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Section 37 Obligations Of The Parties To A Contract

The Term contracts have several implications. In the case of the agreement the parties will choose their own rights and responsibilities. But if one or more than two parties want their agreement to be enforced, then they must have to engage in a legally binding contract under section 37 of the Indian Contract Act 1872. Contract law permits you to engage in legally binding agreements as per section 37 of the Indian contract act. They are specific requirements that must be met for a contract to be legally enforceable. Thus, an agreement is considered a contract when it is legally enforceable under section 37 of the Indian contract act.

Section 37 speaks about the Obligation of parties to contracts. The parties to a contract must either perform, or offer to keep their respective promises, unless such performance is dispensed with or excused under the provisions of this act or of any other law.

According to section 37, there are two types of performance they are:
  1. Actual performance,
  2. Attempted performance.
In this research paper, the researcher explains how the contract was made between the parties according to the section 37 of Indian contract act 1872. Additionally, it includes several cases which elaborate the requirements for an agreement which is legally enforceable under section 37.

Contractual arrangements that require reciprocal promises to be fulfilled are discussed in detail in Section 37. Essentially, what it does is provide a set of rules governing the performance of each party's obligations under a contract. This section highlights the significance of following the specified order and method of performance outlined in the contract. Contractual relationships are made predictable and clearer by this feature, which guarantees a structured and ordered performance of obligations.

Significant elements clarified by Section 37[1] are the temporal and spatial dimensions of performance. Apart from emphasizing the necessary tasks, it also discusses the appropriate timing and manner of fulfilling these contractual duties. This clause serves as a buffer against any misinterpretations or disagreements that can result from unclear affirmations.

Furthermore, when a contract is broken, Section 37 becomes especially important. This section describes the rights and remedies available to the party that has been wronged if one party breaches the contract. These covers asking for payment or requiring the party in default to act according to the terms of the agreement. Within the larger framework of contract law, Section 37 is essential to preserve the validity and enforceability of contracts.

Its provisions offer parties entering contracts direction as well as a methodical way to settle disagreements that may surface during those interactions. A comprehensive comprehension of Section is highly advantageous for legal practitioners, scholars, and persons who are interested in contractual agreements because it is central to Indian contractual jurisprudence.

Proposal And Acceptance

In every contract we must have at least two parties to a contract i.e. offeror and acceptor, also referred to as offeree. The contracts come into existence when one of the parties makes an offer or proposal to the other and hence is termed as the offeror[2].

The other party, after considering the offer or proposal made to it and in its capacity when provides its acceptance in terms of such an offer is termed as the acceptor or offeree and hence the contract comes into existence. When one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal[3] When a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. To be more specific, it is rooted in two factors, that is, actual choice and actual and voluntary acceptance.

Obligation to parties to a contract to perform their promises:

The term contractual obligations are those duties which the parties to a contract are responsible for through the terms of the contract. Every contract is accompanied by the exchange of a valid consideration which can be almost anything ranging from products, services, money etc. Each party to the contract will have various obligations in connection with this exchange of consideration.

If any of the parties to the contract fails to carry out their contractual obligations in accordance with the contractual terms, usually the result will be a breach of the contract[4]. Thus, contractual obligations mostly depend upon the specific subject matter of the contract.

It may be different for different types of contracts. However, some of the most basic forms of contractual obligations, which can be traced in almost all the contracts, include payment. These types of specific obligations can be varied or modified according to the pertinent details of the contracts at hand. Apart from these, the parties may also be bound by certain general principles and obligations while forming a contract.

According to Section 37 of the Act, it is the parties' responsibility to fulfil their share of the obligations outlined in the contract they signed, or to propose to do so. They are not released from performing the contract until the performance is either omitted or excused by the Act. The contract further stipulates that in the event of the parties' deaths, their representatives are obligated to uphold their commitments.

Parties to contracts have obligations under Section 37 of the Contract Act of 1872[5]. A contract's parties must either fulfil their obligations or offer to fulfil theirs unless this Act's or any other law's requirements waive or otherwise excuse such performance. If a promisor passes away before fulfilling their obligations, their representatives are obligated to uphold their end of the bargain, unless the contract makes it clear otherwise.

Performance of contract

According to the contract, performance refers to both the promisor and the Promisee carrying out their respective legal obligations. Following the execution of each party's share of the promises made at the time of contract entry, it makes sense for them to carry out their respective obligations under the agreement. Any agreement that is binding on both parties, enforceable under law, and valid until the terms are fulfilled is called a contract. The agreement is completed an Any agreement that is binding on both parties, enforceable under law, and valid until the terms are fulfilled is called a contract. Performance may refer to an offer to perform or to an actual performance, as stated in Section 37.

Promises are required without exception.

The party seeking enforcement of the commitment must fulfil his end of the bargain before requesting the other party to fulfil his end of the bargain. d discharged by performance when each party carries out their portion of the duty.

As a rule, the promisor is required to fulfil his obligations exactly as stated in the contract at the time of signing. Notice should be taken of the fact that performance is required in full. Therefore, to enforce the promise made to him, the party seeking to do so must fulfil their end of the bargain. He cannot demand the other side keep his word until he has fulfilled his end of the bargain. The premise is specified in Section 37. Therefore, it is the responsibility of each party to the contract to either fulfil their promise or propose to fulfil it. Only in cases where he is released from such obligation by a legal provision or an official action of the other party to contract.

Section 37[6] of the Indian Contract Act, 1872 establishes that the parties to a contract must either perform, or offer to perform, their respective promises unless such performance is dispensed with or excused under the provisions of the contract act or of any other law.

Parties to contracts have obligations under Section 37 of the Contract Act of 1872.

A contract's parties must either fulfil their obligations or offer to fulfil theirs, unless this Act's or any other law's requirements waive or otherwise excuse such performance. If a promisor passes away before fulfilling their obligations, their representatives are obligated to uphold their end of the bargain, unless the contract makes it clear otherwise.

Example: After receiving Rs. 1,000, A agrees to deliver the products to B on a specific day. Before that day, a die. B is obligated to pay A's representatives Rs. 1,000, and A's representatives are required to deliver the products to B. On a specific day, A guarantees to paint a painting for B. On a specific day, A guarantees to paint a painting for B. at a specific cost. A expires ahead of time. Neither B nor the agents of A may enforce the terms of the agreement.

Performance is discussed in Section 37 of the Contract Act. The two categories of performance that the Section lists are as follows:

Actual performance: If someone fulfils their obligation or liability under the terms of the contract, they are said to have fulfilled their part of the agreement and are no longer obligated to fulfil any further obligations. The actual fulfilment of the pledge is attributed to him[7].

At times when the performance is due, an attempt is made to perform. Because the Promisee keeps him from fulfilling his end of the bargain, the promisor is unable to fulfil his responsibility or obligation. This is a scenario in which the promisor truly intended to fulfil his duty or fulfil his responsibility.

The term "attempted performance of a promise" refers to a scenario in which the promisor truly wanted to fulfil his duty or responsibility but is impeded by an unforeseen medical condition. Tender is an additional term for attempted performance[8].

Two kinds of tenders exist:

Tender for goods and services: When the goods are offered for acceptance in compliance with the terms of contract, the contract to deliver the goods and services is fulfilled. The offeror shall retrieve the products and services and shall be released from liability if the offer is not accepted.

Tender of money: This occurs when a debtor offers the creditor the money that needs to be paid, but the debtor declines to take it. The obligation of the debtor to repay the money is not released. Consequently, a debt cannot ever be discharged by a financial tender.

Tender of performance:

The parties' performance under the terms of the contract is addressed in detail in Sections 37 to 39. A contract's parties are required by Section 37 of the Indian Contract Act, 1872, to either fulfil or offer to fulfil the commitments made in the agreement[9]. In accordance with Section 2(b) of the Indian Contract Act, a promise is defined as an offeror's proposal that the offeree accepts.

Based on the terms of the contract, each party is legally required to fulfil the obligations that have been agreed upon. Unless the contract specifically states otherwise, the party shall perform the duty upon the other party. If the terms of the contract do not seem to indicate otherwise, the pledges made by the parties after their deaths bind their representatives.

For instance, let's say that A and B have a contract wherein A agrees to provide items to B in exchange for B paying a specific sum of money on a given day. But if A passes away before the contract is finished, A's representative will still be obligated to fulfil his commitment, which means they will have to deliver the items to B and B will have to pay A's representative the agreed-upon sum.

His representative won't be obligated by the commitment he makes, though, if it relates to the individual's artistic abilities or personal talents. For instance, suppose A promised B that he would paint for him at a specific price on a given day. A pass away before the agreement is fulfilled. The representatives of A are not obligated to fulfil the promise made by A, and neither B nor A can demand that the representative fulfil the promise made by A.

Who Can Demand Performance:
  1. Promisee[10]: As per the general rule, only the Promisee can demand the performance of the promise under a contract. Even the third party cannot demand a promise even though promise is made for his benefit.
    Example: A promises B to give 5000 rupees to C. in this case, only B can demand performance from A. here, C cannot demand performance from A, even though the contract is for his benefit.
  2. Legal representative: If the Promisee has passed away, their legal representative may require execution, unless the contract expressly states otherwise or if it is a personal agreement. K consents, for instance, to marry L. But K passes away prior to the marriage. Since it's a personal contract, K's legal representative cannot require L to fulfil the pledge.
  3. Third party: Rarely, a third party may also demand that the terms of the contract be fulfilled. He is unfamiliar with contracts, even if he was not a party to the first one.
  4. Joint Promisee's: When someone makes a promise to two or more people at the same time, they may be required to fulfil it in one of the following ways: by each Promisee individually; or, in the event of a joint Promisee's death, by the representatives of that Promisee's departed individual along with the remaining promises; or, in the case of all joint promises' deaths, by the representatives of each of them individually. Therefore, joint promises' rights are only joint, and they cannot each seek performance unless it was mutually agreed upon.
Thus, the rights of joint promises are just that joint. Unless otherwise specified in the contract, none of them may require execution. For instance, X borrowed ₹5,000 plus interest from Y and Z, which he agreed to return to them on a given day. Y's representative and Z now jointly own the right to demand performance after Y's death. It would be jointly owned by the delegates of Y and Z following Z's passing.

Obligations of a parties to perform

The obligations in a contract are those duties which the parties to the contract must abide by. In a contract, the parties to the contract usually exchange something of value in the eyes of the law. The thing, which is decided to exchange can be the product, services, money, etc. An example of contract obligations is with the sale of a product such as a building. One party has the obligation to transfer ownership of the building, while the other has the obligation to pay for it. The contract will specify the terms that regulate the obligations, such as the method and amount of payment, and the time or place of delivery.

In the case of M. Kamalakannan v. M. Manikandan[11], there was a contract between the plaintiff and the defendant for the sale of the property. The plaintiff, in this case, retained some part of the money which was stipulated under the terms of the contract to compel the defendant for the performance of some of the obligations like vacating the property which was occupied by the tenants and handing over the vacant property to the plaintiff. The contention by the defendant was that non-payment of some part of the consideration resulted in the infringement of the terms of the contract.

In Geo-Group Communications INC vs. IOL Broadband Ltd[12], the parties to the contract signed an agreement and they fully acted according to the terms of the agreement so much so that there arose no further need for the documents to be executed any further. The agreement was described as one of the preliminary and tentative drafts made for the purpose of discussion and deliberation only. When the contract was challenged in the court of law, the court held that the agreement was valid, and it entitles the claimant to relief.

The obligation arising from the contract must be co-extensive to the contract

In Govind Prasad Dalmia v. W.B.SEB[13], In this case, a particular delivery rate for the goods had been agreed upon, and there was no proof to the contrary. The supplier postponed the goods' delivery because they anticipated being paid the increased pricing. But the buyer wouldn't pay the higher than agreed upon price. The contract was deemed legitimate by the court, and the increased price deduction from the bill was found to be accurate. In this instance, it was decided that there had been no breach of contract.

Submission of tender is proposal
When a tender is submitted in response to an invitation it is a proposal and not a contract. It requires to be accepted. The validity period of the tender as specified in their tender itself was four months. Naturally no acceptance could be made after expiry of such period. The forfeiture of the security deposit amount by accepting the tender after validity period and failure of performance by tender was not proper.

Great Eastern Energy Corporation Ltd v. Jain Irrigation system Ltd[14],

The four-month validity period was stated in the tender specifications. As per the ruling of the Bombay High Court, no acceptance could be made once the tender period expired. It was appropriate to accept the tender even though it had already expired, and the tenderer had not performed, forfeiting the security deposit sum.

Duty of Representatives
In the event of either side's death, the representatives of both parties shall, in accordance with the Indian Contract Act, carry out their contractual responsibilities, unless the contract expressly states otherwise.

Basanti Bai v. Prafulla Kumar Routrai[15]
In this instance, the Cuttack High Court determined that even in cases where the promisor leaves no legal heirs behind, the idea of representatives obligated to carry out the promises of the deceased would still apply. The people acquiring interest in the contract's subject matter would be obligated to fulfil the responsibilities arising out of it, the court ruled, even if one of the parties passed away without leaving a will.

Clause of renewal
If a contract has a renewal provision, it can be extended for an additional period by the same parties, for the same duration, and with the same terms and circumstances.

Hardesh Ores (P) Ltd. v. Hede & Co[16].,., (2007) 5 SSC 614

One of the parties to the contract in this instance used the contract's renewal clause. But this renewal was turned down by the opposite party. In this instance, the Supreme Court decided that the appropriate course of action for the party was to have the right to renewal recognized and upheld by the legal system, or to obtain a statement that the agreement was renewed as the renewal provision had in the contract by the court.

Theories Of Obligation

Promissory theory
The classic approach provides an analytical response to the question of what constitutes a contractual commitment. Charles Fried's hugely influential 1981 book "Contract as promise" served as the impetus for the current debate surrounding this topic. Promissory obligation, according to Stephen A. Smith's interpretive account, can be understood as follows: the promise's structure is based on the communication of the intention to "not merely perform a particular act but to undertake an obligation" to perform, which is the first pillar. The second pillar is the existence of a genuine intention to perform an act, and it is communicated to the other party. Consequently, a promissory obligation is, as its name implies, a promise to undertake a performance duty. Consequently, the obligation to perform rather than the act of performing is the primary element of every contract provision. Although widely praised and accepted, this hypothesis is not without its detractors. One prominent criticism of promissory theory is that it contradicts the common law's objective approach to establishing the existence and nature of a contractual obligation. Critics argue that this objective approach demonstrates that the goal of contract law is not to enforce obligations that parties wish to impose upon themselves, but rather obligations that parties appear to intend to impose upon themselves. The second type of criticisms is made in relation to implied contract. Intentional activities like giving something to someone, boarding a bus, inserting cash into a machine, and other "simultaneous transactions" are incompatible with this idea because "it is impossible to find anything resembling a promise or an agreement."

Reliance theory
Theory had developed as response to the objections against the promissory theory. Though the theory falls short in terms of the volume of literature backing it as compared to promissory theory (even the most fundamental work on this theory, Fuller's, and Perdue's article 'The Reliance Interest in Contract Damages' focuses on explaining damages based on of this theory, rather than propounding a general theory of obligation), this theory is known to many since it is often entangled with the promissory theory in practice.

A contractual obligation has been defined under this theory as obligations to ensure that others whom we induce to rely upon us are not made worse off because of that reliance[17]. An illustration: Suppose that a vendor agrees to provide a machine to a buyer for the purpose of usage in a factory, in exchange for a Rs. 10000 paid in advance. The buyer's payment of Rs.10000 is induced by the vendor's agreement to deliver the machine. If the vendor fails to deliver, and keep the sum paid, the buyer would be in a worse position than he was prior to paying Rs.10000. The buyer will have suffered a 'reliance loss' of Rs. 10000.Significantly, the reliance interest may be at risk even if no payments are made under a contract.

Transfer Theory
An underdeveloped and lesser-known theory falling in the set of non- promissory theories of contract is the transfer theory which is known to have originated in the works of Hugo Grotius. This theory, like the reliance theory, lacks comprehensive discussion and is a model. It propounds that an executory contract is simply a transfer of intangible rights to the performance of future acts[18]. None of the elements of contract � promise, reliance or act affects the transfer of rights; intention to transfer the rights and the intention to receive the rights are enough.

An illustration: A goldsmith promises to deliver a ring to a customer at a future point of time in exchange for a sum of Rs.25000. From the viewpoint of this theory, now of contracting, the goldsmith transfers the existing performance right to deliver the ring to the customer in the future.

There is some degree of similarity between the promissory theory and the transfer theory� in both the theories, the contractual right is a right that other party would do the same thing which he said he would do18. The difference, however, lies in the matter of how the ownership of such rights is achieved. While transfer theory says that a contract brings about the transfer of already existing rights, the promissory theory regards contracts as creation of new rights by way of promise.

A contractual obligation on the parties which arose from an agreement between the parties can thus be enforced either specifically or by giving the obligee the damages which is again stipulated by the contract itself. The cause of action arises only when the agreement and its breach are proved. The obligation to fulfil the terms of the contract is the primary and antecedent obligation. The obligation to pay the damages is only secondary and a remedial obligation.

The obligation of parties to a contract is acquired by the signing on for those obligations. It must be a voluntary acceptance of a cluster of rights and duties. Thus, it is plain to say that the validity of a contractual obligation lies in the very fact that the formation of a contract involves the parties taking up voluntarily a morally binding promise. Since the contract is legally recognized and enforceable; the contractual duty gives a legal effect and validity to the moral duty.

  • Pollock & Mulla, The Indian Contract Act, 1872.
  • Avtar Singh, Contracts & Specific Relief.
  • R.K. Bangia, Law of Contracts.
  • Offer And Acceptance-A Centennial Survey
    • I. C. Saxena, Journal of the Indian Law Institute, SPECIAL ISSUE 1972 (1972), pp. 116-131 (16 pages):
    • Contribution from Indian Law Institute.
  • Historical Background Of The Indian Contract Act, 1872
    • Atul Chandra Patra, Journal of the Indian Law Institute, Vol. 4, No.3 (July-Sept.,1962), pp. 373-400:
  • Hardesh Ores (P) Ltd. v. Hede & Co., (2007) 5 SSC 614
  • Great Eastern Energy Corporation Ltd v. Jain Irrigation system Ltd., 502 OF 2009
  • Basanti Bai v. Prafulla Kumar Routrai, 101 (2006) CLT 685
  • M. Kamalakannan v. M. Manikandan, S.A. No. 576 of 2011 and M.P. No. 1 of 2011.
  • Geo-Group Communications INC vs. IOL Broadband Ltd, (2010) 1 SCC 562
  • Govind Prasad Dalmia v. W.B.SEB, 55 of 2013, C.S. NO. 323 of 1993.
  1. ADV. Umapathi Natarajan, section 37 of Indian Contract Act,
  2. Indian Contract Act, Sec 2(a).
  3. Indian Contract Act, Sec 2(b).
  4. Shivangi Tiwari, performance of a contract, 21st Dec,2019,
  5. Indian Contract Act, Sec 37 of 1872.
  6. Indian Contract Act, Sec 37 of 1872.
  7. Shivangi Tiwari, performance of a contract, 21st Dec,2019,
  8. Shivangi Tiwari, performance of a contract, 21st Dec,2019,
  9. Indian Contract Act, 1872, Sec 37
  10. Performance of a contract, Indian Contract act,1872
  11. S.A. No. 576 of 2011 and M.P. No. 1 of 2011
  12. (2010) 1 SCC 562
  13. 55 of 2013, C.S. NO. 323 of 1993
  14. Great Eastern Energy Corporation Ltd v. Jain Irrigation system Ltd, 502 OF 2009
  15. 101 (2006) CLT 685
  16. (2007) 5 SSC 614
  17. Randy E. Barnett, consent theory of contract, vol.86, No 2(Mar.,1896),
  18. N.k. Indrayan, theoretical basis of law of contracts, vol.36, No. 2(April 1996),

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