Breach of Contract

Introduction Parties to a contract are expected to perform their respective promises. If a party breaks his obligation which the contract imposes , there takes place Breach of Contract. If the contract is unilateral , the only remedy available to the aggrieved party is to claim relief for the breach. If the contract is bilateral , the aggrieved party has 2 remedies: 1.He can claim relief for breach 2. He can be absolved from further performance of the contract. Breach is of 2 types: 1. Actual Breach 2. Anticipatory Breach of contract.

Actual Breach of Contract Actual Breach of contract : 1. At the time when performance is due: Actual Breach of contract occurs when , at the time when performance is due , one party fails or refuses to perform his obligation under the contract. 2. During the performance of the Contract: Actual Breach of contract also occurs when during the performance of the contract , one party fails / refuses to perform his obligation under the contract. During the Performance may be either Express Repudiation (By word /Act) Implied Repudiation ( Impossibility created by act of party to the contract)

Anticipatory Breach Of Contract

This happens when the party repudiates his liability /

obligation under the contract before the time of performance arrives. This could happen in any one of the following ways: 1. By Renunciation (Express repudiation) When one party expresses his inability to perform or renounces his liabilities under the contract expressly , before the performance is due. (Express anticipatory breach of contract) 2. By creating some impossibility: (Implied repudiation) The promisor may , before the time of performance arrives , make the performance of the promise impossible. The effect is the same as renouncement. (Implied anticipatory breach of contract)

Remedies in case of Breach of Contract

1. 2. 3. 4. 5. 6.

In case of Breach of contract , several remedies are available to the aggrieved party . Some of them are as follows: Suit for damages. Bring an action for specific performance. (SRA) Suit for injunction (SRA) Claim for quantum meriut. Restitution He can also sue to declare that the contract is no longer binding on him. (SRA)
The Indian Contract Act deals only with remedy of damages. The word damages means compensation in money which the aggrieved party is entitled to receive form the party who has committed such breach . The fundamental principle underlying damages is not punishment but compensation.

Compensation for Loss / Damage Types of Damages Section 73 of the Indian Contract Act deals with
compensation for the loss caused by breach of contract. Kinds of Damages: 1. Ordinary or General Damages. Damages which the parties are deemed to have known as likely to arise on a breach , even at the time of entering the contract. 2. Special Damages: This results from breach of contract under some special circumstances. In such cases special damages are awarded.

Special Damages Case Law

Pinnock Bros. Vs Lewis & Peat Ltd., (1923) P bought from L some copra cake . P , in turn sold the copra cake to B. B , in turn , sold it to farmers , who used it for feeding cattle. The Copra cake was poisonous & the cattle fed on it & died. Various buyers filed a suit against P , and obtained damages.

P , in turn , demanded damages & costs from L.

The court held that L was liable to pay damages.

Kinds of Damages (Continued)

3. Exemplary Damages: This is intended to show the

Courts strong disapproval of the conduct of the defendant in committing the wrong. Thus exemplary damages are also called vindictive or punitive damages. Ex: In case of Breach of promise to marry 2. When the banker refuses to honor the cheque in spite of having sufficient funds with him , belonging to the person issuing the cheque. 4. Nominal Damages: Here the breach involved may be only technical , so a nominal damages of a small sum of money may be awarded.

Kinds Of Damages (Continued)

Liquidated & Un liquidated Damages:
Under Liquidated damages , the sum has been fixed by the parties as a genuine pre-estimate of the damage likely to be caused by breach of the contract. In Un liquidated damages , no such sum has been fixed by the parties as a pre-estimate of the damage.

Remedies in case of Breach Cancellation /rescission

Recession is the revocation of a contract. This is the way by which a contract may be discharged. When one of the parties to a contract commits breach, the other party may treat the contract as rescinded. He is freed from all obligations under the contract. Under Sec 64 , the party rescinding a voidable contract shall , if he has received any benefit there under from another party to such contract restore such benefit to the person from whom it was received.

Suit for specific Relief

Specific performance is directed only in certain cases
where monetary compensation is not an adequate remedy & there exists no standard for ascertaining the actual damages caused by non performance of the act. This remedy is discretionary & will not be granted in the following cases. 1 Where monetary compensation is an adequate remedy. 2 Where the court cannot supervise the execution of the contract. 3 Where the contract is for personal service. 4 Where one of the parties is incompetent to contract. ex minor.

Suit for injunction

An injunction is a preventive relief . An aggrieved party can sue for an injunction .
An injunction is an order of the court restraining the wrongdoer from doing , or continuing , the wrongful act complained of. Injunctions may be temporary or permanent. Injunctions may be mandatory or prohibitory. Suit for Quantum Meruit Quantum Meruit means as much as is earned. Right to Quantum Meruit means a right to claim the compensation for the work already done. Ex : C , an owner of a magazine engaged P to write a book to be published in installments in his magazine . After a few installments were published , the publication of the magazine was stopped . It was held that P could claim payment for the part already published. (Planche Vs Calburn)