Section 54 The Indian Contract Act, 1872
✅ Section 54 – The Indian Contract Act, 1872
📜 Bare Text of Section 54:
"Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises."
“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.”
🔍 Explanation:
Section 54 deals with reciprocal promises, where:
Promise A must be performed before Promise B can be expected.
If Party A fails to perform their part (which is due first), they:
Cannot demand performance from Party B, and
Must compensate Party B for any loss suffered.
🔁 Example:
A agrees to deliver goods to B after B constructs a godown to store them.
B fails to construct the godown.
In this case, A is not bound to deliver the goods, and B cannot insist on delivery or sue A for non-performance.
📌 Key Points:
Applies to contracts with dependent or conditional reciprocal promises.
The first-performing party’s failure breaks the mutual obligation chain.
The defaulting party becomes liable for damages.
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