A Breach of Contract occurs when one party fails to fulfill their obligations as agreed in the contract. It is a violation of the terms and conditions that creates legal rights for the aggrieved party to seek remedies.
This article explains the meaning of breach, types of breach, and the remedies available under the Indian Contract Act, 1872.
Meaning of Breach of Contract
Breach of contract means the refusal or failure to perform the contract, either wholly or partially, without a lawful excuse.
Example:
A agrees to deliver 100 bags of rice to B on 1st July but fails to do so. A has breached the contract.
Types of Breach of Contract
There are mainly two types:
1. Actual Breach
Occurs when a party fails or refuses to perform the contract on the due date or during the course of performance.
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On due date: Non-performance when performance becomes due.
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During performance: Failure during the performance of ongoing obligations.
Example:
A fails to deliver goods to B on the agreed delivery date.
2. Anticipatory Breach
Occurs when a party declares, before the due date, that they will not perform their obligation.
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Expressly (by words),
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Or impliedly (through actions making performance impossible).
Example:
A agrees to deliver goods on 1st August but informs B on 20th July that he will not supply the goods.
Key Point: In case of anticipatory breach, the aggrieved party can either sue immediately or wait until the due date.
Remedies for Breach of Contract
When a breach occurs, the injured party is entitled to remedies to compensate for the loss suffered or to enforce performance.
The main remedies are:
1. Damages
Damages are monetary compensation awarded for the loss caused due to breach.
Types of damages:
(a) Ordinary Damages
Compensation for direct loss arising naturally from the breach.
Example:
A agrees to sell goods to B. On refusal, B buys goods at a higher price. The price difference is ordinary damages.
(b) Special Damages
Compensation for indirect loss arising from special circumstances communicated to the breaching party.
Example:
A courier company delays delivery of legal documents, causing a client to lose a case. If informed earlier about the urgency, special damages can be claimed.
(c) Exemplary (Punitive) Damages
Awarded to punish the party, usually in cases of breach of promise to marry or wrongful dishonor of a cheque.
(d) Nominal Damages
A small sum awarded when there is a breach but no substantial loss.
Example:
A minor technical breach without any real damage.
2. Specific Performance
Specific performance means the court orders the breaching party to perform their part of the contract instead of paying damages.
Granted when:
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Damages are not an adequate remedy,
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Subject matter is unique (e.g., sale of land, rare goods).
Example:
A agrees to sell a unique painting to B. On breach, the court may order specific performance.
3. Injunction
An injunction is a court order directing a party:
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To do something (mandatory injunction), or
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To refrain from doing something (prohibitory injunction).
Example:
Restraining a singer under contract from singing for a competitor.
4. Quantum Meruit
"Quantum Meruit" means "as much as is deserved."
When a contract is partly performed and further performance is prevented, the party can claim reasonable payment for the work done.
Example:
A agreed to build a wall for B. After half the work, B wrongfully terminates the contract. A can claim payment for the part completed.
5. Rescission
Rescission means canceling the contract and releasing parties from further obligations.
The aggrieved party can:
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Rescind the contract,
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Refuse to perform their obligation,
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And claim damages if necessary.
Example:
B refuses to accept goods delivered by A. A can rescind the contract and claim damages.
Table Summary: Remedies for Breach
| Remedy | Meaning | Example |
|---|---|---|
| Damages | Monetary compensation | Price difference in goods |
| Specific Performance | Court order for actual performance | Sale of rare painting |
| Injunction | Court order to act or not act | Preventing competition |
| Quantum Meruit | Payment for partial work | Half-built wall |
| Rescission | Cancellation of contract | Buyer refuses goods |
Conclusion
In conclusion, the Indian Contract Act, 1872 ensures that a breach of contract gives rise to specific legal remedies. These remedies damages, specific performance, injunctions, quantum meruit, and rescission are designed to protect the rights of the aggrieved party and ensure fair outcomes. A clear understanding of breach and remedies is essential for interpreting and applying contractual rights and responsibilities effectively.