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Section54
The Indian Contract Act, 1872

Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises

In force From 01 Sep 1872 Act 9 of 1872 As on 15 Oct 2026

Act 9 of 1872 Ministry Law and Justice Enacted 25 Apr 1872 In force 01 Sep 1872

Section 54 of the Indian Contract Act, 1872 deals with 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 pr The Act came into force on 01 Sep 1872.

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.

Illustrations

(a) A hires B's ship to take in and convey, from Calcutta to the Mauritius, a cargo to be provided by A, B receiving a certain freight for its conveyance. A does not provide any cargo for the ship. A cannot claim the performance of B's promise, and must make compensation to B for the loss which B sustains by the non-performance of the contract.

(b) A contracts with B to execute certain builder's work for a fixed price, B supplying the scaffolding and timber necessary for the work. B refuses to furnish any scaffolding or timber, and the work cannot be executed. A need not execute the work, and B is bound to make compensation to A for any loss caused to him by the non-performance of the contract.

(c) A contracts with B to deliver to him, at a specified price, certain merchandise on board a ship which cannot arrive for a month, and B engages to pay for the merchandise within a week from the date of the contract. B does not pay within the week. A's promise to deliver need not be performed, and B must make compensation.

(d) A promises B to sell him one hundred bales of merchandise, to be delivered next day, and B promises A to pay for them within a month. A does not deliver according to his promise. B's promise to pay need not be performed, and A must make compensation.

Section 54, The Indian Contract Act, 1872 (Act 9 of 1872).

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

  1. National Insurance Co. LTD vs Seema Malhotra

    Supreme Court of India 20 Feb 2001 Binding (SC)

    Court's Decision & Legal Precedent

    When an insured gives a cheque towards payment of insurance premium and the cheque is subsequently dishonoured by the bank due to insufficiency of funds, the insurer is not liable to the insured or their legal heirs to honour the insurance contract or pay claims arising from accidents that occurred before the cheque was dishonoured. This is because: (1) a cheque is a conditional promise to pay, not actual payment; (2) Section 64-VB of the Insurance Act requires that premium must be received before the insurer assumes any risk; (3) an insurance contract consists of reciprocal promises, and when the insured fails to pay the premium, the insurer is absolved from providing coverage; (4) the insurer's statutory liability to third parties under the Motor Vehicles Act is distinct from and does not extend to claims by the insured or their legal heirs.

    On this section: When one reciprocal promise cannot be performed and the promisor fails, the promisor cannot claim performance of the reciprocal promise; applied to hold that insured cannot claim coverage when premium is not paid

    Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.

Questions about Section 54

What have the courts held on Section 54 of the Indian Contract Act?

National Insurance Co. LTD vs Seema Malhotra (20 Feb 2001) is the leading judgment on this section among those set out below: When one reciprocal promise cannot be performed and the promisor fails, the promisor cannot claim performance of the reciprocal promise; applied to hold that insured cannot claim coverage when premium is not paid.

How do I find court cases under Section 54 of the Indian Contract Act?

In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Contract Act 54, section 54 Contract Act, section 54 of the Indian Contract Act. People searching for it also type insurance contract act 54. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with National Insurance Co. LTD vs Seema Malhotra (20 Feb 2001).

When did Section 54 of the Indian Contract Act come into force?

Section 54 of the Indian Contract Act, cited as Contract Act 54, came into force on 01 Sep 1872, having been enacted on 25 Apr 1872. It is in force as at the date shown on this page.

Other sections of this Act

Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.