Effect of Refusal of a Party to Perform Wholly

In one line

When one party makes plain that the whole of his side will not be done, the other need not wait for the date to arrive: he may end the contract at once, or carry on, and the choice is his and binding.

In the words a student can write in an exam: section 39 of the Indian Contract Act 1872 provides that "When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance." This is the section from which the doctrine of anticipatory breach is worked out in India.

Why the law lets the innocent party act early

Suppose a caterer contracts to serve a wedding in December and writes in August to say he will not be doing it. The bride has two options in fact: find another caterer now, or wait.

If the law made her wait until December to sue, she would be in an absurd position. She must keep herself ready to perform a contract she knows will not be performed, she cannot safely engage anyone else, and her loss grows the longer she waits. And the caterer, who caused all this, would be no worse off for having given her notice.

So the law lets the innocent party treat the refusal as itself a breach and act on it. That is the sense of section 39's words "may put an end to the contract".

The section is careful to make it an option and not an automatic result, and the reason is that the innocent party may prefer to keep the contract alive. The caterer may change his mind; the market may move. The law leaves the choice where it belongs.

The provision itself

"When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance."

Its illustrations:

"(a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her 100 rupees for each night's performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract.

(b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night, A wilfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A's failure to sing on the sixth night."