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CA Foundation · Business Laws · The Indian Contract Act, 1872

Anita agreed to sell her flat to Bharat for Rs 40 lakh, with completion on 1 March. On 1 March Bharat tendered the full price to Anita at her office, but Anita refused to accept it and refused to hand over the documents. What is the legal position?

Bharat is not responsible for non-performance and keeps his rights under the contract. A valid tender of performance that the promisee refuses relieves the promisor of liability, so Anita's refusal is a breach and Bharat can sue her for damages or specific performance.

  1. ABharat is discharged from the contract and must pay interest on the price
  2. BBharat is not responsible for non-performance and Anita's refusal does not bring his rights to an end, so Bharat may sue her for breachCorrect
  3. CBharat loses all rights because the contract was not completed on the due date
  4. DThe contract becomes void because both parties failed to perform on the due date

Explanation

A valid tender of performance made by the promisor, which the promisee refuses to accept, relieves the promisor of responsibility for non-performance. The promisor does not lose his rights under the contract. Bharat made a proper tender and Anita's refusal is a breach by her. Option A is wrong because a refused tender does not discharge him from the contract or create liability for interest.

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