Legal Aspects of Reciprocal Promises: Understanding Mutual Duties

                                                Reciprocal Promises In Law of Contract

                                                              Section 51 to 54, 57 & 58 

S. 51. Promisor not bound to perform, unless reciprocal promise ready and willing to perform.—When a contract consists of reciprocal promises to be simultaneously performed, no promisor need perform his promise unless the promise is ready and willing to perform his reciprocal promise.

Illustration: A and B contract that A shall deliver goods to B to be paid for by B on delivery. A need not deliver the goods, unless B Is ready and willing to pay for the goods on delivery. B need not pay for the goods, unless A is ready and willing to deliver them on payment.

 If the price is to be paid in instalments and the first instalment is payable on delivery, the seller need not deliver unless the buyer is ready and willing to pay the first instalment and the buyer need not pay the instalment unless the seller is ready and willing to deliver the goods.

S. 52. Order of performance of reciprocal promises.—Where the order in which reciprocal promises are to be performed is expressly fixed by the con tract, they shall be performed in that order; and where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.

A and B contract that A shall build a house for B at a fixed price. A's promise to build the house must be performed before B's promise to pay for it. 

S. 53. Liability of party preventing event on which contract is to take effect.—When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract.

For example, in a case before the Privy Council, where in order to get his mine cleared of a rock, the defendant had to supply a crusher. The crusher supplied was too inadequate for the job. This was held to be such an obstruction to performance as enabled the contractor to recover his expenses and loss of profits. 

S. 54. Effect of default as to that promise which should be first per formed in contract consisting of reciprocal promises.—When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract. 

Effect of one party's default Another illustration is the Supreme Court decision in Nathulal v Phoolchand:

The plaintiff was the owner of a ginning factory constructed on agricultural land and nominally held in the name of his brother. He sold the factory to the defendant who paid half the price at once and was put in possession, the balance being payable on a fixed date. The buyer defaulted in paying up on that date and the seller rescinded the contract and brought an action for possession.

Shah J speaking for himself and Hegde J held that the nature of the contract required the seller to have had his own name recorded as the owner and have obtained permission from the State Government for transfer of the agricultural land, before he could claim the final payment. If, therefore, under the terms of the contract the obligations of the parties have to be performed in a certain sequence, one of the parties to the contract cannot require compliance with the obligation by the other party without in the first instance performing his own part of the contract which in the sequence of obligations is to be performed by him earlier. So long as Nathulal (seller) did not carry out his part of the contract, Phoolchand could not be called upon to pay the balance of the price. 

S. 57. Reciprocal promise to do things legal and also other things illegal.—Where persons reciprocally promise, firstly to do certain things which are legal, and, secondly, under specified circumstances to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement.

A and B agree that A shall sell B a house for 10,000 rupees, but that, if Buses it as a gam bling house, he shall pay 1,50,000 rupees for it. The first set for reciprocal promises, namely, to sell the house and to pay 10,000 rupees for it, is a contract. The second set is for an unlawful object, namely, that B may use the house as a gambling house, and is a void agreement. 

S. 58. Alternative promise, one branch being illegal. — In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.