Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Discharge of Contract by Performance and Tender

Updated 10 October 2026 · Fact-checked

Performance by both parties discharges a contract. If one party offers to perform and the other refuses, that offer is a tender. A tender does not discharge the contract by itself. Under Section 38, a valid tender protects the promisor from liability and keeps his rights. The promisee's refusal may be his breach, giving the promisor a claim for damages.

Understand Discharge of Contract by Performance and Tender

A contract creates duties. When those duties are completed, the contract comes to an end. This ending is called discharge. The most common way is performance: each party does what the contract says.

Performance can be actual performance, where the promise is fully carried out, for example the seller delivers the goods and the buyer pays. It can also take the form of an offer of performance, called tender. Here the promisor is ready and willing and offers to perform, but the promisee refuses to accept.

A tender is not discharge by itself. Under the Indian Contract Act, 1872, performance of contracts is covered in Sections 37 to 67, and tender is dealt with in Section 38. That section says that if the promisor makes a valid tender and the promisee refuses, the promisor is not responsible for non-performance, and he does not lose his rights under the contract. So a tender is treated like performance only for one purpose: to protect the honest party from liability. The contract is not ended by it, and a money debt, for example, still remains.

The promisee's refusal of a valid tender can also be treated as a breach by the promisee. The promisor may then treat the contract as broken by the promisee and claim damages.

The money rules, such as offering the exact amount and the creditor not having to give change, are not words of Section 38. They come from general principles and from currency law. Section 38 itself lists three conditions: the offer must be unconditional, made at a proper time and place, and (for goods) give the promisee a reasonable chance to see that the thing offered is the thing promised.

The promise itself must usually be performed by the promisor. But some contracts can be performed by an agent or a representative. If the contract depends on personal skill, such as a singer promising to perform, only that person can do it. For a simple money debt or delivery of goods, someone else can often perform on the promisor's behalf.

So for any question, ask three things: who must perform, what exactly must be performed, and was the offer of performance valid.

Key formulas to remember

Duty to perform: Parties must perform or offer to perform their promises, unless performance is excused by law or the contract; This is the basic rule of Section 37. If the promisor dies, his legal representatives are bound by the promise unless the contract shows a contrary intention, as in a personal contract.
Conditions of a valid tender (Section 38): (1) Unconditional + (2) at proper time and place, so that the promisee can see the promisor is able and willing there and then to do the whole of his promise + (3) for goods, a reasonable opportunity for the promisee to check that the thing offered is the thing promised; These are the three conditions in Section 38. The offer must cover the whole promise, not a part. If any condition is missing, the tender is not valid and gives no protection. The promisor must also be ready and willing to perform.
Tender of goods: Goods must be offered as per contract, and the promisee must get a reasonable chance to see that they match; The buyer is entitled to check that the goods are the ones agreed.
Tender of money: Exact amount, in legal tender currency, unconditionally offered; The creditor need not give change. Offering a larger note and asking for change is not a valid tender. These exact-amount and no-change rules come from general principles and currency law, not from the text of Section 38.
Effect of refusing a valid tender: Promisor is not responsible for non-performance and does not lose his rights under the contract (Section 38); The promisor is not in breach and keeps his rights under the contract. Tender is treated as equal to performance only to protect him from liability. It is not discharge by itself and does not extinguish a money debt. The promisee's refusal may be treated as his breach, so the promisor can claim damages.
Who may perform: Promisor himself, his agent or his representative, unless the contract requires personal performance; Personal skill or confidence in the person means only that person may perform.

How to solve Discharge of Contract by Performance and Tender questions

Use this order for any MCQ on performance or tender. It helps you spot the one condition that fails.

1Read the facts and identify who promised what, and whether the question is about actual performance or an offer of performance.
2Check who is performing. If the contract needs personal skill, only the promisor can perform. Otherwise an agent or representative may do it.
3Test the tender against each condition: unconditional, proper time and place, the whole promise, and a reasonable chance to inspect goods.
4For money, check the exact amount and whether it is legal currency. For goods, check quantity, quality and chance to inspect.
5If the tender is valid and refused, conclude that the promisor is not in breach and keeps his rights under the contract.
6If any condition fails, conclude that there is no valid tender and the promisor is not protected.
7Match your conclusion to the option. Eliminate options that say the contract is void or that the promisor is liable despite a valid tender.

Quickest way: The five-point tender check

When to use it: Use this when a question describes someone offering to pay or deliver and the other side refusing or complaining.

Look for the word 'conditional' or 'part'. Either one usually makes the tender invalid.
Look at the time and place. Offering at midnight or at the wrong place usually fails.
For goods, look for a chance to inspect. If the goods were forced without checking, the tender is weak.
For money, look for exact amount. Asking for change or paying in non-legal tender fails.
If all five points pass, choose the option that protects the promisor.

Common mistakes in Discharge of Contract by Performance and Tender

Thinking a valid tender discharges the debt itself
Students read 'discharge' in the chapter and assume tender always ends the liability.
Fix: Remember that under Section 38 a valid tender relieves the promisor of liability for non-performance. It does not by itself extinguish a money debt.
Accepting a conditional offer as valid tender
The facts sound reasonable, such as 'I will pay if you give me a receipt of a different kind'.
Fix: A tender must be unconditional. If the promisor adds a condition the contract does not allow, it fails.
Treating part-payment as valid tender
Students think offering something is better than nothing.
Fix: The offer must be for the whole of what was promised. A creditor can refuse part.
Believing the creditor must give change
It feels natural in daily life to expect change.
Fix: Tender of money requires the exact amount. The debtor must arrange the right amount.
Forgetting the chance to inspect goods
Students focus on delivery and ignore the buyer's right to check.
Fix: Whenever goods are tendered, ask whether the promisee had a reasonable chance to see that they match the contract.
Assuming every contract can be performed by anyone
The rule that an agent may perform is learned without its exception.
Fix: If the contract depends on personal skill or trust, only that person can perform it.

Worked examples

Example 1

Rohan owes Meera ₹5,000 under a contract due on 1 March. On that day he goes to her house at a reasonable hour and offers a ₹2,000 note and a ₹500 note, saying he will pay the rest tomorrow. Meera refuses. Is this a valid tender?
A) Yes, because he offered at the right time and place
B) No, because the offer was not for the whole amount
C) Yes, because Meera must accept any part payment
D) No, because money can never be tendered

Show the solution

The debt is ₹5,000. Rohan offered ₹2,000 + ₹500 = ₹2,500 only, and promised the rest tomorrow. This is an offer for part of the promise.
A valid tender must be for the whole obligation. A part offer fails this condition, so it is not a valid tender.
Time and place were fine, but that does not cure the shortfall.
Option A ignores the part offer. Option C is wrong because a creditor need not accept part. Option D is wrong because money can be tendered, if it is legal tender and for the whole amount. The defect here is the part offer, not the use of money.

Answer: B) No, because the offer was not for the whole amount

Example 2

Asha agrees to sell 100 kg of rice to Vikram, delivery at his shop on 10 April. She arrives on 10 April during business hours with exactly 100 kg of the agreed rice and offers it unconditionally, allowing Vikram to inspect it. Vikram refuses to accept without any reason. What is the position?
A) Asha is in breach of contract
B) The contract becomes void
C) Asha has made a valid tender and is not responsible for non-delivery
D) Asha must offer again at a later date before any right arises

Show the solution

Check the conditions: right quantity of 100 kg, agreed quality, right date, right place and business hours.
The offer was unconditional and Vikram had a chance to inspect.
So all the conditions of a valid tender are met.
Vikram's refusal has consequences for Vikram, not for Asha. She is not in breach.
A is wrong because she performed her side. B is wrong because refusal does not make a contract void. D is wrong because a valid tender needs no repetition to protect her.

Answer: C) Asha has made a valid tender and is not responsible for non-delivery

Exam tips

Most questions give a short fact pattern. Hunt for the one defect: condition, part offer, wrong time or place, or no chance to inspect.
Learn the essentials of a valid tender as a fixed list. Options often reword one of them.
Do not confuse tender with an offer in contract formation. Tender here means an offer to perform an existing promise.
When the question says the promisee refused a valid tender, pick the option that protects the promisor.
If the contract is personal, such as an artist's performance, choose the option that only the promisor can perform.

Practice questions from Discharge of Contracts

Discharge of Contract by Performance and Tender in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Discharge of Contract by Performance and Tender: frequently asked questions

What is a valid tender of performance?

It is an offer to perform a promise that meets set conditions. It must be unconditional, for the whole promise, at the proper time and place, and give the promisee a chance to check goods. If these are met and the promisee refuses, the promisor is not treated as being in breach.

What is the difference between tender of goods and tender of money?

For goods, the promisee must get a reasonable chance to inspect that they match the contract. For money, the exact amount must be offered in legal currency, and the creditor need not give change. Both must be unconditional and made at the proper time and place.

Who can perform a contract?

Usually the promisor himself, his agent or his legal representative can perform. The exception is a contract based on personal skill or trust, which only the named person can carry out.

Does tender discharge a contract?

Under Section 38, a valid tender relieves the promisor of liability for non-performance when the promisee refuses, and he keeps his rights under the contract. It is not the same as full performance, and it does not by itself extinguish a money debt.