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Section 58: Alternative promise, one branch being illegal

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 57 All 266 Sections of Indian Contract Act Section 59

Legal Commentary & Landmark Judgments: Section 58

Section 58 of the Indian Contract Act, 1872 establishes the rule of severability for alternative promises, providing that in the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.

  • Alternative Promise Structure: The promisor undertakes to perform either of two alternative obligations (e.g., to pay money or deliver contraband; to transfer shares or pay monetary compensation).
  • Separation of Lawful from Unlawful Alternatives: One alternative branch is compliant with the law, while the alternative branch violates statutory prohibitions or public policy under Section 23.
  • Enforcement of the Lawful Alternative: The court disregards the illegal branch as non-existent and compels the promisor to perform the legal alternative, preserving the commercial efficacy of the transaction.
Key Landmark Precedents:
  • Denton v. Peters (1870) LR 5 QB 475: Codified in Section 58: where an alternative promise provides for two modes of performance, one of which is tainted with illegality, the court will enforce the legal mode and discard the illegal branch.
  • Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer (1978) 1 SCC 520: The Supreme Court discussed alternative performance mechanisms under regulatory frameworks, affirming the principle that lawful contractual alternatives remain enforceable.
Courtroom Practice & Strategic Litigation Guidance:

When drafting settlement agreements, cross-border investment exits, or put-call option agreements that require regulatory consents (such as RBI/FEMA approvals), structure the covenants as alternative promises under Section 58. If the primary equity transfer alternative is blocked by foreign exchange regulations, the alternative cash settlement branch remains fully enforceable under Section 58.

Section 57 All 266 Sections of Indian Contract Act Section 59