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Unit 5: Discharge of Contract

executed. A need not perform the contract. B is bound to compensate for any loss caused Notes
to A by the non-performance of the contract.
(ii) X promises Y to sell him 100 units of a commodity, to be delivered next day and Y
promises X to pay for them within a month. X does not deliver according to his promise,
Y’s promise to pay need not be performed. Also X must compensate Y.
2. In the case of mutual and independent promises, each party must perform his promise
without waiting for the performance or readiness to perform on the part of the other.
A promises B to deliver him goods on 10 July and B in turn promises to pay the price on
6 July. B’s paying the price is independent of A’s delivering the goods and even if B does
not pay the price on 6 July, A must offer the delivery of the goods on 10 July. A can, of
course, sue B for price and damages.

3. In the case of mutual and concurrent promises, the performance is to be simultaneous.
Thus, no promisor need perform his promise unless the promisee is ready and willing to
perform his reciprocal promise.

Examples:
(i) L and M contract that L shall deliver goods to M to be paid by installments, the fi rst
instalment to be paid on delivery. L need not deliver, unless M is ready and willing to pay
for the goods on delivery. And M need not pay for the goods unless L is ready and willing
to deliver them on payment.

(ii) R and S contract that R shall deliver goods to S at a price to be paid by installments, the

first instalment to be paid on delivery. R need not deliver, unless S is ready and willing to

pay the first instalment on delivery. And S need not pay the first instalment, unless R is
ready and willing to deliver the goods on payment of the fi rst instalment.
Reciprocal promise to do things legal and also other things illegal. Section 57 provides that

where persons reciprocally promise, firstly, to do certain things which are legal and secondly,
under specified circumstances, to do certain things which are illegal, the first set of promises is a

contract but the second set is a void agreement.
Example: X and Y agree that X shall sell Y a house for ` 1,00,000 but that if Y uses it as a
gambling house, he shall pay X ` 5,00,000 for it. The fi rst set of reciprocal promises, namely, to
sell the house and pay ` 1,00,000 for it is a contract. The second set is for unlawful object, that Y
may use the house as a gambling house and is a void agreement.

5.3 Appropriation of Payments [Ss. 59-61]

Appropriation of payments means application of payments. When a debtor owes several debts
in respect of which the payment must be made (to the same creditor), the question may arise as
to which of the debts, payment is to be appropriated. In England, the law on the subject was laid
down in Clayton’s case. The rule in Clayton’s case was stated as : “If a man owes another two
debts upon distinct causes, and pays him a sum of money, the payer has a right to say to which
account the money so paid is to be appropriated”.

In India, the rules regarding appropriation of payments are contained in Ss. 59 to 61 which, in fact,
have adopted with certain modifications the rules laid down in Clayton’s case. The provisions of

these sections are summarised hereunder:
Rule 1 – Appropriation by debtor (s. 59) Where a debtor, owing several distinct debts to one
person, makes a payment to him with express intimation that the payment is to be applied to the
discharge of some particular debt, the payment, if accepted, must be applied to that debt. Where,

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