Performance of Contract in Nepal

A contract is a legally binding agreement between two or more parties that outlines their rights and obligations. The performance of a contract refers to the fulfillment of these obligations as agreed upon in the contract. When all parties execute their respective duties as specified, the contract is considered discharged through performance.

Performance can be actual or attempted. Actual performance occurs when a party fully completes their obligations, while attempted performance happens when a party is willing and ready to perform but is prevented by the other party.

In some cases, contracts require joint or separate performance by multiple parties, depending on the nature of the agreement. If a party fails to perform their contractual duties, it may lead to breach of contract, giving the other party the right to seek legal remedies such as damages, specific performance, or contract termination.

Certain contracts also allow for substituted performance, where obligations are fulfilled by a third party with the consent of the contracting parties. Additionally, unforeseen events may make performance impossible, leading to frustration of contract.

Thus, the performance of a contract is crucial in ensuring that agreements are honored, maintaining trust and legal certainty in business and personal transactions.

Performance of contract means fulfillment of the obligations by the parties. The parties who make the contract must fulfill their obligations as per the terms laid down in it. Performance of contract is one of the best methods to discharge a contract. Performance of contract is also called 'happy ending, ' a metaphor in contract by the parties.

General rule of Performance of Contract:

Performance of contract must be precise and exact. That means, a party performing an obligation under a contract must perform that obligation exactly within the time frame set by the contract and exactly to the standard required by the contract.

1. Modes (Procedure) of performance

1. If the modes of performance of the contract are prescribed in the contract itself, the performance of the contract must be done by the mode prescribed,
2. If the mode is not prescribed in the contract, then it shall be performed in a reasonable mode and the reasonableness of the mode is determined by the nature of the contract, usage of business and intention of the parties to the contract.
3. If the mode is not prescribed, the performance may be made at a particular mode, if a particular mode is applicable.

2. Time of performance

The National Civil Code, 2017 in Section 523, has stated about the time of performance of the contract.

1. If the time is prescribed in the contract, the performance of the contract must be within and at the time prescribed in the contract.
2. If the time is not prescribed in the contract, then it shall be performed within a reasonable time and the reasonableness of the time is determined by the nature of the contract, usage of business and intention of the parties to the contract.
3. If the time is not prescribed, the performance may be tracked for a particular time if a particular time is applicable.

3. Place of performance of contract

1. In case any specific place has been specified in the contract for performing the work, the work shall be performed at the same place.
2. In case any party has to hand over or deliver goods to the other party under the contract and the place where those goods are to be handed over or delivered has not been specified in the contract, those goods are stored.
3. Place of performance must be in the workplace.
4. Place of performance of contract depends upon the express implied intentions of the parties, judged from the nature of the contract and the surrounding circumstances,

4. Methods of performance

1. If a contract is concluded with a provision requiring both parties simultaneously fulfill their respective obligations, and in case one party fundamentally shows conduct or intention of not fulfilling his/her obligation, the other party may not be obliged to fulfill his/her promise.
2. If the priority is mentioned in the contract, then it should be fulfilled accordingly. If no such order of priority is specified, the party who is required to do so at first according to the nature of the contract should fulfill it.
3. In case once promise cannot be fulfilled without fulfilling another promise under any contract containing reciprocal promises, the party, which cannot execute the contract because of the failure of the other party to fulfill its promise, may recover the loss or damage caused by the failure of the other party to execute the contract.
4. If the contract is performed as mentioned in the contract paper and any party obstructs the other party from executing the contract, the party which becomes unable to execute the contract may cancel the contract and also recover any loss or damage suffered by him/her from the cancellation of the contract in that manner.

5. Party to perform contract

1. By the promisor himself/herself: Section 528, proviso clause, of the National Civil Code, 2017 states, 'the contract should be performed by the promisor himself/herself.
2. By the promisor or an agent: Section 529 (1) of the National Civil Code, 2017 states, 'the contract can be performed by the agent of the promisor also'.
3. Section 528 of the National Civil Code, 2017 states the following are the conditions where the legal heir needs to perform the contract:
   • If there is the death of the promisor;
   • If the promisor lost his/her sense;
   • If the special power is acquired by the document, in lifetime of the promisor through adhikrit wareshnama, (authorised attorney)
   • By third party.

6. Contract need not be performed when

1. In case one of the parties to the contract absolves the other party from fulfilling the obligation according to the contract,
2. In case a voidable contract is made void by the concerned party:
3. In case the party cannot execute the contract due to its violation;
4. In case it becomes unnecessary to perform the work mentioned in the contract under any provision of the National Civil Code, 2017.
5. e. If the contract cannot be executed in the event of fundamental changes in the circumstances. Example:
   • If the contract becomes illegal and cannot be executed,
   • If the contract becomes impossible to execute due to the emergence of situations such as war, flood, landslides, fire, earthquakes, and volcanic eruption, which are beyond the control of human beings,

In case the contract has been signed with a provision to provide services on the basis of efficiency, skill, or talent and the person providing such service dies or loses his/her sense or becomes incapable of performing the contract because of physical or mental disability.

The performance of a contract is fundamental to ensuring that agreements are honored and obligations are fulfilled as per the terms agreed upon by the parties. It serves as the most effective method of discharging a contract, often referred to metaphorically as a "happy ending" in contract law. The general rule dictates that performance must be precise, exact, and timely.

Various factors influence the execution of a contract, including the modes, time, place, and methods of performance. Legal provisions, such as those outlined in the National Civil Code, 2017, provide guidance on how and when a contract must be performed, ensuring fairness and certainty in contractual relationships. Additionally, a contract need not be performed under specific conditions, such as impossibility, fundamental changes in circumstances, or mutual absolution by the parties.

Ultimately, the performance of a contract upholds legal certainty, trust, and efficiency in business and personal transactions, reinforcing the importance of adherence to contractual obligations.