Contract Act, Section 39

Contract Act, Section 39: Effect of Refusal of a Party to Perform the Whole Promise

Section 39 of the Indian Contract Act, 1872 provides that where a party refuses to perform or disables himself from performing the whole of the contractual promise, the promisee may put an end to the contract.

However, if the promisee, by words or conduct, accepts the continuation of the contract despite such refusal or incapacity, the right to terminate on that ground is lost.

1. Purpose of Section 39

The primary objective of Section 39 is to protect the promisee where the promisor has clearly refused to perform the contract or has made performance impossible through his own actions.

The provision allows the innocent party to terminate the contract without waiting for the due date of performance when it is evident that the contract cannot or will not be performed.

2. Refusal to Perform the Contract

Section 39 applies where one party expressly or impliedly refuses to perform the contractual promise in its entirety.

Such refusal may be communicated through words or inferred from conduct clearly showing an intention not to fulfil the contractual obligations, amounting to a fundamental breach of the contract.

3. Disabling Oneself from Performance

Section 39 also applies where a party disables himself from performing the contract, even without an express refusal.

Where a person, by his own acts or omissions, makes contractual performance impossible or impracticable, the law treats it in the same manner as an outright refusal.

4. Refusal Must Relate to the Entire Promise

Section 39 applies where the refusal or inability relates to the whole of the contractual promise and not merely to a minor part of the obligations.

A complete refusal strikes at the foundation of the agreement and gives the promisee the right to terminate the contract.

5. Right of the Promisee to Terminate the Contract

Where the conditions prescribed by Section 39 are satisfied, the promisee is entitled to put an end to the contract.

The innocent party may treat the contract as discharged and is no longer bound to perform his own promises after the other party has fundamentally repudiated the agreement.

6. Termination Is at the Option of the Promisee

An important feature of Section 39 is that a contract does not automatically come to an end upon the promisor's refusal to perform.

The law gives the promisee the option either to terminate the contract or to continue with it, as the choice rests entirely with the innocent party.

7. Acquiescence in the Continuance of the Contract

Section 39 provides that a promisee who, after knowing of the promisor's refusal or inability to perform, signifies acquiescence in the continuance of the contract loses the right to terminate it.

8. Acquiescence by Words or Conduct

Section 39 recognizes that acquiescence may be expressed by words or conduct, and once the promisee accepts or treats the contract as continuing, the right to terminate it is lost.

9. Effect of Acquiescence

Once the promisee accepts the continuance of the contract, the earlier refusal to perform can no longer be relied upon to terminate the agreement, and both parties remain bound by their contractual rights and obligations.