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

Kiran agrees to sell 100 bags of rice to Lalit, delivery on 1 March, time being stated to be of the essence. Kiran fails to deliver on 1 March, but delivers on 5 March, and Lalit accepts delivery without any protest or reservation. Lalit later claims compensation for the delay. What is the legal position?

Lalit cannot claim compensation. Although time was of the essence, he accepted the late delivery without telling Kiran he would claim compensation for the delay. Under the Contract Act, accepting late performance without such notice at the time of acceptance forfeits the right to compensation for the delay.

  1. ALalit can claim compensation, because time was of the essence
  2. BLalit can claim compensation only if the delay exceeded one week
  3. CLalit cannot claim compensation, because he accepted the late performance without notice of intention to claim itCorrect
  4. DLalit can treat the contract as void even after accepting delivery

Explanation

Where time is of the essence and the promisor fails to perform on time, the contract becomes voidable at the promisee's option. If the promisee accepts late performance, he cannot claim compensation for the delay unless he gave notice of his intention to do so at the time of acceptance (Section 55). Lalit gave no such notice, so his claim fails. Option A ignores the acceptance without notice.

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