Tuesday, 15 February 2022

Performance of Contractual Obligation

Performance of Contractual Obligation

A. Pre-existing contract with promisor

Secondly, compliance with legal obligation imposed by a contract with the promisor can be no consideration for a promise. An illustration is supplied by the facts of Ramchandra v Kalu Raju: 

The plaintiff accepted a Vakalatnama from the defendant to act for him in a certain suit on receiving his usual fee. Subsequently the defendant agreed to pay him a certain sum as a special reward (inam), if the suit was decided in his favour. The suit was decided in favour of the defendant, who, however, did not pay the amount. The plaintiff, therefore, brought the present suit against him. 

In a Canadian case, a contractor was carrying out construction work for the completion of which the plaintiff was to supply steel at a fixed price. The plaintiff then found out that the steel prices were rising and, therefore, asked the contractor for an upward revision of the price for future supplies. The contractor orally accepted the revision and also accepted deliveries against invoices reflecting the increased price. The contractor, however, did not pay and the supplier sued for the difference. It was held that the price revision being without consideration, the contractor was not bound. The fact that he continued to accept supplies without repudiating invoices did not create any promissory Estoppel against him.

Promise to pay less than the amount due

On the same principle, a promise to pay less than what is due under a contract cannot be regarded as a consideration. 

Position under Indian Contract act different

In India, section 63 of the Indian Contract act clearly provides that “Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit.” There was a development-agreement between an Improvement Trust and a land owner. A clause in the agreement provided that the owner is to transfer the plot earmarked for a primary school to the Trust free of cost. It was held to be not void for being without consideration or being opposed to public policy. The land owner had under the agreement derived huge benefit by getting his land freed from acquisition and also getting permission to develop the land and put it to commercial use. 

B. Pre-existing contract with third party

Where a person has contracted to do an act and a third party promises to pay him a sum of money if he would go ahead with the performance, is there a consideration for the promise? A situation like this arose in Shadwell v Shadwell. 

The plaintiff was already engaged to be married to a girl, named Ellen Nicholl. His uncle, the defendant, sent him the following letter : ‘I am glad to hear of your intended marriage with Ellen Nicholl ; and, as I promised to assist you at starting, I am happy to tell you that I will pay to you $ 150 yearly during my life, and until your annual income derived from your profession of a Chancery barrister shall amount to 600 guineas. ’

The question was what the consideration for the uncle’s promise was. The court found sufficient consideration to sustain the promise.

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