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.
Section 51 – Simultaneous Performance of a Reciprocal Promise
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.
Section 52 – Order of Performance of a Reciprocal Promise
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.
Section 53 – One party Preventing the Other From the Performance of the Promise
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.
Section 54 – Reciprocal and Dependent Promises
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.
Section 55 – Failure to Perform within the Stipulated Time in a Time-sensitive Contract.
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.
Section 56 – Impossible or Unlawful Act
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.
Initial Impossibility
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.
Subsequent Impossibility
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.
Section 57 – Reciprocal Promise of Legal and Illegal Acts
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.
Section 58 – Alternative Promise of Legal and Illegal Acts
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.
FAQs on Reciprocal Promises in Contracts: Performance Explained
1. What exactly is a reciprocal promise as defined in the Indian Contract Act, 1872?
According to Section 2(f) of the Indian Contract Act, 1872, reciprocal promises are defined as promises which form the consideration or part of the consideration for each other. In simpler terms, it's a 'you do something, I'll do something' scenario where each party's promise is the 'price' for the other's promise. For example, if A promises to deliver goods to B, and B promises to pay A ₹1,000 upon delivery, these are reciprocal promises.
2. What are the main types of reciprocal promises found in contracts?
Reciprocal promises in contracts can be categorised into three main types based on the dependency and timing of their performance:
- Mutual and Independent: Each party must perform their promise without waiting for the other party to perform. The performance of one promise is not dependent on the performance of the other.
- Mutual and Dependent (Conditional): The performance of one party's promise is dependent on the prior performance of the other party's promise. For example, a contractor's promise to paint a house is dependent on the owner's promise to supply the paint first.
- Mutual and Concurrent: Both parties must perform their promises simultaneously. For instance, in a cash sale, the seller's promise to deliver the goods and the buyer's promise to pay the price are to be performed at the same time.
3. What are the key rules for the performance of reciprocal promises under the Contract Act?
The performance of reciprocal promises is governed by Sections 51 to 54 of the Indian Contract Act. The key rules are:
- Section 51 (Simultaneous Performance): When promises are to be performed concurrently, a promisor need not perform their promise unless the promisee is ready and willing to perform their own.
- Section 52 (Order of Performance): If the contract specifies an order for performance, the promises must be performed in that order. If not specified, the order is dictated by the nature of the transaction.
- Section 53 (Preventing Performance): If one party prevents the other from performing their promise, the contract becomes voidable at the option of the party who was prevented.
- Section 54 (Default in First Performance): If a promise cannot be performed without the first promise being fulfilled, and the first promisor fails to perform, they cannot claim performance from the other party and must compensate them for any loss.
4. How is the order of performance decided when a contract with reciprocal promises doesn't specify it?
When a contract does not expressly fix the order of performance for reciprocal promises, the law dictates that they shall be performed in the order which the nature of the transaction requires. For example, if A promises to build a house for B for a certain price, A's promise to build must be performed before B's promise to pay, as payment is contingent upon the completion of the house. The logical sequence of the tasks determines the order.
5. What happens if one party to a contract prevents the other from performing their reciprocal promise?
As per Section 53 of the Indian Contract Act, if one party to a contract prevents the other party from performing their promise, the contract becomes voidable at the choice of the party who was prevented. This means the affected party has the right to either cancel the contract or continue with it. Additionally, they are entitled to claim compensation from the other party for any loss or damage sustained due to the non-performance.
6. How does a contract handle a situation where there are reciprocal promises to do things that are both legal and illegal?
Under Section 57 of the Indian Contract Act, when there are reciprocal promises, first to do certain legal things and second, under specified circumstances, to do certain illegal things, the first set of promises is a valid contract, but the second is a void agreement. For example, A agrees to sell his house to B for ₹50 lakh, but if B uses it as a gambling den, B shall pay A ₹60 lakh. The first promise to sell the house for ₹50 lakh is valid. The second promise concerning the gambling den is for an unlawful object and is void.
7. Aren't reciprocal promises and consideration the same thing? What is the core difference?
This is a common point of confusion. While closely related, they are not identical. Consideration is the 'price' or 'something in return' for a promise (quid pro quo). In a contract with reciprocal promises, the promises themselves serve as the consideration for each other. For example, in a contract where A agrees to sell his car to B for ₹2 lakh:
- The consideration for A's promise (to sell the car) is B's promise (to pay ₹2 lakh).
- The consideration for B's promise (to pay ₹2 lakh) is A's promise (to sell the car).
8. How does the 'impossibility of an act' affect the performance of reciprocal promises?
The impossibility of performance, as covered under Section 56 of the Contract Act, directly impacts reciprocal promises. If the act central to one of the promises becomes impossible or unlawful to perform after the contract is made (known as subsequent impossibility or supervening impossibility), the contract becomes void. Consequently, the corresponding reciprocal promise also does not need to be performed. For example, if A promises to rent his hall to B for a function, and B promises to pay, but the hall burns down before the event, A's promise becomes impossible to perform. Therefore, B is discharged from their promise to pay the rent.
