Indian Contract Act Section 54 — Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises

CHAPTER IV OF THE PERFORMANCE OF CONTRACTS — Performance of reciprocal promises

Commercial / Corporate

Summary

When a contract involves promises that depend on each other, and one promise cannot be performed—or its performance cannot be demanded—until the other promise has been performed first, then the person who was supposed to perform that first promise has a special duty. If that person fails to perform their part, they lose the right to demand that the other party perform their side of the deal. Additionally, the person who failed must pay compensation to the other party for any loss that the other party suffers because the contract was not performed.

Official Text

When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract. Illustrations