Section 54 of ICA : Section 54: Effect Of Default As To That Promise Which Should Be First Performed, In Contract Consisting Of Reciprocal Promises

Explanation using Example

Imagine that a homeowner, Raj, enters into a contract with a painting company, Vibrant Hues, to have his house painted. According to the contract, Raj is to pay half the amount upfront and the remaining half after the painting is completed. Vibrant Hues, on their part, is to begin painting Raj's house on a specified date. The contract clearly states that the painting company cannot demand the final payment until the painting work is finished.

However, when the agreed date arrives, Vibrant Hues does not show up to start the work and gives no valid reason for their absence. As a result, Raj's house remains unpainted, and he is inconvenienced and has to look for another painter, potentially at a higher cost.

In this scenario, based on Section 54 of The Indian Contract Act, 1872, Vibrant Hues, having failed to perform their reciprocal promise of starting the painting job, cannot claim the final payment from Raj. Moreover, they would be liable to compensate Raj for any additional expenses he incurs in getting his house painted by another company.