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