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Mercantile Laws-I

Notes contract illegal. Held, the contract was discharged and B could not sue for damages [Avery v.
Bowen (1856) 6 E & B 965].
Actual breach of contracts. The actual breach can occur by (i) failure to perform as promised,
(ii) making it impossible for the other party to perform. The failure to perform means that
one party must not have performed a material part of the contract by a stated deadline. The
actual breach by failure to perform may take place (a) at the time when performance is due, or
(b) during the performance of the contract. Thus, if a person does not perform his part of the
contract at the stipulated time, he will be liable for its breach.

Example: A, the seller, offers to execute a deed of sale only on payment by the buyer of a
sum higher than is payable under the contract for sale, he shall be liable for the breach.

But, if the promisor offers to perform his promise subsequently, the question arises whether it
should be accepted, or whether the promisee can refuse such acceptance and hold the promisor
liable for the breach. The answer depends upon whether time was considered by the parties to
be of the essence of the contract. Section 55 provides the meaning of ‘time to be the essence of a
contract’ and is discussed below.

Breach during the performance of the contract. The actual breach of contract also occurs when
during the performance of the contract, one party fails or refuses to perform his obligation under
the contract.

Example: A contracted with a Railway Company to supply it certain quantity of railway
chairs at a certain price. The delivery was to be made in installments. After a few installments
had been made, the Railway Company asked A to deliver no more. Held, A could sue for breach
of contract.

How is a contract breached by making performance impossible? Suppose you hire an agency
to clean carpets in your home on Saturday for ` 500. You go out for the day neglecting to make
arrangements to let the agency people into your home to clean the carpets. You have breached
the contract by making performance impossible. You would owe the money since the cleaning
agency could not clean and because the agency probably turned down requests to clean for other
clients.
Partial breach of a contract. That happens when a non-material (unimportant) part of the
contract gets breached. It may happen if the contract has several divisible parts each of which
you may treat as a separate contract. Then you could sue for damages even though the breach is
not complete. An example of this would be agreeing to perform a duty once every three months

for one year and then not performing for the final three months.
5.8 Time as the Essence of a Contract (S. 55)

We have seen above that if a person does not perform his part of the contract at the stipulated
time, he will be liable for its breach. But if the promisor offers to perform his promise subsequently
the question arises whether it should be accepted or whether the promisee can refuse such
acceptance and hold the promisor liable for the breach. The answer depends upon whether
time was considered by the parties to be of the essence of the contract or not. When a party
to a contract promises to do a certain thing at or before a specified time, and fails to do any

such thing at or before the specified time, the contract becomes voidable at the option of the
promisee, if the intention of the parties was that time should be of the essence of the contract.
If it was not the intention of the parties that time should be of the essence of the contract, the

contract does not become voidable by failure to do such thing at or before the specified time but
the promisee is entitled to compensation from the promisor for any loss occasioned to him by
such failure. However, if in case of a contract voidable on account of the promisor’s failure to

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