05 Reciprocal Promises PDF

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SEC_002F_ReciprocalPromises Pending: 1. Definition for sec-51 to 58 2. Separate summary and detailed section (Summary alone needed for lamination) Meaning: In a contract, the promisor and the promisee both undertake certain obligations towards each other. These obligations can also be in the form of a reciprocal promise or a promise in exchange of a promise. Example: When we go to a shop, the shopkeeper agrees to give us the product in exchange for money. This is an example of a reciprocal promise where we promise to pay the value of the product and the shopkeeper promises to give us the goods on receipt of the payment. Sections related with tops (Legal framework) Definition  SEC-2F Acceptance by performing conditions, or receiving consideration  SEC-8 Performance of reciprocal promises  SEC-51 to 58 Definition:  { SEC_002F_ReciprocalPromises} Promises which form the consideration or part of the consideration for each other are called 'reciprocal promises'. Meaning: It is a promise in exchange for a promise. So, each party to the contract is a promisor as well as a promisee. Definition:  { SEC_008_AccByPerformingConditionsReceivingConsideration} Performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal Meaning: Acceptance by conduct or actions of the promisee is acceptable. So if a person performs certain actions that communicate that he has accepted the offer, such implied acceptance is permissible. Types of Reciprocal promises: 1. Mutual & Independent: Perform their promises independently without waiting for other party to perform. EX: X agrees Y to supply milk daily, while Y agrees to pay the price of milk every month. Both these are mutual and independent promises. 2. Mutual & concurrent: This is the state when two contracts are to be performed simultaneously eg:- cash on delivery 3. Conditional & dependent: When the performance of a promise by one party depends upon the prior permission of the other party, it will be a conditional and dependent promise eg:- ‘X’ unable to construct a house if ‘Y’ doesn’t provide necessary cement & material.

Performance of Reciprocal Promise 1. Simultaneous performance: SEC-51 [Simultaneous Performance] Definition: “When 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” Meaning: Both the parties have to perform their promises simultaneously. i.e. both should ready to perform their rolls simultaneous EX: The shopkeeper agrees to give you the product in exchange for money. Illustration: 1. A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for the goods, unless A is ready and willing to deliver them on payment. 2.

A and B contract that A shall deliver goods to B at a price to be paid by instalments, the first instalment to be paid on delivery. A need not deliver, unless B is ready and willing to pay the first instalment on delivery. B need not pay the first instalment, unless A is ready and willing to deliver the goods on payment of the first instalment

2. Order of performance:SEC-52 [Fixed order performance] Here promises are to be performed is fixed by the contract & performed in that order only. EX: 3. When order of performance is not fixed: SEC-52 [Natural order performance] Here promises shall be performed in order the nature of the transaction requires. EX: 'X' promises to 'Y' to get a house for 'Y' instead of 'Y' promises to 'X' to pay the commission. The contract does not specify the order of performance of the promise. However, the nature of the transaction suggests that 'X' should help 'Y' to get a house before he expects him to perform his promise of paying the commission

4. Effect of preventing the performance: SEC-53 [Preventing the performance] If one party (‘X’) willing to perform, but other party (‘Y’) stops him (‘X’) from doing so. a) He (‘X’) can treat the contract as void. b) He (‘X’) may claim compensation for the loss. Example: 'X' and 'Y' entered into a contract where 'X' promises to paint 'Y'’s house. In exchange, 'Y' promises to pay 'X' Rs 10,000 and clear the house of all furniture before 'X' begins. However, when 'X' starts painting, he finds that 'Y' has not cleared the furniture as promised and does not agree to his requests too. 'X' can void the contract and claim the money since 'Y' obstructed him from performing his promise.

5. Effect of non performance by the party who is to perform first:SEC-54 [Non performance] If the promisor, who is supposed to perform his promise before the other, fails to perform it, then he cannot claim the performance of the reciprocal promise. He is also liable to compensate the other party for any loss that he might sustain due to non-performance of the contract. Example: 'X' hires a car for a month and promises to pay the car rental company a certain amount. The company promises to send the car to his house instead of receiving the advance payment in 24 hours. 'X' does not make the payment and fails to perform his promise. The company does not send the car either. 'X' cannot claim the performance of the company’s promise since he was supposed to perform his promise first. 'X' will also have to compensate the company for the losses sustained by them due to him not paying the advance. 6. Effect of failing the performance in fixed time: SEC-55 [Failing the performance] In a contract, If a party promises to do a certain thing in a specified time and fails to do so then the contract becomes voidable at the option of the promisee. Here, 1. Promisee can void the contract 2. Promisee can claim the compensation to the promisor for any loss caused by the delay 3. Promisee can accept the performance of promise at any other time without giving the claim notice for previous non-performance promise 4. Promisee can accept the performance of promise at any other time with giving the claim notice to get any compensation for previous non-performance promise Example for time sensitive promise: Share trading-where shares are provided in exchange of money and share price can fluctuate with time.so time is essence. Example for time insensitive promise: Sale of land-where contract is made by expressing somany words and cross verifying somany documents and it takes lot of time. so time is not essence 5. Performance of Impossible or Unlawful Act SEC-56 If two parties enter a contract, where the promisor agrees to do an impossible or unlawful act, then the contract is void. The act can be impossible or unlawful at the time the contract was made or subsequent events can make a possible act impossible. Let’s look at both the scenarios. Initial Impossibility: If both the promisor and promisee are aware that the act is impossible or unlawful, then the contract is void Example: ’X’ promises to deliver the goods from India to US in 4 hours. It is impossible. 1. If this fact is not known to both promisor and promisee then the contract is void 2. If this fact is known to promisor and (must) not knowing to promisee then the promisor has to compensate the promise’s losses sustained due to non performance of contract Subsequent Impossibility: When the contract was made, the promise was possible and lawful. Afterwards, the contract was impossible/unlawful due to unforeseen reason and promisor couldn’t prevent it. In such cases, the contract is void from the moment the act becomes impossible Example: Peter promises to deliver 100 kilograms of thin plastic bags to John. However, the State passes a law which bans all plastic bags. Peter could not prevent it and due to the recent law, he cannot perform his promise. Hence, the contract is void.

6. Performance of legal and illegal ‘RP’  SEC-57 Promise to do things legal & also other things illegal: here first set of promise is a contract & second set is a void agreement. Example: Peter agrees to sell his house to John for Rs 30 lakh. Further, they agree that if John opens a gambling den in the house, then John will pay him an additional amount of Rs 20 lakh. In this case, the first promise of buying the house for Rs 50 lakh is a legal and valid contract. However, the second promise is based on unlawful grounds and is hence void. 7. Performance of alternative ‘RP’  SEC-58 It is possible to make a contract with an alternative promise. If one branch of the alternative promise is legal and the other is illegal, then only the legal branch can be enforced. Example: Peter and John enter a contract where Peter agrees to pay off John’s outstanding loan of Rs 20 lakh taken from Oliver. If Peter cannot repay the amount them he will kill Oliver. In this case, the contract is valid for Peter’s promise of repaying the loan. However, the alternative branch is illegal and hence, void....