Page 78 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes z 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.
z 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:
z A contract may be discharged by (i) performance; (ii) tender; (iii) mutual consent; (iv)
subsequent impossibility; (v) operation of law; (vi) breach.
z If the parties to a contract agree to substitute a new contract for it, or to rescind it or alter
it, the original contract is discharged. A contract may terminate by mutual consent in any
of the six ways viz. novation, rescission, alteration and remission, waiver and merger.
Novation means substitution of a new contract for the original one. The new contract may
be substituted either between the same parties or between different parties.
z A contract may be discharged because of impossibility of performance. There are two types
of impossibility: (i) Impossibility may be inherent in the transaction (i.e., the contract), (ii)
Impossibility may emerge later by the change of certain circumstances material to the
contract.
z The anticipatory breach of contract occurs when a party repudiates it before the time

fixed for performance has arrived or when a party by his own act disables himself from
performing the contract.
z The anticipatory breach of contract does not by itself discharges the contract. The contract
is discharged only when the aggrieved party accepts the repudiation of the contract, i.e.,
elects to rescind the contract. Thus, if the repudiation is not accepted and subsequently an
event happens discharging the contract legally, the aggrieved party shall lose his right to
sue for damages.

5.11 Keywords

Alteration: If the parties mutually are to change certain terms of the contract, it has the effect of
terminating the original contract. There is, however, no change in the parties.
Appropriation of payments: Means application of payments.
Commercial impossibility: It means that if the contract is performed, it will result in a loss to the
promisor.

Performance of joint promises: The Act provides rules for devolution of joint liabilities and
rights.
Reciprocal promises: Means a promise in return for a promise.
Remission (s.63): It is the acceptance of a lesser sum than what was contracted for or a lesser
fulfillment of the promise made.

Waiver: It means relinquishment or abandonment of a right.

5.12 Self Assessment

Fill in the blanks:

1. A contract creates obligations. ......................... of contract means the carrying out of
obligations under it.

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