Contract Act, Section 37

Contract Act, Section 37: Obligation of Parties to Perform Contracts

Section 37 of the Indian Contract Act, 1872 lays down the fundamental rule that every party to a contract must perform or offer to perform the promises undertaken, unless such performance is legally excused or dispensed with.

The section further provides that contractual obligations bind the legal representatives of a deceased promisor unless a contrary intention appears from the contract, thereby ensuring continuity and certainty in contractual relationships.

1. Purpose of Section 37

The primary objective of Section 37 is to affirm the binding nature of contractual obligations and ensure that every valid contract is performed according to its terms.

By requiring parties to honour their contractual promises, the provision promotes confidence in commercial transactions and preserves the sanctity of contracts.

2. Duty to Perform the Contract

Section 37 imposes a legal duty upon every contracting party to perform the promises undertaken under the contract.

Performance is the normal mode of discharging contractual obligations, and once the promises are fulfilled, the contract is executed and the contractual relationship comes to an end.

3. Offer to Perform

Section 37 recognizes that a party may discharge the obligation to perform by making a valid tender of performance, demonstrating readiness and willingness to perform, with the legal consequences of an unjustified refusal governed by the subsequent provisions of the Contract Act.

4. Mutual Performance of Promises

Section 37 applies equally to all parties to a contract, requiring each to perform or offer to perform their respective obligations in accordance with the agreed terms unless performance is lawfully dispensed with or excused.

5. Performance May Be Dispensed With

Section 37 recognizes that the obligation to perform a contract may be discharged under the Contract Act or any other applicable law through doctrines such as novation, rescission, waiver, remission, impossibility, or frustration.

6. Performance Excused by Law

Section 37 operates subject to other applicable laws, under which contractual performance may be excused where a statutory provision, judicial order, or legal prohibition makes performance unnecessary, impossible, or unlawful.

7. Binding Effect of Promises

A significant feature of Section 37 is that contractual obligations continue to bind the parties until they are duly performed or lawfully discharged, and are not extinguished merely by the passage of time or a change in circumstances.

8. Effect of Death of the Promisor

The second part of Section 37 provides that, upon the death of the promisor, contractual obligations ordinarily bind the legal representatives, so that the promises do not automatically come to an end by reason of the promisor's death.

9. Liability of Legal Representatives

Where the promisor dies before completing performance, Section 37 generally transfers the contractual obligation to the legal representatives, who are liable to perform it to the extent permitted by law and the assets inherited from the deceased.

10. Contrary Intention Appearing from the Contract

Section 37 recognizes an exception where the contract requires personal skill, qualifications, or confidence, or otherwise indicates a contrary intention, in which case the obligation does not pass to the legal representatives upon the promisor's death.