Section 39 of Indian Contract Act

39. Effect of refusal of party to perform promise wholly.— When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

Illustrations

(a) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and B engages to pay her 100 rupees for each night’s performance. On the sixth night A wilfully absents herself from the theatre. B is at liberty to put an end to the contract.

(b) A, a singer, enters into a contract with B, the manager of a theatre, to sing at his theatre two night’s in every week during the next two months, and B engages to pay her at the rate of 100 rupees for each night. On the sixth night, A wilfully absents herself. With the assent of B, A sings on the seventh night. B has signified his acquiescence in the continuance of the contract, and cannot now put an end to it, but is entitled to compensation for the damage sustained by him through A’s failure to sing on the sixth night.

Final Thoughts

Introduction

Section 39 of the Indian Contract Act, 1872 deals with the situation where one party refuses or becomes incapable of performing their contractual obligation fully. In such cases, the law gives the other party (called the promisee) the right to end the contract.

Text of Section 39

When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

Explanation of Section 39

Section 39 protects the interest of the party who is affected by the non-performance of the other party. It says:

If a party refuses to perform their part of the contract completely, or becomes incapable of doing so,
Then the other party (promisee) has a right to cancel the contract,
But, if the promisee has accepted the refusal or allowed the contract to continue (by words or action), he cannot cancel it later.

This section only applies when the breach is total and not partial.

Legal Rights of the Promisee

The promisee has two options when the promisor refuses or fails to perform fully:

Terminate the Contract: The promisee can treat the contract as cancelled and need not perform his part further.
Continue the Contract: If the promisee accepts the failure or non-performance, the contract continues, and he can claim damages or compensation.

Important Concepts Under Section 39

Refusal to Perform: When a party clearly says or shows that they will not fulfill the promise.
Disability to Perform: When a party becomes incapable (physically or legally) of performing the contract.
Acquiescence: If the promisee continues the contract or accepts the situation without protest, it is treated as consent.

Illustrations (with Explanation)

Illustration (a):

Facts: A, a singer, agrees to sing for B (theatre manager) two nights a week for 2 months. B agrees to pay ₹100 per night. On the 6th night, A wilfully does not perform.

Legal Effect: Since A intentionally failed to perform, B can now end the contract under Section 39. This is a breach of contract.

Illustration (b):

Facts: Same as above. A skips the 6th night, but with B’s consent, she performs again on the 7th night.

Legal Effect: Since B allowed A to perform again, this shows acquiescence. Now, B cannot cancel the contract. But he can still claim compensation for loss on the 6th night.

Effect of Acquiescence (Silent Acceptance)

If the promisee behaves in a way that shows he is okay with the non-performance, or
If he accepts performance even after the breach,
Then he loses the right to cancel the contract.

This is based on the principle: “You cannot approve and disapprove at the same time.”

Conclusion

Section 39 ensures fairness in contractual relationships. It provides a clear remedy to the innocent party when the other side refuses or fails to perform their part of the contract completely.

It balances the rights of both parties.
It encourages honest performance.
It prevents misuse by either side.

In short, if one party refuses or fails to perform fully, the other party can end the contract, unless he has shown acceptance of the situation.