Performance of Reciprocal Promise :

The law relating to reciprocal promise as set out in Sections 51 to 54 of the Indian Contract Act,1872.

General observation: A contract may consist of (i) an act and a promise or (ii) two promises one being the consideration for the other.

The second type of contract which involves two promises, one promise from each to the other party is known as “Reciprocal promise”. This can be illustrated with the following.

When ‘A’ sells 500 quintals of rice to ‘B’ and ‘B’ promises to pay the price on delivery, the contract would consist of two promises one by ‘A’ to ‘B’ and another by ‘B’ to ‘A’. These promises are reciprocal promises. Here the promise of ‘A’ is the consideration for the promise of ‘B’ and vice versa.

The above is in contrast to another situation. In the above example if ‘B’ promises to pay the price after a month, the contract would have two parts one is the act of ‘A’ and the second is promise of ‘B’. This is not a reciprocal promise.

The performance of reciprocal promise can take in different forms-

(i) Simultaneously performance of reciprocal promise [Section 51]: In this case, promises have to be performed simultaneously. The conditions and performances are concurrent. If one of the parties does not perform his promise, the other also need not perform his promise. For example where ‘A’ promises to deliver rice and ‘B’ promises to pay the price on delivery, both have to be performed simultaneously. Here both ‘A’ and ‘B’ must be willing and ready to perform their accepted part.

(ii) Performance of reciprocal promise where the order is expressly fixed: Where the order of performance is expressly fixed, the promise must be performed in that order only. Where ‘A’ promises to build a house for ‘B’ and ‘B’ promises to pay after construction, here ‘A’ must perform his promise before he can call upon ‘B’ to fulfill his promise of payment of money. A’s performance of the promise is a condition precedent to ‘B’ performing his part of the promise. Any breach of promise by ‘A’ would enable ‘B’ to avoid the contract.

(iii) Performance of reciprocal promise by implication: Where the performance of reciprocal promise is not fixed expressly, some times the order is understood by implication. For example where ‘A’ agrees to make over certain stock in trade to ‘B’ and ‘B’ agrees to provide certain security for the value of stock in trade, then ‘A’ need not make over the stock until ‘B’ provides the security as by implications ‘B’ is required to perform his part first; otherwise ‘A’ in the absence of any security will not make over the stock to ‘B’.

(iv) Effect of one party preventing another from performing promise [Section 53]: When in a contract consisting of reciprocal promises one party prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented. The person so prevented is entitled to get compensation for any loss he may have sustained for the non-performance.

The above can be illustrated with the following illustrations by way of two case laws.

(a) Where there is a contract for sale of standing timber and as per the terms seller is expected to cut and cord the standing timber before the buyer takes delivery but seller cords only a part of it, but neglects to cord the rest of it, then the buyer has a right to avoid the contract and claim compensation for any loss sustained.

(b) In the well known case of O ‘Nell vs. Armstrong, an Englishman was engaged by the Captain of a Japanese ship to act as fireman on a voyage from England to Japan. During the course of the voyage Japan declared war against China. The Englishman had to leave service because had he continued in service he would have incurred penalties under Foreign Enlistment Act. In effect because of the war, the Englishman was prevented from discharging his part of the contract. The suit filed by him was decreed in his favour in spite of being opposed by the Japanese shipping company. It should be appreciated that the Captain of Japanese ship could not have brought a case against the Englishman for non-performance as the Japanese themselves were responsible for preventing the Englishman from performing his part of the contract.

Sometimes the parties would be prevented from discharging a part of the contract but not the entire contract. In such a case, the party so prevented need not avoid the full contract but perform the rest of it.

(v) Effects of default as to promise to be performed first: Section 54 of the Act provides that promises may be such that:

(i) one of them cannot be performed or

(ii) its performance cannot be demanded till the other has been performed.

Example: Where ‘B’ a ship owner agrees to convey A’s cargo from Calcutta to Mauritius for a freight. Here the beginning part of the transaction is on ‘A’ as he has to provide the cargo to ‘B’ to enable ‘B’ to perform his promise. Thus until cargo is handed over by ‘A’. A cannot expect ‘B’ to perform his promise nor would ‘B’ be in a position to perform his promise. This peculiar position arises because of default on the part of one of the parties. Here ‘B’ is entitled to put an end to the contract and claim compensation for any loss he may have suffered.

(vi) Position of legal and illegal parts of Reciprocal promises: Reciprocal promise to do certain things that are legal and certain others that are not legal –

Section 57 of the Act provides that if reciprocal promises have two parts, the first part being legal and the second part being illegal, the legal part is a valid contract and the illegal part is void.

Example: Where ‘A’ agrees to sell his house to ‘B’ for ` 50000/- and further ‘A’ insists and it is agreed that if the house is used as a gambling house, then ‘B’ would pay another ` 75000/-. In this case the first part is valid as it is legal, the second part is void as it is illegal.

(vii) Alternative promise one branch being illegal: “In the case of the alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced”. For example, in the nearest reversionary heir of B, agreed to transfer his inheritance to C, if he succeeded to B; and he did not transfer his own estate to C. It was held that first promise was not enforceable, as it amounted to an agreement to transfer an estate on the mere chance of succession prohibited by Section 6 of the Transfer of Property Act, but the second promise was enforceable under Section 58 as an alternative promise. [Mahadeo Prasad Singh vs. Mathura 132 L.C. 321 A]