By Whom a Contract Must Be Performed
Chapter Forty-Eight
Syllabus topic 3.1, "Performance of Contract"
Pages 233 to 236 of 462
In one line
Most promises can be kept by anyone competent, some can only be kept by the promisor himself, and a promisee who accepts performance from someone else cannot afterwards go back to the promisor.
In the words a student can write in an exam: section 40 of the Indian Contract Act 1872 provides that "If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it." Section 41 provides that "When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor."
Why these two sections sit together
Section 37 says the parties must perform. It does not say by whose hands.
For most contracts the question does not matter. A buyer who has contracted for a hundred bags of cement cares that they arrive, not who carries them. For some contracts it matters entirely: a client who has retained a particular advocate has not agreed to be represented by whoever that advocate sends.
Section 40 sorts contracts into those two classes. Section 41 then deals with the practical consequence of the sorting going the promisee's way: if a stranger performs and the promisee takes the performance, that is the end of it.
The provisions
Section 40:
"If it appears from the nature of the case that it was the intention of the parties to any contract that any promise contained in it should be performed by the promisor himself, such promise must be performed by the promisor. In other cases, the promisor or his representatives may employ a competent person to perform it."
Its illustrations:
"(a) A promises to pay B a sum of money. A may perform this promise, either by personally paying the money to B or by causing it to be paid to B by another; and, if A dies before the time appointed for payment, his representatives must perform the promise, or employ some proper person to do so.
(b) A promises to paint a picture for B. A must perform this promise personally."
Section 41:
"When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor."
Broken down
Section 40: the test, and the default
The test is what appears from the nature of the case to have been the intention of the parties. Not what the promisor would prefer, and not what is convenient. Two questions answer it in practice.
By Whom a Contract Must Be Performed
- Did the promisee bargain for this person's skill, judgment, taste or credit? A contract with a named surgeon, painter, singer, advocate or architect is of this kind.
- Would performance by a competent substitute give the promisee exactly what he contracted for? If yes, the contract is not personal.
The default is that it is NOT personal. Section 40's second sentence says that "in other cases" the promisor or his representatives may employ a competent person. So a contract is personal only if the nature of the case shows it was meant to be, and the burden of showing that lies on the party asserting it.
"Or his representatives." The section carries the death rule of section 37 into the question of substituted performance. Where the contract is not personal, the estate must perform, and may engage someone competent to do it.
Section 41: acceptance from a third person discharges
Three points, and the second is the one that decides problems.
- The promisee must have ACCEPTED the performance. Section 41 is about acceptance, not about tender. A promisee who refuses performance from a stranger is not caught by it, and whether his refusal is justified depends on section 40.
- The discharge is absolute and it does not depend on the promisor's consent or knowledge. If a stranger pays your debt and your creditor takes the money, the debt is gone, whether or not you asked the stranger to pay and whether or not you knew.
- It says nothing about the position between the promisor and the third person. That is governed by their own arrangement, and where none exists by section 69, which allows a person who is interested in the payment of money that another is bound by law to pay, and who pays it, to be reimbursed. See [Quasi Contracts: Obligations Resembling Those Created by Contract].
Section 41 is not the same as novation. Under section 62 the parties agree to substitute a new contract or a new party, and the old contract is discharged by that agreement. Under section 41 nobody agrees to anything: a third person simply performs and the promisee takes it. See [Discharge by Agreement: Novation, Rescission and Alteration].
A worked example
Anil owes Bhagyashree three lakh rupees under a loan, and separately has contracted to design her house, Bhagyashree having chosen him for his particular style.
- Anil's brother pays Bhagyashree the three lakh rupees, and she accepts. Section 41 applies. She cannot afterwards enforce the debt against Anil, whether or not Anil asked his brother to pay. Whether the brother can recover from Anil is a separate question, on their arrangement or under section 69.
- Anil's brother offers to pay and Bhagyashree refuses. Section 41 does not apply, because it requires acceptance. But a debt is not a personal promise under section 40, so a promisee who refuses good payment from a competent source may find that a tender under section 38 has been made and refused.
- Anil, being busy, has an employee prepare the house design. The contract was made for Anil's style, so it appears from the nature of the case that the parties intended him to perform personally. Section 40 requires him to perform, and delivery of an employee's design is not performance.
- Anil dies before the loan is repaid. Not a personal promise, so his representatives must perform, on illustration (a).
- Anil dies before the design is delivered. A personal promise, so on illustration (b) and on the second paragraph of section 37 the promise cannot be enforced either by his representatives or by Bhagyashree.
By Whom a Contract Must Be Performed
What it does NOT mean
"A promisor may always delegate performance." Not where the nature of the case shows the parties intended him to perform personally.
"Delegating performance transfers the liability." It does not. The promisor remains liable on the contract; he has merely arranged for someone else to do the work. Only a novation under section 62 substitutes a party.
"A promisee must accept performance from a stranger." Section 41 tells you what happens if he does accept. Whether he must is a section 40 question, and where the contract is not personal a refusal may be unjustified.
"The debtor must consent for section 41 to apply." He need not. The section turns on the promisee's acceptance.
"Personal contracts are only contracts for artistic work." Personal skill, judgment, taste, confidence and credit all qualify. A guarantee given because of a particular surety's credit is personal in the same sense.
Quick revision
- s.40: where it appears from the nature of the case that the parties intended the promise to be performed by the promisor himself, he must perform it. In all other cases the promisor or his representatives may employ a competent person.
- The default is non personal; the party asserting a personal contract must show it from the nature of the case.
- Illustration (a): paying money is not personal, and representatives must perform. Illustration (b): painting a picture is personal.
- s.41: where the promisee accepts performance from a third person, he cannot afterwards enforce it against the promisor. The promisor's consent or knowledge is irrelevant.
- s.41 requires acceptance, not merely an offer.
- s.41 is not novation: there is no agreement to substitute, and the position between the promisor and the third person is governed separately, often by s.69.
By Whom a Contract Must Be Performed
Test yourself
1. When must a promise be performed by the promisor personally? Where it appears from the nature of the case that the parties intended it, which is so when the promisee bargained for the promisor's own skill, judgment, taste, confidence or credit. In all other cases section 40 allows the promisor or his representatives to employ a competent person, and the default is therefore that a contract is not personal.
2. State section 41 and explain its effect. When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor. The obligation is discharged by that acceptance, irrespective of whether the promisor consented to or even knew of the third person's performance.
3. Does section 41 apply if the promisee refuses the stranger's performance? No. The section turns on acceptance. Whether the promisee was entitled to refuse depends on section 40: if the contract was not one for personal performance, the refusal may be unjustified and the offer may amount to a tender under section 38.
4. Distinguish section 41 from novation under section 62. Section 41 operates without any agreement: a third person performs and the promisee accepts, and the promisor is discharged by that fact. Novation under section 62 is a tripartite agreement to substitute a new contract or a new party for the old, and the old contract is discharged by the agreement itself rather than by any performance.
5. A stranger pays a debtor's debt and the creditor takes the money. Can the stranger recover from the debtor? Section 41 answers only the creditor's position, which is that he can no longer enforce the debt. As between the stranger and the debtor, recovery depends on any arrangement between them, and in the absence of one on section 69, which entitles a person interested in the payment of money that another is bound by law to pay, and who therefore pays it, to be reimbursed by that other.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.