Succession to benefit of Contract

AUTHOR – NISHTHA MAHAJAN, UNIVERSITY INSTITUTE OF LEGAL STUDIES, PANJAB UNIVERSITY, CHANDIGARH

INTRODUCTION 

According to Section 2(h) of The Indian Contract Act, 1872, “ An agreement enforceable by law is a contract”. As all agreements are not contracts, some essentials should be fulfilled to make one as mentioned in Section 10 of The Indian Contract Act, 1872.

Section 10 of The Indian Contract Act, 1872, states “ All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

To avoid the breach of contract one should discharge the contract by performing the same.

PERFORMANCE OF CONTRACT 

A promisor is the one making a promise and to whom the promise is being made is known as the promisee. Both create rights and obligations against each other. Thus it is a promise in exchange for another promise. 

For instance, when you go to a shopping store, the shopkeeper agrees to sell the shirt for 1000 rupees. Here the shopkeeper getting 1000 rupees is his right. Whereas handing over the shirt is an obligation against you and vice versa. Thus, these are known as reciprocal promises. 

• Contracts to be performed 

According to Section 37 of The Indian Contract Act, 1872, “ The parties to contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.”         Promises bind the representatives of the promisors in case of death of such promisor before the performance, unless a contrary intention appears from the contract. 

If the promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance. Also he does not thereby lose his right under the contract but discharges his obligation under the same. This is an attempt to perform a contract under Section 38 of The Indian Contract Act, 1872.

• By whom contracts must be performed 

According to Section 40 of The Indian Contract Act, 1872, the contract is to be performed by following :

1. Promisor himself: Section 40 of The Indian Contract Act, 1872, says if the contract, in particular, is based upon personal skill the promisor is the only person who can perform the same. Whereas in a general sense also the promisor should have the intention to perform the contract. 
2. Agent: If it is not particularly mentioned an agent can perform the contract for the promisor too
3. Representatives: In other cases like death and incapacity, promisors’ representative may himself or further appoint a competent person to perform the contract.
4. Competent Third Party: When performance is accepted from third-party promisee can’t enforce performance of the contract according to Section 41 of The Indian Contract Act, 1872.

If a promise is joint and several then the other joint promisors need to fulfil the same. Even one joint promisor can be made liable as a whole and further he can get compensated by the others.

DOES THE CONTRACT END ON DEATH OR INCAPACITY? 

If a party to a contract dies before he has performed the contract that, by itself, does not put an end to the obligation to perform the same. The promisee can bind the representatives of the promisors in case of the death of the promisor before the performance. For example, A promises to deliver 1000 units of cotton to B but dies for performance. Then a representative of A is bound to deliver the same. 

Expectation :

If the performance of a contract requires personal skill or personal confidence, the death of the party in such a case, puts an end to the contract and thus representatives can not be made liable for performance. 

In Robinson v Davison, the defendant’s wife was an eminent piano player. She promised to play at a concert. But due to her illness, she was unable to perform. Thus the defendant was not liable as the contract can be performed in good health. So the contract was discharged.

Succession VS Assignment 

These are two legal concepts. Succession refers to the benefits of a contract that are succeeded by the process of law. Herein benefits and burden both would sometimes devolve the legal heir. 

Assignment whereas refers to where a person can’t be subject to the obligation of a contract to which he is not a party. The logical consequence is that a stranger can’t acquire rights under a contract. 

SUCCESSION TO BENEFIT OF CONTRACT AND PERFORMANCE OF CONTRACT

When the contract is not based on personal skill or expertise, on death or incapacity of the promisor, the representatives of the promisor are bound to perform the contract.

Thus binding the legal representatives to perform the contract is known as succession. Eg: A son, B inherited the property of A. He is further liable to pay the debts of the deceased and perform all the contracts A was bound to perform.

The Limit Of Liability :

The obligations relating to the contract will only bind the legal heir to the extent of asset or benefit incurred by them. One can not pay off debts or perform the contract if the benefit he incurred from the deceased is less than the amount required to do the same. 

Thus there is limited liability of the legal heir.

For instance, X’s legal heir, Z has transferred the property of X which was 200 crores and liabilities 201 crores, thus Z is only bound to pay liabilities up to the extent to which he has inherited benefit or asset, i.e. not more than 200 crores. 

In case there is no legal heir left behind, the liability would fall upon the person who acquires interest over the matters of contract through the deceased party. The closest person having the interest in best is further passed.

In Hazari v Neki, it was held by the Apex court that the legal representative is also entitled to specifically enforce the contract as they are representatives in interest unless the contrary intention appears in the contract.

Under the Specific Relief Act,1963, representatives in interest generally include those entitled to the contract’s benefit. It is not necessary that all representatives in interest must join as co-plaintiff.

Eg: A agrees to transfer his house property to B. Before transfer A dies. A widow and four sons are representatives in interest. Where the widow files the suit for specific performance along with three sons and the eldest son refuses to be co-plaintiff then he can be made defendant along with B. 

CONCLUSION :

The matter of succession to benefit of a contract is a bilateral concept. The legal heir of the deceased person is bound to perform the contract. But also at the same time, he can benefit from the specific performance of the contract. The representative is thus bound to withdraw all the liabilities of the deceased but to a limited extent. On the other hand, he can also enforce the performance of the contract and even sue the other party for non-performance to get compensation. This gives him the right to avail of that benefits. Thus succession gives the legal representative the right to benefit but even burden to eliminate all his liabilities.

Thus, unless there is a contrary intention, the contract does not come to an end on death or incapacity of the person, the representatives are responsible for the same.

REFERENCES :

• The Indian Contract Act, 1872
• The Specific Relief Act, 1963
• R.K. Bangia’s The Indian Contract Act, 1872
•  Avatar’s Singh Contract and Specific Relief