Reciprocal obligations | In a suit for damages for non-delivery of linseed upon a contract, the terms of which as to the payment were cash on delivery, part delivery had been made by the defendants, and a sum of Rs. 1,000/- had been paid on account, by the plaintiff. The plaintiffs then made a claim… Can the defendants rescind the contract? Decide.

Question: Reciprocal obligations | In a suit for damages for non-delivery of linseed upon a contract, the terms of which as to the payment were cash on delivery, part delivery had been made by the defendants, and a sum of Rs. 1,000/- had been paid on account, by the plaintiff.

The plaintiffs then made a claim against the defendants for excess refraction, and the defendants thereupon, refused to deliver the rest of the linseed, unless the plaintiffs paid the full amount owing for the portion that had been delivered.

The plaintiffs declined to accept these terms, and the defendants then canceled the contract. Can the defendants rescind the contract? Decide. [Punj JS 1998]

Find the answer to the mains question only on Legal Bites. [Reciprocal obligations | In a suit for damages for non-delivery of linseed upon a contract, the terms of which as to the payment were cash on delivery, part delivery had been made by the defendants, and a sum of Rs. 1,000/- had been paid on account, by the plaintiff. The plaintiffs then made a claim… Can the defendants rescind the contract? Decide.]

Answer

Section 39 of The Indian Contract Act,1872 lays down the provision for the effect of the refusal of a party to perform the promise wholly. It states, “When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.”

The party in default must have refused altogether to perform the contract and the refusal must go to the whole of the contract, otherwise, the other party would not be justified in putting an end to the contract.

The facts of the present case are borrowed from the leading case of Schiller v. Sooltan Chand, [ILR (1878) 4 Cal 252, 256].

There was a contract for the sale of 200 tons of linseed oil in April and May, to be paid for on delivery. Some deliveries were made and the plaintiffs made part payment for the same withholding the balance for adjustment of their claims. But the defendants, taking that as an anticipatory repudiation, refused to make further supplies and the plaintiffs sued them for the breach. It was held that the withholding of a part payment under a bona fide claim cannot be regarded as a refusal to perform the contract in its entirety.

Section 51 applies because the promises to deliver linseed and to pay for it on delivery were reciprocal promises. The section says, that “where a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.”

Now, applying that section to the present case the reciprocal obligations were the delivery of the seed and payment of the money on the occasion of each delivery.

The defendants were bound to deliver, the plaintiffs to pay for, the linseed. If the plaintiffs had been unwilling or unable to pay, the defendants would have been justified in refusing to deliver; but the defendants did deliver the seed; the neglect to pay in this instance was after delivery, when the reciprocity of obligation had ceased; and there is clearly no evidence here that the plaintiffs were unwilling or unable to pay for the deliveries which the defendants refused to make. The neglect to pay for past deliveries was, under the circumstances, no reason for refusing to make all further deliveries.

However, once the repudiation has been accepted the contract becomes rescinded. In this case, the defendant cannot cancel the contract because there is no breach of performance in its entirety. The fact of withholding a part payment on account of a bona fide claim of the plaintiff cannot be regarded as a refusal on his part to perform the contract in its entirety. Thus, the defendants cannot rescind the contract.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X