A tender of performance is an offer by a promisor to fulfil a contractual obligation in accordance with the terms of the contract. It becomes legally significant when the promisee refuses to accept the offer.
Tender of performance is not a separate type of contract. It is a principle governing the performance of contractual obligations and the consequences of refusing a valid offer.
A valid tender must correspond to the obligation actually undertaken. A promisor cannot claim the protection of Section 38 merely by offering something different from what the contract requires.
Example
A agrees to deliver 50 bags of wheat to B on 20 October at B’s warehouse. On that date, A brings all 50 bags of the agreed quality to the warehouse and offers delivery. B refuses to accept them without a valid reason.
If A has satisfied the requirements of Section 38, A is not responsible for non-performance merely because B refused the offer. A also retains the rights available under the contract.
Types of Tender of Performance
1. Tender of Goods
This occurs when a promisor offers to deliver goods in accordance with the contract.
For example, a supplier offers to deliver the agreed quantity and quality of goods at the contractually specified location and time. If the buyer refuses a valid offer, Section 38 may protect the supplier against the consequences of that refusal.
2. Tender of Money
This occurs when a promisor offers to pay money owed under a contractual obligation.
For example, a debtor offers the full amount due on the agreed date, but the creditor refuses to accept it.
The tender must be unconditional and comply with the applicable contractual requirements. A mere offer to pay a smaller amount ordinarily does not constitute a valid tender of the entire debt.
3. Tender of Services or Other Contractual Performance
A promisor may also offer to perform an obligation involving services or another non-monetary undertaking.
For example, a contractor arrives at the agreed time with the necessary resources to carry out the work specified in a contract, but the other party refuses to allow the work to proceed.
The legal consequences depend on the terms of the contract, the nature of the obligation and whether the requirements for a valid offer of performance have been satisfied.
Tender of Performance and Joint Promisees
Section 38 expressly provides that an offer made to one of several joint promisees has the same legal consequences as an offer made to all of them.
This rule concerns the legal effect of the offer of performance. It should not automatically be interpreted to mean that payment accepted by one joint promisee always discharges every claim held by the others. The consequences of an accepted payment may require separate consideration under the applicable legal principles.
Important Case Law
Amar Krishna Sen v. Chandra Kumar Sen (1919)
Court: Calcutta High Court
Citation: 51 Indian Cases 793
The dispute concerned the recovery of rent. The defendants claimed that they had tendered the rent to the plaintiff. However, they insisted that the receipt should describe their tenancy in a particular way and refused to pay when that condition was not accepted.
The court held that the tender was conditional and therefore did not qualify as a valid tender under Section 38 of the Indian Contract Act, 1872. The plaintiff was entitled to recover the rent and contractual interest.
Legal principle: A tender that is made conditional on the recipient agreeing to an additional requirement may fail to satisfy Section 38.
Relevance: The case demonstrates that the legal effect of tender depends on the actual terms of the offer. A promisor cannot rely on Section 38 simply by asserting that payment or performance was offered.
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Join WhatsApp ChannelLegal Effect of Refusal to Accept Tender
The legal consequences of refusing a tender depend on whether the offer is valid under Section 38.
- Protection of the promisor: A valid tender that is refused protects the promisor against responsibility for non-performance arising merely from that refusal.
- Preservation of contractual rights: The promisor does not lose their contractual rights merely because the offer was rejected.
- Possible remedies: Depending on the contract and the circumstances, the promisor may be able to pursue remedies for the other party’s breach.
- No automatic discharge of every obligation: A valid tender does not necessarily terminate all continuing or separate contractual obligations.
- Invalid tender: If the offer is conditional or fails to satisfy the other statutory requirements, the promisor cannot automatically claim protection under Section 38.
Difference Between Tender of Performance and Actual Performance
| Basis | Tender of Performance | Actual Performance |
|---|---|---|
| Meaning | An offer to fulfil a contractual obligation | Actual fulfilment of the obligation |
| Acceptance | The promisee may refuse the offer | Performance is completed to the relevant extent |
| Statutory provision | Section 38 | Section 37 and other applicable provisions |
| Legal effect | A valid tender may protect the promisor against the consequences of refusal | Proper performance discharges the obligation performed |
| Example | A offers the agreed goods, but B refuses delivery | A delivers the goods and B accepts them |
Difference Between Tender of Performance and Breach of Contract
Tender of performance is an offer to fulfil an obligation, whereas breach of contract involves a failure to fulfil a contractual obligation without a sufficient legal justification.
If a promisor makes a valid tender and the promisee refuses it, the promisor may be protected under Section 38. If the promisor offers only part of the required performance or imposes an unauthorised condition, the offer may be invalid and the promisor may remain liable for non-performance.
The distinction therefore depends on the terms of the contract, the conduct of the parties and compliance with the statutory requirements.
Key Points for Exams
- Tender of performance is also known as attempted or tendered performance.
- Section 37 establishes the general obligation to perform or offer to perform contractual promises.
- Section 38 governs the effect of refusing an offer of performance.
- A valid tender must be unconditional.
- It must be made at the proper time and place under circumstances that allow the promisee a reasonable opportunity to ascertain the promisor’s ability and willingness to perform the whole promise.
- Where something is offered for delivery, the promisee must have a reasonable opportunity to verify that it is the thing required under the contract.
- An offer to one of several joint promisees has the same legal consequences as an offer to all of them.
- Amar Krishna Sen v. Chandra Kumar Sen (1919) illustrates the requirement that a tender must be unconditional.
- A valid tender does not necessarily discharge every contractual obligation.
Conclusion
Tender of performance is an important principle under the Indian Contract Act, 1872, because it addresses situations in which a promisor offers to fulfil a contractual obligation but the promisee refuses to accept the offer.
Section 38 establishes the conditions for a valid tender and protects the promisor against responsibility for non-performance arising merely from the refusal of a valid offer. The provision also preserves the promisor’s contractual rights.
The decision in Amar Krishna Sen v. Chandra Kumar Sen illustrates that a conditional offer may not qualify as a valid tender. Ultimately, the legal effect of tender depends on whether the offer complies with the contractual terms and statutory requirements.
