Certain obligations are undertaken towards each other by both the promisor and the promisee in a contract. The obligations could be defined in the form of a promise in exchange for another promise or a reciprocal promise too. The law on performance of a reciprocal promise is provided by Sections 51 to 58 of The Indian Contract Act, 1872. Let’s discuss the provisions of all of these sections in detail. This would help us learn more about the rules regarding the performance of reciprocal promises.
When certain contracts constitute promises that are to be carried out at the same time or a reciprocal promise, the promisor is never obligated to execute his promise until the promise wills to proceed with his reciprocal promise.
For example, when we are buying something, the seller agrees on giving us the product in exchange for the money we are paying. This is a classic example of reciprocal promise where we promise to pay the monetary value of the product and the seller promises to give us the goods on receiving the amount. If either of us is not willing to perform our promise, then the contract could be deemed ended by the other party.
If there is a reciprocal promise included in a contract, the parties involved in the contract can decide on the sequence in which the promises are to be carried out. In such cases, the order of performance of a reciprocal promise as mentioned in the contract is to be paid heed to.
However, if the contract does not specifically mention any such sequence, the order of performance of a reciprocal promise is dictated depending on the sole nature of the transaction.
For example, Party A promised Party B to help find a property in lieu of Party B’s promise to pay an amount of commission for the same purpose. Here the contract does not mention the sequence of performance of the promise. However, the nature of the business is suggestive that Party A has to help Party B find the property before Party A expects Party B to fulfil his promise of paying Party A the commission.
In a contract with reciprocal promises, if one party does not let the other party perform their promise, the party prevented from performing their promise is allowed the option of declaring the contract void.
Moreover, the party prevented from the performance can demand and claim reimbursement from the hindering party for any losses that he might bear because of the non-performance of the contract.
For example, Robert and Dave entered a contract where Robert promises to deep-clean Dave’s kitchen. In exchange, Dave promises to pay Robert Rs. 15,000 and empty the kitchen of all the appliances and utensils before Robert starts work. However, when Robert begins work, he discovers that Dave has not cleared the stuff as promised and does not endorse his pleas too. So, Robert can declare the contract null and void and claim the money he was promised by Dave since Dave obstructed him and did not let him perform his promise.
In a contract where the reciprocal promises are dependent on each other, if the promisor who is required to fulfil his promise before the other fails to fulfil it, he cannot demand the execution of the reciprocal promise.
He also stays liable to reimburse the other party for any losses he could suffer because of the non-performance of the contract.
For example, Dave hires a private detective for a month and promises to pay the detective a certain amount. The detective promises to start work within 48 hours of receiving an advance payment from Dave. Dave fails to make the payment and doesn’t perform his end of the promise. The detective also does not start working.
Now, Dave cannot demand the performance of the detective’s promise due to his failure to perform his promise first. He would also have to reimburse the detective for any losses endured by the detective due to non-payment of advance by Dave.
If it is essential to the contract that a certain promise is performed in a specific time frame, and the promisor fails in doing so, then the promisee could void the contract and claim compensation for any losses sustained.
E.g., share trade is a contract where time is of the essence due to its fluctuating price.
The contract cannot be voided against the expiration of the time for performance of a promise if time is not of the essence. The promisee is only entitled to compensation for any losses generated from the delay from the promisor.
The promisee can also void the contract if the promise is not performed within a reasonable time, even when time is not of the essence. The promisee could also waive his right to void the contract if the promisor fails to perform it in a reasonable time frame in a time-sensitive contract. The promisee also has to serve a notice of his intent to the promisor to demand compensation when he accepts the performance of the contract. Otherwise, he cannot claim any compensation for non-performance of the promise from the promisor within the agreed time.
E.g. Dave promises to pay Robert’s fees for the next academic year. Dave needs to ensure the payment is made before the last date specified by the College, although it’s not mentioned in the contract. Here Dave’s failure to perform before the last date could cause losses to Robert.
If in a contract the promisor takes up an unlawful or impossible act, the contract is void. The act could be unlawful or impossible at the time of signing the contract, or certain subsequent events could turn it impossible.
The contract is void if the promisor and the promisee know that the act is unlawful or impossible. Even if they are not aware of the act being so during the signing, the contract stays void. If the promisor is aware and the promisee is not, then the promisor is liable to compensate the promisee for any sustained losses of the promisee.
If the promise was lawful and possible when they entered the contract but subsequent events made it unlawful or impossible and the promisor could not prevent it from happening, the contract is void from the time the act becomes unlawful or impossible.
If the parties entered a contract to do certain legal things, but afterwards, under certain circumstances agree to do illegal things, the first batch of promises is a valid contract but the second is void.
If a contract made with an alternative promise, later branches out to an illegal act, then only the legal branch stays viable to be enforced.
Q1: Give one example each of Initial Impossibility and Subsequent Impossibility.
Ans: Initial Impossibility
Maggie promises Jill to travel from India to the US in four hours and collect goods from Jack. The contract is void even if both of them are not aware that the distance cannot be covered in four hours.
Maggie promises to deliver 50 Kgs of plastic bags to Jill. However, a law banning plastic bags is passed and Maggie is unable to perform his promise. The contract is void.
Q2: Give one example each of Reciprocal and Alternative Promise of Legal and Illegal Acts.
A2: Reciprocal Promise of Legal and Illegal Acts
Robert agrees on selling his property to Dave for 20 Lakh. Then they agree that if Dave opens up a gambling café there, he would pay Robert 30 Lakhs more. Here the first promise of 20 lakh is legal and so is a valid contract but the second promise is unlawful and hence void.