Time and Place for Performance of Contract
It is understood that for contracts certain essentials have to be satisfied. After the satisfaction of those essentials, only the contract gains the force of law. But those are not the only elements that need to be satisfied. If a contract is not performed on time and in the manner prescribed its legality can be questioned. This article… Read More »
It is understood that for contracts certain essentials have to be satisfied. After the satisfaction of those essentials, only the contract gains the force of law. But those are not the only elements that need to be satisfied. If a contract is not performed on time and in the manner prescribed its legality can be questioned. This article seeks to understand the effect and impact of time and place for the performance of contract. Time and Place for Performance Of Contract Time for performance...
It is understood that for contracts certain essentials have to be satisfied. After the satisfaction of those essentials, only the contract gains the force of law. But those are not the only elements that need to be satisfied. If a contract is not performed on time and in the manner prescribed its legality can be questioned. This article seeks to understand the effect and impact of time and place for the performance of contract.
Time and Place for Performance Of Contract
Time for performance of the promise, where no application is to be made and no time is specified.
Time for performance – Section. 46 – This section proceeds upon the assumption that a contract not specifying the time of performance would not be bad for uncertainty.
Where, by the contract, a promisor is to perform his promise without application by the promise, and no time for performance is specified, the engagement must be performed within a reasonable time.
Explanation —The question “what is a reasonable time” is, in each particular case, a question of fact.
This section would not apply to case where the promise has to apply to or call upon the promisor to perform the promise.
Reasonable time – where the defendants agreed to discharge a debt due by the plaintiff to a third party and in default to pay the plaintiff such damages as he might sustain, and no time was fixed for the performance of the obligation, it was held that the failure of the defendant to perform it for a period of three years amounted to a breach of contract, as that was sufficient time for a performance.[i]
Engagement – this word appears to be synonymous with ‘promise’.
Time and place for the performance of promise where time is specified and no application to be made.
Section 47. When promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promisee, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed.
Where there was a specified time under section 47 before which the vendor agreed to tender the goods sold, he is bound to tender without any demand being made by the purchaser; if he fails to do so he clearly precludes himself from having any access to the Courts of law. He cannot complain that he has been damnified by the breach of the contract when on his own admission it is, he who first broke the contract.[ii]
Application by the promise required
For performance on a certain day to be at proper time and place.
Section 48. When a promise is to be performed on a certain day, and the promisor has not undertaken to perform it without application by the promisee, it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business.
Where No Application to be made but the Place of Performance of Contract is not Specified
Section 49 creates provision for a place for the performance of promise, where no application to be made and no place fixed for performance.
When a promise is to be performed without application by the promisee, and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place.
Section 49 does not apply where the money is payable on demand and not ‘without application by the promisee’. The common-law rule is a reasonable rule and is in conformity with justice and equity as it recognizes the obligation of the debtor to pay his debt by going to his creditor and impose this obligation only when there is no express contract to the contrary.
In applying the general rule regard must be had to the proper place at the time when the money is payable. Section 49 can only apply when there is no place fixed for the performance of the contract and when the promise is to be performed without application of the promisee. Where the place is fixed, the rule can have no application. In the absence of stipulation, the general rule of English law is that the debtor must seek his creditor, e.g., he must pay the debt at a place where the creditor is living, provided he is within the jurisdiction.
If no place of performance of the contract is fixed by the contract and there is no evidence to show that the debtor applied to the creditor to appoint a reasonable place of performance, it is the duty of the debtor to pay where the creditor is.[iii]
The rule in this section is that one which, it was intended, should apply both to delivery of goods as well as payment of money.[iv] The common law rule requiring a debtor to find the creditor in the realm was not applied.
Place for performance – the legislature has used three different expressions viz: ‘at the place at which the promise ought to be performed’ (S. 47), ‘at proper place’ (S. 48) and ‘at a reasonable price’(S. 49). The said expressions imply that the place to be fixed should be reasonable.
The words ‘no place is fixed’ and promisor to apply to the promise to appoint a reasonable place do not exclude any interference the Court may draw as to the intention of the parties from the nature and circumstances of the contract, especially where the obligation is to pay money.[v] A debtor cannot be held liable to pay wherever the creditor may choose to shift his business.[vi] The application of common law rule would be engrafting something on S.20 of the Civil Procedure Code and in a vast country like India, it will not only be inconvenient but oppressive.[vii]
Sections 47, 48 and 49 deal with the place of performance. So far as the stipulated place is concerned there should ordinarily be no problem. But where, the contract is silent about the place, and (1) the promisee is not required to indicate the place, the place of performance shall be the place at which the promise ought to be performed or the promisor must ask the promisee for a reasonable place and (2) where the promisee is required to specify the place, at the place appointed by him, provided such place is a proper place.
Now, there may arise situations in which the promises is not required to specify the place of if required does not so specify the place, or if the place so specified is neither reasonable not proper, then the Court may be called upon to look for solutions and the place selected by the Court is the proper place of performance. This the Court can do by taking into consideration all the relevant factors
Place of delivery – whereby an agreement for the sale of goods it was stipulated that the goods were ‘to be delivered at any place in Bengal in March and April 1891’ and it was added, ‘the place of delivery to be mentioned hereafter,’ the Judicial Committee held that the buyer has the right to fix the place, subject only to the express contract that it must be in Bengal and to the implied one that it must be reasonable.[viii]
Performance as prescribed by the Promisee
Section 50 creates provision for performance in a manner or at times prescribed or sanctioned by promise.
The performance of any promise may be made in any manner, or at any time which the promisee prescribes or sanctions.
Section 50 merely lays down the elementary rules that a promisor is discharged from liability if he performs the promise in a manner or at a time prescribed or sanctioned by the promisee. If the payee presents the cheque beyond a reasonable time, the liability of the drawer stands discharged. If any agreement states that a particular act relating to the furtherance of the contract has to be done in a particular manner, then it is not open to the concerned parties to chalk out his own manner of preforming his part of the contract.
If the promise prescribes or sanctions any manner of performance, performance in that manner discharges the obligation of the promisor. The mode of performance agreed to cannot be changed or substituted. If the time for the performance is not fixed, the contract has to be performed within a reasonable time. What is a reasonable time, is always a question of fact.[ix]
The illustration attached to section 50 clearly indicates that the direction by the drawer of the cheque to the bank to put the amount in the credit of the payee amounts to payment by the drawer to the payee. If the payee deposits the cheques in his current account, it is as good as payment of cash to the bank unless the drawer had no funds in the bank to meet the amount of the cheque.[x]
Payment may be made not only in the currency coin of the realm, but in any other medium that the creditor may choose to accept.
The question, whether a tender of payment by cheque by the debtor is equivalent to payment, is one of fact and must be decided according to the facts and circumstances of each case. If the creditor accepts the cheque, it will be a valid tender unless the cheque is subsequently dishonoured. If the creditor does not accept that cheque and contends that there was not valid tender, the debtor must establish that he had a right to tender the payment by cheque.
This he may do by proving that the creditor had accepted payment by cheque on all previous occasions, or that there was a custom sanctioning payment by cheque. In the absence of circumstances permitting payment by cheque, a debtor cannot claim a light to make payment by cheque, if the creditor insists on payment in cash.[xi]
If there is either an express or implied request to send cheques by post, the debtor performs his obligation by posting the cheque. This is however not so where there is no such request to send cheques by post. This in UTI v. Ravinder Kuman Shukla,[xii] a mutual fund (UTI) has sent cheques to their fund holders through the post. These cheques never reached the fund-holders as they were intercepted and fraudulently encashed. The issue arose whether the mere posting of the cheques was sufficient to discharge the debt owed by UTI.
The Apex Court held that there was no contract with or request of payees to send the amount by post, nor was sending of cheques through the post in such cases established commercial practice. This the risk of non-delivery was on UTI, and the debt was not discharged by posting cheques. UTI has to bear the loss and make fresh payments to the affected to fund-holders.
[i] Subramanian v. Muthia, (1912) 35 Mad 639
[ii] Mukunchand v. Nihalchand, (1916) ILR 40 Bom 517
[iii] Champaklal v. Nector Tea Co. AIR 1933 Bom 179
[iv] Soniram Jeethmul v. R.D. tata & Co., AIR 1927 PC 156
[v] Ibid
[vi] Madan Lal v. Chawle Bank Lt.d, AIR 1959 All. 612
[vii] Piyara Singh v. Bhagwandas, AIR 1951 Punj 33
[viii] Grenon v. Lachmi Narain Angurwala, (1896) ILR 24P.C. 8
[ix] Firm Bacchraj Amolakchand v. Firm Nandial Sitaram, AIR 1966 MP 145.
[x] Mohanlal Malpani v. Loan Co of Assam Ltd, AIR 1960 Assam 191.
[xi] Navin Chandra v. Yogendra Nath, AIR 1967 All 293.
[xii] AIR 2005 SC 3528