A contract is formed for fulfillment not to breach. After the formation of a contract the stage of fulfillment comes before the parties. The contract is performed when both the parties do what they had agreed to do in contract. This is called the performance of obligations by its parties. When both the parties have performed the respective obligations, the contract is said to be discharged by performance. This is the most usual and expected mode of termination of contract since parties wanted to perform it at the time of inception. Parties bound to perform only that obligation as specified by the contract. So, they are supposed to fulfill their respective obligations. Therefore, fulfillment of respective promises by the concerned parties on a manner as designed in the contract without making any variation in its terms and condition is called performance or execution of contract. If one party performs his promise under the contract, he alone is discharged from his liability and acquires right of action against the other non-performing party. But it is minimum condition to take action against other party that the claiming party has to perform or is willing to perform his promise on hi side.
Possibility of performance is one of the significant elements of valid contract. An agreement must be capable of being performed to be regarded as valid one. If an agreement is made containing impossible obligation such as to colour in the sky, is void from the time of its formulation. Performance means fulfillment or execution of promises of parties by themselves.
Promises bind the representatives of the promisor in case of death of such promise before performance, unless a contrarily intention appears from the contract.
Performance of contract is expected at the time of its formulation and it is important to carry oui the sound business environment between the parties. The importance of performance of contract can be mentioned as:
1. Performance promotes the good relationship between the parties.
2. The good performance encourages the parties to further transactions.
3. Both the parties feel greater profit and lesser loss from the consequence of performance.
4. The parties have no further risk of disputing and invoking remedies.
5. Both the parties are standing in winning position since they got what they want.
6. The performance opens the further opportunities of exploring new areas of transactions.
7. The purpose of making contract is fulfilled by the performance as expectation, and nothing remain to do between its parties.