LAPSE OF TIME LAW IN CONTRACT

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Lapse of time in contract law can be the lapse of time in accepting the offer i.e. offer termination, it can be the lapse of time in performance of the contract, it can be the lapse of time of agency i.e. agency termination.

This article will be dealing with the lapse of time in performance of contract.

There is always a duty to complete the contract; the question is the specified performance of the contract will be counted if it is done after the due date. Now how is this due date determined in every contract. There are two ways to it: either the date is already specified in the contract or the is said it should be done in a reasonable period of time. This is not just my thought but a proper section of the Indian contract act. The Indian contract categorizes as when time is not specified and when time is not specified under section 46 and 47 respectively.

These clearly state that:

46. Time for performance of promise, where no application is to be made and no time is specified — Where, by the contract, a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the engagement must be performed within a reasonable time.

Explanation —The question “what is a reasonable time” is, in each particular case, a question of fact.

Time lapse in this performance of the contract will be leaving the affected party with few options:

1. Contract does not become voidable at the option of such a party but the party can claim compensation for any loss occasioned to him by such failure in performance ( section 55 part 2)

2. Give more time to complete the contract ( specific performance of the contract)

3. Or may accept instead of it any satisfaction which he thinks fit. ( section 63)

4. Or remit wholly or in part the performance of the contract. ( section 63)

47. Time and place for performance of promise, where time is specified and no application to be made —When a promise is to be performed on a certain day, and the promisor has undertaken to perform it without application by the promisee, the promisor may perform it at any time during the usual hours of business on such day and at the place at which the promise ought to be performed. For example: A promises to deliver goods at B’s warehouse on the first January. On the day A brings the goods to B’s warehouse, but after the usual hour closing it, and they are not received. A has not performed his promise.[1]

Time lapse in this performance of the contract will be leaving the affected party with few options:

1. Declare this non- performance as breach of contract. ( section 55 part 1)

2. Give additional time for the performance of the contract. ( section 63)

3. Or may accept instead of it any satisfaction which he thinks fit. ( section 63)

4. Or remit wholly or in part the performance of the contract. ( section 63)


There is also a case when the party completes the contract after the specified time, in such a case if the suffered party accept such late performance then that party cannot claim any compensation such of such late performance unless it gives a notice to do the same.

Now we will examine first option in detail:

Declare this non performance as breach of contract: if he decides to do so then he will have the option to claim damages. The party who is injured by the breach of a contact may bring in an action for damages.[2] Damages mean compensation in terms of money for that loss suffered by the injured party. Burden lies on the injured party to prove his loss.[3] Every action for damages raises two problems. The first is the problem of “remoteness of damage” and the second that of “measure of damages”.

Remoteness of damage: every breach of contract upsets many a settled expectation of the injured party. He may feel the consequences for a long time and in a variety of ways. A person contracts to supply to a shopkeeper pure mustard oil, but he sends impure stuff, which is a breach. The oil is seized by an inspector and destroyed. The shopkeeper is arrested, prosecuted and convicted. He suffers the loss of oil, the loss of profits to be gained on selling it, the loss of social prestige and of business reputation, not to speak of the time and money and energy wasted on defence and the mental agony and torture of the prosecution.

Thus, theoretically the consequences of a breach may be endless, but there must be an end to liability. The defendant cannot be held liable for all that follows from his breach. There must be a limit to liability and beyond that limit the damage is said to be too remote and, therefore, irrecoverable. The problem is where to draw the line.

The rule in "Hadley v Baxendale":

A very noble attempt was made as early as (1854) in the well-known case of Hadley v Baxendale to solve the problem by laying down certain rules. The plaintiffs carried on an extensive business as miller. Their mill was stopped by a breakage of the crankshaft by which the mill was worked. The defendants, a firm of carriers, were engaged to carry the shaft to the manufacturers as a pattern for a new one. The plaintiffs' servant told the defendants that the mill was stopped, and that the shaft must be sent immediately. But the defendants delayed the delivery by some neglect, and the consequence was, that the plaintiffs did not receive the new shaft for several days after they would otherwise have done. The action was brought for the loss of profits which would have been made during the period of the delay.

ALDERSON B laid down the following rule:

Now we think the proper rule in such a case as the present is this:

Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. On the basis of this principle the defendants were held not liable for the loss of profits, because in the great multitude of cases of millers sending off broken shafts for repair, it does not follow in the ordinary circumstances that the mill is stopped. Even though it was pointed out that the mill was stopped there could have existed several reasons for the stopping of the mill. The fact that the mill was out of action for want of the shaft was a special circumstance affecting the plaintiff's mill and the same should have been pointed out to the defendants in clear terms. It should also have been communicated that the plaintiffs would have suffered unreasonable loss by way of delay. This decision has always been taken as laying down two rules.

(i) General damages

General damages are those which arise naturally in the usual course of things from the breach itself. Another mode of putting this is that the defendant is liable for all that which naturally happens in the usual course of things after the breach.59

(ii) Special damages

Special damages are those which arise on account of the unusual circumstances affecting the plaintiff. They are not recoverable unless the special circumstances were brought to the knowledge of the defendant so that the possibility of the special loss was in the contemplation of the parties. No recovery of special damages when special circumstances not known:

Lack of knowledge of special circumstances once again prevented recovery of special damages in Horne v Midland Railway Co.:

The plaintiffs, a firm of shoe manufacturers, contracted to supply a quantity of shoes to a firm in London for the use of the French army at an unusually high price. The shoes were to be delivered by the 3rd of February. They consigned the shoes with the defendant railway company telling them that the consignment must reach by the 3rd, but not that there was anything exceptional in the contract. The consignment was delayed and the consignee refused to accept it. The plaintiffs had to sell them in the market at about half their contract price. In the action against the defendants for the delay in delivering the shoes, they paid into the court a sufficient sum to cover any ordinary loss occasioned thereby, but the plaintiffs further claimed the difference between the price at which they had contracted to sell the shoes and the price which they ultimately fetched. But it was held that this was a damage of an exceptional nature and it could not be supposed to have been in the contemplation of the railway company when it contracted to convey the goods by the 3rd.

Special circumstances already within knowledge of contract breaker:

But in the subsequent case of Simpson v London & North Western Railway Co, the above suggestion was qualified to this extent that if the enecial circumstances are already within the knowledge of the party breaking the contract, the formality of communicating them to him may not be necessary.[4]

The plaintiff was in the habit of exhibiting samples of his implements at cattle shows. He delivered his samples to the defendant company for consignment to the show grounds at New Castle. The consignment note said: “must be at New Castle on Monday certain". But no mention was made of the intention to place the goods in the exhibition. On account of negligence the goods reached only after the show was over. But as the company was already aware of the object of carrying the goods there, the plaintiff was allowed to recover not only the loss of freight but also the profits he would have made by placing the goods at the show.

COCKBURN CJ said:

The principle is now well-settled that, whenever either the object of the sender is specially brought to the notice of the carrier, or the circumstances are known to the carrier, from which the object ought in reason to be inferred, so that the object may be taken to have been in the contemplation of both parties, damages may be recovered for the natural consequences of the failure of that object.

In another case a fragmentiser was purchased by the plaintiff under a hire-purchase agreement. Its rotor broke down before normal life. The plaintiff had no means to replace it at cash price. He had to arrange it again at a hire-purchase price and claimed the same as damages. The defendant contended that the plaintiff had to pay hire-purchase price because of his lack of means. This contention was rejected. The fact that in the present circumstances of of economy business has to depend upon hire-purchase system was held to be within the contemplation of parties.

Section 73 of the ICA: Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

This implies direct liability of the party cause such loss.

Now moving on to the next 3 options which are all covered under section 63 of the ICA:

Promisee may dispense with or remit performance of promise — 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.

This can be looked in the following examples:

(a) A promises to paint a picture for B. B afterwards forbids him to do so. A is no longer bound to perform the promise.

(b) A owes B 5,000 rupees. A pays to B, and B accepts, in satisfaction of the whole debt, 2,000 rupees paid at the time and place at which the 5,000 rupees were payable. The whole debt is discharged.

(c) A owes B 5,000 rupees. C pays to B 1,000 rupees, and B accepts them, in satisfaction of his claim on A. This payment is a discharge of the whole claim.

(d) A owes B, under a contract, a sum of money, the amount of which has not been ascertained. A, without ascertaining the amount, gives to B, and B, in satisfaction thereof, accepts, the sum of 2,000 rupees. This is a discharge of the whole debt, whatever may be its amount.

(e) A owes B 2,000 rupees, and is also indebted to another creditors. A makes an arrangement with his creditors, including B, to pay them a [composition] of eight bananas in the rupee upon their respective demands. Payment to B of 1,000 rupees is a discharge of B’s demand.[5]

  1. The Indian contract Act, 1872 ( 9 of 1872)
  2. Contract and specific relief, Avatar Singh
  3. Sudesh Prabhakar Volvoikar v Gopal Babu Salvokar
  4. Contract and specific relief, Avatar Singh, pg 468
  5. Bare act ICA.