Sections 38 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 38 says what happens when a promisor offers performance and the promisee does not accept it, and lists the conditions a valid offer must meet. Section 39 says what the promisee may do when the other party refuses to perform, or disables itself from performing, the whole of its promise. People often search section 39 as "anticipatory breach"; that phrase is not used in the Act, which speaks of refusal or disablement. If you need to put a defaulting party on notice, our legal notice drafting service can help.
Under s.38, a promisor who has made a proper offer of performance that is not accepted is not responsible for non-performance, nor does he lose his rights under the contract. The offer must be unconditional, made at a proper time and place, and (for goods) allow the promisee a reasonable opportunity of seeing the thing offered. Under s.39, where a party 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.
Section 38: effect of refusal to accept an offer of performance
The first paragraph: "Where a promisor has made an offer of performance to the promisee, and the offer has not been accepted, the promisor is not responsible for non-performance, nor does he thereby lose his rights under the contract."
This follows from section 37, which allows a party to "perform, or offer to perform"; see section 37. Two consequences are named: the promisor is not responsible for the resulting non-performance, and he keeps his rights under the contract (for example, his right to be paid).
The three conditions of a valid offer
Every such offer "must fulfil the following conditions":
| No. | Condition in the Act |
|---|---|
| (1) | It must be unconditional. |
| (2) | It must be made at a proper time and place, and under such circumstances that the person to whom it is made may have a reasonable opportunity of ascertaining that the person making it is able and willing there and then to do the whole of what he is bound to do. |
| (3) | If it is an offer to deliver anything, the promisee must have a reasonable opportunity of seeing that the thing offered is the thing the promisor is bound to deliver. |
Note the word "whole" in condition (2). A part-offer does not meet it. Note also "there and then": a promise to perform later does not count.
Joint promisees
The last paragraph says: "An offer to one of several joint promisees has the same legal consequences as an offer to all of them."
The Act's illustration
A contracts to deliver to B at his warehouse, on the 1st March, 1873, 100 bales of cotton of a particular quality. To make an offer with the effect stated in the section, A must bring the cotton to B's warehouse on the appointed day, in circumstances where B has a reasonable opportunity to satisfy himself that it is cotton of the contracted quality and that there are 100 bales.
A modern example (ours). Rohan agrees to deliver 200 laptops to Sapna Retail's godown on 5 May. He arrives on 5 May during working hours with the full lot, boxes open for inspection. Sapna's manager refuses to receive them. Under s.38, Rohan has made a proper offer: he is not responsible for non-delivery and keeps his right to the price. If he had brought only 150 laptops, or had said "I will deliver only if you pay in advance, though the contract says otherwise", the offer would not meet conditions (1) and (2).
Section 39: refusal to perform a 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."
Break it down.
- Refused to perform, or disabled himself. Two routes: an outright refusal, or an act that makes performance impossible for that party. The section does not say that either must happen at a particular time; it applies whenever a party has so refused or disabled itself.
- "In its entirety." The section is about the whole promise. It does not, by its words, deal with a refusal of only part of it.
- "The promisee may put an end to the contract." The right is the promisee's choice. It is not automatic.
- "Unless he has signified, by words or conduct, his acquiescence in its continuance." If the promisee has indicated that the contract continues, the right to end it is lost.
The Act's illustrations
| Illustration | Facts | Result |
|---|---|---|
| (a) | A, a singer, contracts with B, a theatre manager, to sing two nights every week for two months at Rs. 100 a night. On the sixth night A wilfully absents herself. | B is at liberty to put an end to the contract. |
| (b) | Same contract. On the sixth night A absents herself, but with B's assent she sings on the seventh night. | B has signified acquiescence in the continuance of the contract and cannot now end it, but is entitled to compensation for the damage through A's failure to sing on the sixth night. |
The second illustration shows that continuing the contract does not cost the promisee his claim for compensation for the missed night.
A modern example (ours). A software firm, Nimbus Labs, agrees to build a billing portal for Orchid Clinics in three phases. In month two it tells Orchid in writing it will not do the work. Under s.39 Orchid may put an end to the contract. If Orchid replies, "Please continue and finish by month five", it may be taken to have signified acquiescence in continuance, and the right to end the contract may be lost for that refusal.
What the parties can change
Neither section carries the words "unless a contrary intention appears". The parties can still shape the practical side by contract: how notice of refusal must be given, how tender must be made, and what counts as acquiescence (for example, "no conduct will waive a right unless in writing"). Whether such a clause is effective in a given case depends on the contract and on case law not covered here.
Practical points
- Tender properly. Record the time, place, quantity and inspection facility whenever you offer delivery.
- Do not make the offer conditional on something the contract does not require.
- Decide quickly. If the other side refuses wholly, decide whether to end the contract; carrying on may be read as acquiescence.
- Reserve rights in writing. If you continue, say that you reserve your claim for loss. For the compensation rule, see section 73.
Need help with a notice of default?
If the other side has refused to perform, or you have made a proper tender that was turned away, a clear written notice protects your position. Our legal notice drafting service can prepare a notice that records the tender, the refusal and your election to end or continue the contract. Bring the contract and your correspondence and we can start from there.
Key takeaways
- A proper, unaccepted offer of performance leaves the promisor not responsible and with his rights intact (s.38).
- A valid offer is unconditional, at a proper time and place, shows ability and willingness to do the whole, and (for goods) allows inspection.
- An offer to one joint promisee counts as an offer to all.
- On refusal or disablement as to the whole promise, the promisee may end the contract (s.39).
- The right is lost if the promisee signifies acquiescence in continuance, though compensation for the damage may still be claimed, as the Act's illustration (b) shows.
Read next
- Section 37: obligation of parties to perform or offer to perform
- Sections 40 and 41: who must perform and performance by a third person
- Section 73: compensation for breach of contract and remoteness of damage
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.