Performance of a Contract
Performance of Contract is the fulfillment of obligations by the respective parties to a contract. It is one of the modes of discharging the contract.
Ex. X agrees to sell his Sofa at Rs 1000 to Y. X must deliver the Sofa to Y and Y must Accept deliver of the Sofa from X and pay Rs 1000 to X.
Performance of Contract is execution of Contract, after which the parties to the Contract are discharged from their duties
Perform or offer to perform : The parties to the contract must either perform or offer to perform their respective promises (s. 37).
Ex. If X is ready to deliver the Sofa to Y, but Y does not take delivery and Pay X, X is said to have performed the Contract and is discharged from Duty. X may now sue Y for breach of Contract
Ex. If Y has paid to X and X does not deliver the Sofa to Y, Y is said to have performed the Contract and is discharged from Duty. Y may now sue X for beach of performance.
Perform or offer to perform : सरल हिंदी में समझे
Modes of Performance of Contract: Accordingly, Performance may be done as follows:
- Actual Performance. Where the promisor makes an offer of performance to the promises and such offer is accepted by the promisee, and the parties perform their respective obligations, it results in actual performance.
- Offer to Perform. The promisor offers to perform his obligation (also known as “Tender”)
If the promisee does not Accept the ‘Tender to perform’ by the promisor (promisee does not allow promisor to perform), the promisor is not responsible for non-performance and retains his rights under the contract. Thus, a Tender of Performance is equivalent to performance itself. The promisor is excused from further performance and he may also sue the promisee for the breach of contract (s.38).
Modes of Performance of Contract : सरल हिंदी में समझे
Effect of Performance of Contract:
- Contract terminated: The contract is completely discharged (i.e terminated).
- Right to get performed : The party, who has performed his obligation, gets the right to get the obligation performed by the other party.
Effects of Performance of Contract: सरल हिंदी में समझे
Legal consequences of Non Performance of Contract
- Contract comes to end : When a party to a contract fails to perform his promise in its entirety, the promisee may put an end to the contract (s.39).
Ex. A servant is employed for one year on a salary of Rs.600 per month, but the salary for the entire year is payable at the end of one year’s service. The servant wrongfully leaves after 3 months. He is not entitled to the salary for the period he has been employed because, by leaving the service, he has failed to perform his promise in its entirety.
- No Repudiation : If the promisee signifies (by words or conduct) his acquiescence (tacit assent) in the continuance of the contract, he cannot repudiate it.
Ex. A,a singer, contracts with B, the manager of a theatre, to sing at his theatre two nights in every weekend during the next two months and B agrees to pay her Rs.1,000 for each night’s performance. After performing 5 nights, on the sixth night, A willfully absents herself from the theatre. B is at liberty to put an end to the contract. However, if A sings on the seventh night with the consent of B, B has signified his acquiescence in the continuance of the contract, and cannot put an end to the contract (but may claim compensation for the loss due to A’s failure to sing on the sixth night).
- Restore benefits received : When a promisee puts an end to a contract u/s 39, being rightly entitled to do so, it amounts to rescinding a voidable contract and the promisee shall be bound to restore to the other party all the benefits received under the contract.
Non Performance of Contract : सरल हिंदी में समझे
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Tender to Perform a Contract
Tender to Perform (or offer to perform) means offer to Perform as per Contract. Sometimes, one Party offers to perform the obligation but other party will not allow it. The contract is deemed to have been performed by tenderer (the Party who agrees to perform).
Types of Tender : Tender is normally of following types:
- Tender of Goods or Services: It is attempted performance of a promise to do something.
- Tender of Money: It is attempted performance of a promise to pay something.
Tender to Perform a Contract – सरल हिंदी में समझे
Conditions of Tender to Perform a Contract :
‘Tender’ or ‘Offer to Perform’ should meet the following conditions:
- Unconditional : The offer must be unconditional. It becomes conditional when it is not in accordance with the terms of the contract and hence not a valid tender (any new condition imposed later by the performer is treated as Conditions).
Ex. A, a debtor, offers to pay B, his creditor, the due amount on the condition that B sells him certain shares at cost. This is not a valid tender.
- Full Obligation: It must be for the obligation in full. A Tender to fulfill only a part of the obligation is not a valid tender.
Ex. A, a debtor, owes Rs 10,000 to B. A tenders to pay only Rs 5000. It is not a valid tender.
Ex. A contracts for delivery of 4,950 tons of wheat to B, but A delivers 4,951 tons. Held,the contract was duly performed by the seller.
- Proper person and Form : It must be made to proper person (to the promisee or his authorised agent) and in proper form, as agreed.
- Proper time and Place : It must be made at the proper time and place where it is mentioned in the tender and in case the contract is silent it must be tendered in the business place and during business hours.
Ex. A owes B Rs.1000 payable on the 1st of August with interest. He offers to pay on the 1st of July the amount with interest upto the 1st of July. It is not a valid tender as it is not made at the appointed time.
- Joint promisees : It may be made to one of the several joint promises. In such a case it has the same effect as a tender to all of them.
- Inspection of goods : In case of tender of goods, the promisee must get proper opportunity to inspect the goods. A tender of goods at a time when the other party cannot inspect the goods is not a valid tender.
- Tender of Money : Tender of money must be in legal Tender (e.g. Rupees in India).
Conditions of Tender to Perform a Contract – सरल हिंदी में समझे
Effects of Tender to Perform a Contract
The tenderer is discharged from the responsibility for non performance of the contract without any prejudice to his rights against the promisee.
- Tender of goods and services
- Rights : The promisor does not loose his rights under the contract.
- Discharged : The promisor is discharged from his obligation under the contract.
- Responsibility : The promisor is not responsible for non-performance of his promise.
- Sue : The promisor is entitled to sue the other party
- Tender of money
- Rights : The promisor does not loose his right under the contract.
- Responsibility : The promisor is not responsible for non-performance.
- Debtor’s Obligation : The debtor is not discharged from obligation to pay. But, he is discharged from liability for payment of interest from the date of tender.
Effects of Tender to Perform a Contract – सरल हिंदी में समझे
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Parties responsible to perform the Contract
- Promisor: If the contract signifies personal performance by promisor himself (involving personal skill of the promisor – like singing, painting or special skill), then the promise must be performed by the promisor himself and none else (s. 40).
Ex. A promises to paint a picture for B. In the mean time, A became disabled in an accident and said his son C to draw the picture of B. Held C cannot perform the promise made by his father A as it involves personal skill of the promisor. The contract between A and B is discharged on non-performance of promise by A.
- Agent: Except in contracts requiring personal performance, the promisor or his representative may employ a competent person to perform (s. 40).
Ex. A promises to pay B a sum of money. A may personally pay the money to B or may pay through any other person.
- Legal Representatives: On death of the promisor, contracts requiring personal performance comes to an end (a personal action dies with the person), but in other cases, the legal representatives of the deceased promisor are to perform it unless a contrary intention appears from the contract (s.37). The liability of the legal representatives is limited to the value of the property inherited from the deceased.
Ex. A promises to paint a picture for B within a month.A dies before that time without being able to paint the picture. The contract cannot be enforced neither by A’s representatives nor by B.
Ex. A promises to deliver his maruti car to B on payment of Rs.1,00,000 on 31st March. A dies before that day. A’s legal representative must perform the contract.
- Third persons: When a promisee accepts performance by a third person, he cannot afterwards enforce it against the promisor (s.41).
Ex. X contracted with Y for supply of 500 tons of iron ore. X demanded more 200 tonnes, but Y referred his friend Z as he is out of stock. X accepts the performance of the contract with Z. At the time of delivery, Z was unable to supply the ore. X can neither enforce Y to supply 200 tonnes of ores or to pay for the damages.
- Joint Promisors: When two or more persons make a joint promise, they must jointly fulfil the promise. (s.42)
Parties responsible to Perform a Contract – सरल हिंदी में समझे
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Parties to demand Performance of Contract
- Promisee: Only the promisee (or his authorised agent) can demand performance of the promise under a contract even if it is for the benefit of any other person.
Ex. A promises B to pay C a sum of Rs.500. A does not pay the amount to C. Only B (and not C) can take action against A.
- Legal Representative: In case of death of the promisee, his legal representatives can demand performance.
Ex. A promises to deliver his maruti car to B on payment of Rs.1,00,000 on 31st March. A dies before that day. A’s legal representative must perform the contract.
- Third Party: Normally, a person, who is a party to the contract, can only demand performance. However, in certain cases, a third party (like a beneficiary to the contract) may enforce a promise under a contract, even though he is not a party to the contract.
Parties to demand Performance of Contract- सरल हिंदी में समझे
When a Contract need not be performed
A contract need not be performed when:
- Performance impossible : Its performance becomes impossible (s. 56).
- Contract Substituted : The parties agree to substitute a new contract for it or to rescind or alter it (s. 62).
- Performance Dispensed: The promisee dispenses with the performance of the promise (wholly or partly), or extends the time or accepts any satisfaction for it (s. 63).
- Contract Rescinded : The person at whose option it is voidable, rescinds it (s. 64).
- Negligence / Refusal : Promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise (s. 67).
Ex. A contracts with B to repair B’s house. B does not properly describe the places to be repaired. B cannot charge A for non-performance of the contract, if it is caused by B’s neglect to properly tell the job to A.
- Illegal : The contract becomes Illegal. (s.23,24)
- Novation : Contract is discharged by Novation.
When a Contract need not be Performed – सरल हिंदी में समझे
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Rules of Performance of Contract
The rules of performance of a contract are summarized below:
- Time : The rules regarding Time of performance are as follows :
- Reasonable time: If a promisor is to perform his promise without application by the promisee, and no time for performance is specified, the promise must be performed within a reasonable time (s. 46), having regard to the facts, usage of trade & intention of the parties at the time of entering into the contract. There is no specific meaning or condition attached to the word ‘Reasonable Time’. ‘Reasonable Time’ is to be decided by court, with regard to the facts and prevailing circumstances of the specific case (normally, regular Business Hours is considered as Reasonable Time).
- Specified Time: When a promise is to be performed within a specified time, the promisor may perform the promise at any time during the usual hours of business on such day and at the place at which the promise ought to be performed (s.47, 48).
- Ex. Apromises to deliver goods at B’s warehouse on the 1st January. On that day A brings the goods to B’s warehouse, but after usual hour for closing it and they are not received, A has not performed his promise.
- Time not essence: Where time is not of the essence of the contract, (e.g in a contract of sale of immovable property, normally time is not of the essence unless such intention is explicit in the contract), failure to perform within the fixed time does not make the contract voidable, but the promisee is entitled to compensation for any loss caused to him by such failure (s.55).
- Time Essence of contract: Where time is essence, on failure to perform by the promisor, the contract becomes voidable at the option of promisee. However, if the promisee accepts the contract after fixed time, he can not claim compensation, unless he has given prior notice (s. 55).
In case of mercantile contracts, the time fixed for delivery of the goods is considered to be the essence of the contract, not the time fixed for the payment of the price. In the following cases time is considered to be the essence of contract:
- Where parties to the contract have agreed to treat the time as essence of contract,
- Where non-performance of contract at the specified time results an injury to the party,
- Where the contract is required to perform within the specified time.
- Place: When no place is fixed for the performance, the promisor must apply to the promisee to appoint a reasonable place for the performance of the promise, and to perform it at such place (s.48, 49). If promisor fails to ask fix the place of performance, it becomes the duty of promisor to fix the place of performance.
Ex. A undertakes to deliver 100 quintals of Jute to B on a fixed day, A must apply to B to appoint a reasonable place of delivery and must deliver at such place. If A fails to fix the place, B must fix a reasonable place and deliver at that place.
- Manner: The performance of any promise must be made in manner (e.g., at place or time) specified by the promisee (s.50).
Ex. Aand B are mutually indebted. They settle and B pays A the balance upon settlement. This amounts to payment by A and B. respectively, of the sums which they owed to each other.
Ex. A asks B, who owes him Rs.1,000, to send him a promissory note for Rs.1,000 by post. The debt is discharged as soon as B sends the promissory note duly addressed to A, by post.
Ex. A owes B Rs.2,000. B accepts some of As goods in reduction of the debt. The delivery of the goods operates as a part payment.
Rules of Performance of Contract – सरल हिंदी में समझे
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Joint Promise in a Contract
Joint Promise means a Promise by two or more person (called joint promisors) to discharge obligation jointly. The partners of a firm, the members of a joint Hindu family, co-sharers or mortgagees are all Joint promises.
- Joint Responsibility : All joint promisors are jointly responsible to fulfil the promise, unless a contrary intention appears from the contract.
- Death of Promisor : If any of them dies, his legal representatives, jointly with the surviving promisors, must fulfill the promise. If all of them die, the legal representatives of all of them must jointly fulfill the promise (s. 42).
Joint Promise of Contract – सरल हिंदी में समझे
Rules relating to Joint Promise a Contract
- Non Discharge of Obligation : If the parties do not discharge their obligations of their own volition, the promisee may compel any one or more of the joint promisors to perform the whole of the promise, if there is no express agreement to the contrary (as liability of joint promisors is joint and several).
Ex. A, B and C Jointly promise to pay D Rs.3,000. D may compel all or any of A, B or C to pay him Rs.3,000.
- Whole Performance by Single Promisor : When a Joint promisor is compelled to perform the whole of the promise, he may compel the other Joint promisors to contribute equally with himself to the performance of the promise (unless a contrary intention appears from the contract).
Ex. A, B and C are under a Joint promise to pay D Rs.3000. A is compelled to pay the whole amount to D. He may recover Rs.1000 each from B and C.
Ex. A partner of a firm is entitled to claim contribution from other partners when he is required to pay some dues of the firm.
- Sharing of loss arising from default (Sec. 43): If any one of the Joint promisors (or his legal representatives after his death) makes default in the contribution, the remaining joint promisors must bear the loss arising from such default in equal proportion.
This section also applies in case of recovery of loan by a creditor from the heirs, who by operation of law, become joint promisors after the death of the single promisor.
Ex. A, B and C, jointly promise to pay D the sum of Rs.3,000. C is compelled to pay the whole sum Rs 3000) to D. A is insolvent but his assets are sufficient to pay one-half of his debts. C is entitled to receive Rs.500 (half of Rs.1,000) from A’s estate and Rs.1,250 (half of remaining debt of Rs.2,500) from B.
Ex. A,and B jointly promise to pay C Rs.3.000. B is unable to pay anything and A is compelled to pay the whole sum. A is entitled to receive Rs.1,500 from B.
- Release of Joint Promisor (Sec. 44): A release by the promisee of any of the joint promisors does not discharge the other Joint promisors from liability. The released joint promisor also continues to be liable to the other Joint promisors.
Ex. A, B & C jointly owe a debt to D. D releases A from his liability and files a suit against B and C for payment of the debt. B and C are not released from their liability and A is not discharged from his liability to B & C for contribution.
- Death of promisor : In case of death of promisor (one or more, in case of joint promisor), the legal representative of the expired promisor will be responsible to perform the promise
- Devolution of Joint Rights (sec.45): In case of Joint promisees (one person making promise to several persons jointly), the right to claim performance rests with all of the Joint promisees, unless a contrary intention appears from the contract. The partners of a firm, the members of a joint Hindu family, co-sharers or mortgagees are all Joint promisees.
- Death of one Promisee : If one of the Joint promisees dies, the right to claim performance rests with his legal representatives jointly with other surviving joint promisees.
- Death of all Promisees : When all the Joint promisees die, the right to claim performance rests with their legal representatives jointly.
- Joint Rights : A suit to enforce such promise must be instituted by all the Joint promisees (unless a contrary intention appears from the contract). The right of joint Promisees is thus only joint and not several.
Ex. B and C Jointly lend Rs.10,000 to A who promises B and C Jointly to repay them the loan with interest on a specified date. B dies. Now Bs representatives jointly with C can claim refund of money with interest as per terms, during C’s life. After the death of C, representatives of B and C jointly can claim from A.
Rules relating to Joint Promise of Contract – सरल हिंदी में समझे
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Reciprocal Promises for Performance of Contract
Reciprocal promises means both parties have some obligation to do (both parties have promised to do something as per contract). Reciprocal Promises form the consideration between promisor and the promisee (e.g. A promises to do or not to do something in consideration of B’s promise to do or not to do something). Normally, majority of the agreements / contracts constitute reciprocal promises.
According to sequence of execution of performance, Reciprocal promises may be classified as follows:
- Mutual and Independent Reciprocal Promise: When each party performs his promise independently and irrespective of the fact whether the other party has performed or willing to perform his promise or not, the promises are mutual and independent.
Ex. A & B contracts that A would deliver him a book and B would deliver him the class note. In this case, the promises are mutual and independent. Both of them have to perform without the regard of other person’s performance.
- Conditional and Dependent Reciprocal promise: When the performance of a promise by one party depends upon the prior permission of the other party, it will be called as a conditional and dependent promise.
Ex. A and B contract that A shall deliver goods and B would pay after delivery. B need not pay until A delivers.
- Mutual and Concurrent or Simultaneous Reciprocal Promise: When two contracts are to be performed simultaneously, then it is called as Mutual and Concurrent or Simultaneous Reciprocal Promise.
Ex. A and B contract that A shall deliver goods and B would pay on delivery. A & B should perform their obligations simultaneously.
Reciprocal Promises of Performance of Contract – सरल हिंदी में समझे
Rules regarding of Reciprocal Promise in a Contract
- Simultaneous Performance : When the reciprocal promise is to be simultaneously performed, the promisor need not perform his promise unless the promisee is ready to perform his reciprocal promise (s.51).
Ex. A and B contract that A shall deliver goods and B would pay on delivery. A need not deliver the goods, unless B is ready and willing to pay for the goods on delivery. B need not pay for the goods unless A is ready and willing to deliver on payment.
- Sequenced Performance : If the sequence of performance is expressly fixed by the contract, they must be performed in that order; otherwise they must be performed as per normal rules (s.52).
Ex. A and B contract that A shall build a water tank and B will pay after construction is complete. So, A must build the tank first before the demands payment from B.
- Performance Prevented: If one party to the contract prevents the other from performing, the contract becomes voidable at the option of the party so prevented. Further, the party so prevented is entitled to compensation from the other party for any loss which he may sustain in consequence of the non-performance of the contract (s.53).
Where the contract is such that one (1st Party) can not perform till the other (2nd Party) does not perform, he (2nd Party) cannot claim performance (from 1st party) and he (2nd Party) must compensate the other (1st Party) for loss suffered due to non performance (s.54).
Ex. A and B contract that it shall execute certain work for A for Rs.1,000. B is ready and willing to execute the work but A prevents him from doing so. B may rescind the contract and may recover for loss suffered, from A.
Rules regarding Reciprocal Promises of Performance of Contract – सरल हिंदी में समझे
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Appropriation of Payments of Debt under Contract
When a debtor owes several debts to the same creditor and makes a payment which is not sufficient to discharge the whole indebtedness, following rules apply:
- Appropriation towards Principal Debt :
- Debt Specified (s. 59): The creditor is obliged to discharge off the debtor for the particular debt for which the payment is intended:
- where the debtor specifically mention about the particular debt for which the payment is made.
- where the payment is made in such a circumstances which itself indicates the discharge of some particular debt.
- Debt unspecified (s. 60): Where debt to be discharged is not indicated the creditor can act according to his own judgment to apply such payment against discharged of any lawful debt.
- If the application of the payment made is not specifically mentioned by the debtors.
- where the circumstances of the case do not indicate the particular debt to which the payment made is to be applied.
- No specific appropriation (s. 61): If neither of the party specifically discharges any particular debt, the payment shall be applied in discharge of the debts in order of time. If the debts are payable on the same date, then discharge of such debts shall take place proportionately.
- Appropriation towards interest: When the debtor makes a part payment without indicating as to whether payment is made towards principal or interest, the payment shall first be adjusted towards interest and the balance shall be adjusted towards Principal Amount.
Appropriation of Payments of Debt under Contract – – सरल हिंदी में समझे
Right of Appropriation of Payments of Debt under Contract
- Debtors’ Rights : Appropriation is a Right primarily of the debtor. The debtor has the right to expressly state the particular debt towards which the payment made by him shall be applied. So, money paid by the debtor must be applied according to the directions of the payer and not of the receiver.
- Creditors’ Rights : If the creditor does not agree to apply the payment made as per the directions of the debtor, he should not receive the money, nor a creditor can receive the payment under protest. The creditor cannot alter the appropriation after he has accepted the payment.
Rights of Appropriation of Payments of Debt under Contract – सरल हिंदी में समझे
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Assignment of Contract
Assignment of a contract means transfer of rights and liabilities under the contract to a third party.
It may take place by:
- By the Parties
- Assignment of Contractual Obligation
- Assignment of Contractual Rights
- By Operation of Law.
Assignment of Contract- सरल हिंदी में समझे
Assignment of Contractual Obligations
Assignment of Contractual Obligation means transfer of obligations under the contract, to a third party. Rules of Assignment of Contractual Obligation :
- Personal skill : Contractualobligations involving personal skill or ability cannot be assigned (s.40).
Ex. A painter cannot assign his obligation to paint to another person.
- Third party performance : Promisor cannot compel promisee to Accept performance by third party.
Ex. A owes B Rs.1,000 and C owes A Rs.1,000. A cannot ask B to realize from C, unless B agrees to such term.
- Original Party Obligations: Parties may agree to allow a competent third party to perform, provided the contract does not contemplate performance only by the promisor. But even then, the original party remains liable for the proper performance of the contract.
Ex. A undertakes to do some work for B which needs no special skill, B cannot complain if A gets the work done by an equally competent person, but A still remains responsible for performance
- Novation : Novation means transfer of liability of one party to a third Party, withthe consent of the other Party and of the Third Party (Transferee). Novation is a new contract substitution of an existing one, between one of the parties and a third party, discharging the old contract with a new one (s. 62).
Rules of Assignment of Contract- सरल हिंदी में समझे
Assignment of Contractual Rights
Assignment of Contractual Rights means transfer of Rights under the contract, to a third party.
Rules of Assignment of Contractual Rights
- Non Personal Skill : The rights and benefits under a contract, not involving personal skill, may be assigned, subject to all equities between the original parties.
Ex. A owes B Rs.5,000. B can transfer his right to C to recover the amount from A. If A has already paid Rs.2,000 to B, C can recover only Rs.3,000 from A.
- Actionable claim : Actionable Claim means act, event, right etc, when there are legal grounds for basing a lawsuit on it.
Ex: Actionable Claims
- “A” owes Rs. 1000 to “B”. “B”’s claim is an actionable claim. Because, “B” can bring an action in a court and claim back the amount
- “A” borrows Rs. 1000 from “B” and mortgages his house to him. Mortgage is not an actionable claim.
- “A” contracts to buy goods from “B”. On the due date, A fails to take delivery and B sells the goods in the open market, at a loss of Rs. 1000. B has a right to claim the damages from A, but this claim is not an actionable claim.
- A contracts to sell to B, 100 bales of cotton deliverable on a future day. B has a beneficial interest in the goods and it is an actionable claim
- Assignment of Actionable Claims : An actionable claim can be assigned only through an instrument in writing, giving a notice of such assignment to the debtor.
Assignment of Contractual Rights- सरल हिंदी में समझे
Assignment of Contract by Operation of law
Assignment by Operation of Law takes place on happening of some event, without any action from the Parties.
- Death: Upon the death of a party to a contract, his rights and liabilities under the contract (except in the case of contracts requiring personal skill or services) devolve upon his heirs and legal representatives (called Successor) through Succession.
- Insolvency: In case of insolvency of a person, his rights and liabilities incurred previous to adjudication, pass to the Official Receiver or Assignee.
Assignment of Contract by Operation of Law – सरल हिंदी में समझे
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Succession of Contract and Assignment of Contract
|Deceased person : It is transfer of rights and liabilities of a deceased person to his legal representative||Living Person : It is transfer of rights by a person to another person.|
|On Death : It takes place on the death of a person.||During Lifetime : It takes place during the lifetime of a person.|
|Automatic operation of law : It takes place automatically by operation of law.||Voluntary Act : It takes place on voluntary act of the parties.|
|Without written document : It may take place even without any written document.||Executed through a deed : It must be written and executed through a deed.|
|No Notice : Notice of succession is not needed to be given to any person.||Notice to Creditor : Notice of assignment must be given to creditor.|
|Consideration not essential : Consideration is not required for succession.||Consideration essential : Consideration is essential between assignor and assignee.|
|All rights & liabilities transferred : All rights and liabilities of a person are transferred.||Rights can be assigned : Only rights can be assigned.|
Succession of Contract vs Assignment of Contract- सरल हिंदी में समझे
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