Reciprocal Promise

Reciprocal Promise
06 September 2020

Reciprocal Promise

Contracts are the founding stone of various agreements. When we talk about contracts we talk of one party agreeing to do something and the other party doing an act in return that means I give you a banana and you pay for it. But many times in contracts, parties just agree to do things or they promise to do certain acts. Unlike an act, promises are not tangible.

The Indian Contract Act of 1872 under section 2 defines what promises are- When someone expresses his willingness to do or not to do something, he/she is said to make a proposal. When the other person to whom the proposal is made accepts the proposal, the proposal becomes a promise. Here, the person who made the proposal is the ‘promisor’, and the person to whom the proposal is made is called the ‘promisee’. When, at the desire of the promisor, the promisee does something, does not do something or promises to do something; this act of the promise is called ‘consideration of the promise’. These promises that the promisee does to form the consideration form an agreement. Such promises that form an agreement are called reciprocal promises.

For example, Mehak expresses her willingness to pay for some coats to Rajat. Rajat accepts Mehak’s proposal to pay through the word (Now Mehak has promised to pay). Now Mehak is the promisor and Rajat is the promisee. Now, due to Mehak’s promise to pay, Rajat promises to supply the coat. (Rajat’s promise to provide the coat is a consideration). Rajat’s promise to supply sets the agreement in place. Rajat’s promise to supply is a reciprocal promise.

The Indian Contract Act under section 2(f) talks about what are reciprocal promises. Reciprocal promises which form are a part of the consideration.

Types Of Reciprocal Promise

1. Mutual and independent: This concept has emerged through jurisprudence. It states that the two promises of the parties are independent of each other and they do not have to rely on each other for performance. Suppose there is a contract where D will give chocolates to E and E will give Pokemon cards to D. D can fulfil his promise even if E does not give him the pokemon cards i.e; the absence of Pokemon cards does not make the performance of his promise impossible. The same goes for E. Thus while the acts are binding, they are mutually exclusive and are thus independent of each other.

In Mrs Saradamani Kandappan vs. Mrs S. Rajalakshmi and Ors, Sadarmani was paying for a piece of land to Rajalakshmi in instalments. Before the payment of the last instalment, Sadarmani wanted to see the title document but there was a failure on the part of Rajalakshmi to show it

and Saradamani thus did not pay the last instalment. Thus, Rajalakshmi terminated the contract. Sadarmani moved to the court and argued that failure to show the title document was the reason she could not pay the last installment. The court ruled that these two promises i.e. promise to show the title document and the promise to pay for the last document were exclusive as Sadarmani could pay the last installment without showing the title document. Therefore, Sadarmani should have paid the last instalment.

2. Conditional: This is when the performance is dependent upon the prior performance of the other party. If there is a failure on the part of the first party to perform his promise, then it will not be possible for the second party to perform his side of the contract. Suppose the contract if C promises to give money to D if D promises to buy Maggi for C. If C defaults, i.e- he fails to pay D, then it will not be possible for B to hold up his side of the contract as he won’t be able to buy the Maggi if C does not pay him. Thus, this type of contract is considered a conditional contract.

In M/s Shanti Builders vs. CIBA Industrial Workers’ Co-Operative Housing Society Ltd., the defendant, CIBA alleged that they suffered losses as Shanti builders did not do their work on time. On the other hand, Shanti builders contested they were not given plots of land in accordance with the payment for construction. Since this plot of land was not given to them, they were not able to complete construction. The court upheld in favor of Shanti Builders and stated that if the nature of the transaction states that some promises must be performed first before others, then that order must be followed. They also stated that in respect to conditional promises, the first party can not ask for the performance of the second party without performing their act first.

3. Concurrent: In this, parties promise to do acts that have to be performed simultaneously. A party will be exempted from doing their promise if the other party is not ready or willing to do their promise. Here ‘readiness’ means financial abilities and ‘ willingness’ is perceived through the action of the party. For instance, A is supplying coats to B. A will only supply the coats if B financially can and is willing to, and B will only pay if A is willing to and has the goods.

Performance of Reciprocal Promises

The rules in regard to Performance of Reciprocal Promises are the following as under:

  1. Section 51 Simultaneous Performance: As seen in concurrent promises, If the other party is not ready or willing to perform their promise, then the other party does not need to perform their side of the promise. Thus, for example, if Mehak and Rajat are in a contract, Rajat need not pay for the goods unless Mehak is ready and willing. Similarly, Mehak need not give the goods unless Rajat is ready and willing.
  2. Section 52 A sequence of Performance: If the contract calls for an order in which the acts promised should be performed, then the acts should be performed in that order. Otherwise, the sequence of the order is determined by the nature of the promises. For example, if C cannot build a road he promised to build without providing material, then D’s promised act should be performed first, then C’s.
  3. Section 53 One party preventing the other to perform their promise: If one party averts, or makes it impossible for the other party to perform their job, then the affected party has the option of voiding the contract. They also have the option of asking for compensation for the damages. For instance, Rajat is willing to supply coats to Mehak, but on the day of delivery, Mehak does not show up or locks Rajat in his shop; then Rajat can void the contract or collect compensation.
  4. Section 54 Reciprocal and dependent promises: When the nature of the promise is conditional, the first party can not ask the other party to perform their promise, if they do not perform first. The second party can also ask for compensation if they face damages due to the non-performance of the first party. For instance, Ashok is a carpenter and Navya provides wood. They have a contract that Naya will provide wood to Ashok and then he will make a table for her. If Navya Refuses to provide the wood, then she can not expect Ashok to make the table. If Ashok faces any loss due to the fact Navya failed to provide wood, then he can ask for compensation.
  5. Section 55 Failure to perform in stipulated time: If performing an act in a specific time frame is essential to the contract, and there is a failure on the part of the promisor to do so, then the promisee or the aggrieved party can either void the contract and ask for compensation for losses. If time is not essential to the contract then the promisee can not void the contract, he can also ask for compensation of losses that were suffered due to the delay.
  6. Section 56 Impossible or unlawful act: If the promisor promises to do something which is impossible to do, then the contract is void. This section, thus, deals with the ‘Doctrine of Frustration’. The conditions that should be satisfied in order to invoke this section are the following as under:
    1. The cause should not be a result of a default of the parties.
    2. The cause must be unforeseeable and inevitable.
    3. The cause must render the entire contract impossible to do.
  7. Section 57 Reciprocal promises or legal and illegal acts: The parties may have entered the contract to do lawful acts. But after the contract was established, under specific conditions, they agreed to do unlawful acts. Then in such cases, the previous lawful acts are valid and the preceding unlawful acts are held void. For instance, Rajat promises to supply coats to Mehak  Mehak then promises to sell such coats on the black market for more profits. Here Rajat’s promise to supply coats to Mehak is valid but Mehak’s promise to sell such coats on the black market is invalid.
  8. Section 58 Alternative promise of legal and illegal acts: Parties may promise to do lawful acts that branch off into unlawful acts. For instance, Riya promises to pay back her loan to Rajat. But this loan shall be paid with black money. Thus, while Riya’s promise to pay back the loan is valid, the promise to pay with black money is invalid.