void and the advance must be refunded' over a bare 'void'.
Learn the illustrations: cotton at the warehouse, singer too ill, ship and cargo, painter dying. Many questions mirror them.
For tender, list the conditions as numbered points. It makes your answer easy to mark.
Keep Sections 56 and 65 together in your mind, since examiners often test them in one question.

Practice questions from The Indian Contract Act, 1872

Performance and Discharge of Contracts: frequently asked questions

What is the doctrine of frustration under Section 56?

It says a contract becomes void when the act promised becomes impossible, or unlawful because of an event the promisor could not prevent. The contract ends from that moment. Under Section 65, benefits received must be restored or compensated.

What are the conditions of a valid tender?

Under Section 38, the offer must be unconditional. It must be made at a proper time and place so the promisee can see the promisor is able and willing to perform the whole promise. For goods, the promisee must have a reasonable chance to check them.

What is anticipatory breach?

It is when a party declares, before performance is due, that they will not perform. The other party can treat the contract as ended and claim damages, or wait until the due date. This is a general rule of contract law, not a section number you need to quote.

What are the modes of discharge of a contract?

The main modes are performance, mutual agreement, impossibility under Section 56, lapse of time and breach. Learn one short example for each so you can answer quickly in the exam.