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CMA Foundation · Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Karan contracts to supply 100 bales of cloth to Lata, delivery next day, and Lata promises to pay within one month. Karan fails to deliver on the due day. Which statement is correct?

Lata's promise to pay need not be performed, and Karan must compensate her for any loss. Since delivery was to occur before payment fell due, Karan's default under Section 54 means he cannot claim the price and is liable for loss caused by non-performance.

  1. ALata's promise to pay need not be performed, and Karan must compensate her for lossCorrect
  2. BLata must still pay within a month and then claim damages
  3. CLata must pay half the price because the contract is divisible
  4. DThe contract is automatically void and no compensation is due

Explanation

Section 54 deals with reciprocal promises where one must be performed first. Karan's delivery had to be performed first, and his failure means he cannot claim payment and must compensate Lata for loss from non-performance. Requiring Lata to pay anyway reverses the rule, and nothing makes the contract void.

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