Indian Contract Act Section 55 — Effect of failure to perform at fixed time, in contract in which time is essential
CHAPTER IV OF THE PERFORMANCE OF CONTRACTS — Performance of reciprocal promises
Commercial / Corporate
Summary
When a person promises to do something by a specific time, or several things by specific times, and fails to do any of them on time, the contract—or the part not yet done—can be cancelled by the person who was promised the action, but only if both parties intended that meeting the deadline was a crucial part of the deal.
If the parties did not intend for the deadline to be a crucial part of the deal, then missing the deadline does not make the contract cancellable. However, the person who was promised the action can still claim money from the person who missed the deadline to cover any loss caused by the delay.
If the contract is cancellable because the promisor missed the deadline, but the promisee still accepts the performance after the agreed time, the promisee cannot later claim money for losses caused by the delay—unless, at the time of accepting the late performance, the promisee clearly tells the promisor that they intend to claim such compensation.
Official Text
When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. Effect of such failure when time is not essential.—If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.2