Section 39 Indian Contract Act 1872 - Effect of Refusal to Perform Promise Wholly
Section 39 of the Indian Contract Act, 1872 deals with the legal effect of a contracting party refusing to perform, or disabling himself from performing, his promise in its entirety. It gives the promisee an option to terminate the contract, subject to an important exception where the promisee has accepted or acquiesced in the continuation of the contract.
What does Section 39 of the Indian Contract Act provide?
Section 39 appears in Chapter IV of the Indian Contract Act, 1872, which deals with the performance of contracts. The provision addresses a situation where a party refuses to perform the entire promise or puts himself in a position where performance of the entire promise is no longer possible.
When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.
The provision therefore gives the promisee a choice. The promisee may accept the refusal and put an end to the contract, or may elect to allow the contractual relationship to continue. The choice made by the promisee can have important legal consequences.
Meaning and essential elements of Section 39
For Section 39 to operate, the conduct must amount to refusal to perform the promise in its entirety, or the promisor must have disabled himself from performing the promise as a whole. A minor or partial failure does not automatically attract the consequence contemplated by Section 39.
- There must be a contract: The rights under Section 39 arise from an existing contractual obligation.
- Refusal to perform: One party must refuse to perform the contractual promise in its entirety.
- Self-disablement: Section 39 also applies where a party makes himself incapable of performing the entire promise.
- Option of the promisee: The promisee may elect to put an end to the contract.
- Acquiescence: The right to terminate may be affected where the promisee, through words or conduct, signifies acceptance of the continuation of the contract.
Section 39 and anticipatory breach of contract
Section 39 is an important statutory provision governing what is commonly described as repudiation or anticipatory breach. Where, before the contractual performance is completed, a party unequivocally refuses to perform the entire obligation or makes performance impossible by his own conduct, the promisee may elect to accept that repudiation and terminate the contract.
The legal consequence is not necessarily automatic termination. The language of Section 39 gives the promisee an election. The promisee may put an end to the contract or may, by words or conduct, acquiesce in its continuation.
What is acquiescence under Section 39?
Acquiescence means conduct showing that the promisee has chosen to continue with the contractual relationship despite the other party's refusal or breach. It may be expressed through words, but Section 39 expressly recognizes that it can also arise from conduct.
Whether particular conduct amounts to acquiescence depends on the facts and terms of the contract. Continuing to accept performance after knowledge of the relevant refusal may, depending on the circumstances, indicate an election to keep the contract alive.
Illustrations to Section 39
The statutory illustrations demonstrate the difference between terminating the contract following refusal and electing to continue it.
A, a singer, contracts with B, the manager of a theatre, to sing at the theatre two nights every week during the next two months. B agrees to pay her 100 rupees for each night's performance. On the sixth night, A wilfully remains absent. B is entitled to put an end to the contract.
In the same situation, A wilfully remains absent on the sixth night but, with B's assent, sings on the seventh night. B has thereby signified acquiescence in the continuation of the contract and cannot then terminate it on account of that refusal. B can, however, claim compensation for the damage caused by A's failure to sing on the sixth night.
Termination and compensation
Section 39 primarily addresses the promisee's right to put an end to the contract following refusal or self-disablement by the other party. The question of monetary compensation for breach must be considered together with the other relevant provisions of the Indian Contract Act, particularly the provisions governing consequences of breach and compensation.
The second statutory illustration is important because it demonstrates that acquiescence in continuation of the contract does not necessarily erase the consequences of an earlier breach. Although the promisee in that illustration cannot terminate the contract on that basis after electing to continue it, compensation for the damage caused by the failure remains available.
Difference between Sections 38 and 39
Section 38 of the Indian Contract Act concerns the effect of a promisee refusing to accept a proper offer of performance made by the promisor. Section 39 deals with the converse type of problem: refusal by a contracting party to perform, or that party disabling himself from performing, the promise in its entirety.
Practical effect of Section 39
When a dispute involves an alleged refusal to perform a contract, it is important to determine precisely what was communicated or done, whether the refusal concerned the promise in its entirety, whether the promisee accepted the repudiation, and whether subsequent words or conduct instead showed an intention to continue the contract.
The terms of the particular agreement, communications between the parties and subsequent conduct may therefore be significant in deciding whether Section 39 applies and what remedy is available.
Official text of the Indian Contract Act, 1872
The current text of the Indian Contract Act, 1872 can be checked through the Government of India's official India Code portal. Users dealing with a contractual dispute should verify the applicable statutory text and any relevant amendments before relying on a provision.