ELEMENT OF TIME IN CONTRACTS

Introduction:

To begin with the term contract has been defined in section 2(h) of the Indian contract act 1872. An agreement enforceable by law is known as contract. It is important to note here that all the agreements are not enforceable by law which clearly means that all agreements are not contracts.

As stated above the term agreement forms the basis of every contract and so now let us know what an agreement basically is?



The term agreement has been defined in section 2(e) of the act as: “Every promise and set of promises forming the consideration for each other is an agreement”. In any agreement there is a promise from both sides. The main ingredients required for the formation of the agreement are-

● Two or more parties are required to form an agreement

● There must be an offer or proposal on behalf of the party

● The person to whom such proposal is made must signify his acceptance

● When the proposal is accepted it becomes a promise

● There is a price for promise known as the consideration.



Time of performance of contract:

Here we are talking in regard to the element of time in contract that, if time has been fixed for the performance of the contract by either of the parties to contract. The common law as the General Rule states that this is to be the essence of the contract. There are many viewpoints to look at the same which gives rise to confusion regarding the fact that the question here is not related to the contract as a whole but the particular term which has been breached by either of the parties. As in such a case if the condition related to time is not fulfilled the other party clearly has the right to treat the contract as broken and is free to terminate it.


Section wise provisions:

Section 46 to 50 of the Indian contract act in particular lay down the provisions related to time and place of the performance. We shall discuss the same in detail as under:



Section 46 – time for performance of promise, where an application is to be made and no time is specified.

In this particular section the question as to “what is reasonable time” depends from case to case and is a question of fact. This section also makes it clear that even if no time has been decided by the parties to the contract, the contract will still not be rendered void for uncertainty.


Section 47 – time and place for performance of promise, where time is specified, and no application has been made

This section simply states that when a promise is to be performed on a certain day, in such a case it becomes the promisors duty to perform the said contract during the usual business hours.

For instance, if the goods which are to be delivered are supplied after the usual closing time, the buyer is at liberty to reject the same.



Section 48 – when the promise is to apply for performance, he must do so at proper time and place

As per section 48where the day of performance is fixed but the promisor does not perform without the application of the promise, it here becomes the duty of the promise to apply for performance at a proper place within the business hours. It is also mentioned that the proper time and place is a question of fact in each case.


Section 50 – it states that the time and the manner of performance is wholly the choice of the promise, the performance of any promise can be made in any manner and time as per the will or direction of the promise.



Section 55 – effect of failure to perform the contract in time

This section specifically states that when one of the parties fails to perform the contract in time, there arises a question as to what remedy is made available to the other party in such circumstances. To mention here explicitly two remedies have been provided under section/55 to deal with the same, namely:

1. One in a case when the time of performance is the essence of the contract;

2. The other when the time is not the essence of the contract;


⮚ In cases where the time is the essence of the contract, the non-performance of the same in the specified time tends to frustrate the purpose for which the particular contract has been signed between the parties.

Here when there is delay in performance by one party, the other party has the right to avoid the contract.



Whether time is the essence of the contract or not:

Whether time is the essence of the contract or not depends wholly on the intention of the parties. In case the intention is not expressly conveyed by the parties, then it depends on the nature of the contract so entered into by the parties.


Is the right to avoid a contract available, if delay in performance?

Yes, in case if the time is the essence of the contract and certainly it is expected that the promisor would perform the contract within the stipulated time and where he fails to perform the contract. The other party here undoubtedly gets the right to avoid the contract, that is to say that such a contract becomes voidable at the option of the promise.



⮚ Such failure when time is not the essence of the contract

In such a case if it was not the intention of the parties that time should be made the essence of the contract, here the contract does not become voidable merely by failure to do such a thing, but promise is entitled to claim compensation from the promisor for any loss occurred to him.


Certain factors with regard to time as essence:

As per the provisions of section/55 of Indian contract act, 1872. Time is considered to be the essence of the contract in the following cases-

1. Where the parties have expressly agreed to treat it as the essence of the contract;

2. Where delay is regarded as injury;

3. Where the nature and the necessity of the contract required to be so construes;



Case laws:


Mahabir Prasad Rungta vs. Durga Datta (Jan 31, 1961)


The supreme court held that time of payment was of the essence of the contract. It was held that in commercial transactions time usually is the essence of the contract, and that here section/55 could be invoked by the aggrieved party and the transporter here was entitled to rescind the contract.


Haryana Telecom Ltd. Vs Union of India (11 may, 2006)


It was held that one of the clauses of contract stipulated those deliveries that would be made after the stipulated time would deprive the party of its rights to recover the liquidated damage, stating further that here too the time was the essence of the contract.



Conclusion:

It can be concluded here that time in contract plays a significant role especially in present times where commercial contracts hold an important place. The essence factor in contracts however depends on the nature and circumstances of the case.



This article is written by Samriti Sharma of University Institute of Legal Studies Shimla.

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