Theoretical overview
A breach of contract by a party is a failure to fulfill obligations under a contract. A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. It is of two types, namely the anticipated breach and the present breach. Breach occurs when a party to a contract fails to fulfill its obligation(s), whether partially or wholly, as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform its obligation under the contract.
A breach of Contract takes place when a party corresponding consents formally to abandon his liability under it, or by his own act makes it impossible that he should perform his obligations under it or fully or partially fails to perform such obligations.
DISCHARGE BY BREACH
“A breach of contract occurs when a party thereto renounces his liability under it, or by his own act makes it impossible that he should perform his obligations under it or totally or partially fails to perform such obligations.”^ The failure to perform or renunciation may take place when the time for performance has arrived or even before that.
Anticipatory Breach is an announcement by the contracting party of his intention not to fulfil the contract and that he will no longer be bound by it.
S. 39 states effect of refusal of party to perform 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.
DAMAGES FOR BREACH [Ss. 73-74]
“Damages” means compensation in terms of money for the loss suffered by the injured party. It is compensatory and not penal in nature.
S. 73. Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
In estimating the loss or damage arising from a breach of contract, the means which existed to remedy the inconvenience caused by the non-performance of the contract must be taken into account.
Limitations
The consequences of a breach may be endless, but there must be an end to liability. The defendant cannot be held liable for all that follows from his breach. There must be a limit to liability and beyond that limit the damage is said to be too remote and, therefore, irrecoverable
Relevant sections
S. 39. Effect of refusal of party to perform 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
S. 73. Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
In estimating the loss or damage arising from a breach of contract, the means which existed to remedy the inconvenience caused by the non-performance of the contract must be taken into account.
Important case laws
- Hochester v De La Tour (Court ofQueen’s Bench, (1853) 2 Ellis andBlackburn 678: 95 RR747: 118 ER 922)
Held- It cannot be laid down as universal rule that, where by agreement an act is to be done at a future date, no action can be brought for a breach of the agree ment till the day for doing the act has arrived. - Forcometal SARLv Mediterranean Shipping Co SA, 1989 AC 788 (HL)
Held- The option is with the aggrieved party to sue at once or wait for performance.The promisee, if he pleases, may treat the notice of intention as inoperative, and await the time when the contract is to be executed, and then hold the other party responsible for all the consequences of non-per formance; but in that case he keeps the contract alive for the benefit of the other party as well as his own; he remains subject to all his obligations and liabilities under it, and enables the other party not only to complete the contract, if so advised, notwithstanding his previous repudiation of it, but also to take advantage of any supervening circumstance which would justify him in declining to complete it. - Avery v Bowden (1855) 5 E 6cB714:25 LJ QB49; 103RR 695:119ER 647:27 LJ119.
Held-It was held that the contract had ended by frustration and not by breach. - Maple Flock Co Ltd v UniversalFurniture Products (Wembley) Ltd, (1934) 1KB148 (CA)
Held- the seller’s conduct did not show an intention to throw away the contract and, therefore, the buyer should have to be content with damages for defective goods. - Juggilal Kamlapat v Pratapmal Rameshwar, (1978) 1 SCC 69: AIR 1978 SC 389
Held- Whether a partial failure goes to the root of the contract or not is a question of fact in each case.The sellers were in breach of their contract in this case. - Robinson v Harman (1848) 18 LJ Ex 202.
Held- The rule of the common law is that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed. - Hadley v Baxendale (1854) 9 Exch 341.
Held- Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e.According to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. - Madras Railway Co V Govinda Rau 4. ILR (1898) 21 Mad 172
Held- The damages claimed were too remote. All of these were due to the frustration of the special purpose and that was not known to the company - Simpson v London & North Western Railway Co. . (1876) LR 1 QBD 274
Held- Whenever either the object of the sender is specially brought to the notice of the carrier, or the circumstances are known to the carrier, from which the object ought in reason to be inferred, so that the object may be taken to have been in the contemplation of both parties, damages may be recovered for the natural consequences of the failure of that object. - British Westinghouse Electric & Mfg Co v Underground Electric Railway Co of London 1912 AC 673, 687
Held- a plaintiff has the duty of taking all reasonable steps to mitigate the loss consequent on the beach, and is debarred from claiming any part of the damage which is due to his neglect to take such steps. - Murlidhar Chiranjilal v Harishchandra Dwarkadas . AIR 1962 SC 366: (1962) 1 SCR 653
Held- Judge referred to two principles which he considered to be well-settled. One is that as far as money can do it, the aggrieved party is to be put in as good a situation as if the contract had been performed. This is qualified by the second principle which imposes upon the buyer the duty to take reasonable steps to mitigate the consequences of the breach.
Points to remember
- A breach of contract by a party is a failure to fulfill obligations under a contract. A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract.
- It is an announcement by the contracting party of his intention not to fulfil the contract andthathe will nolonger be bound by it.
- Damages” means compensation in terms of money for the loss suffered by the injured party. It is compensatory and not penal in nature.
- The consequences of a breach may be endless, but there must be an end to liability. The defendant cannot be held liable for all that follows from his breach. There must be a limit to liability and beyond that limit the damage is said to be too remote and, therefore, irrecoverable
OVERVIEW
Here in this topic, we are going to discuss the topic of contract which is a breach of contract in which we will see how breach of the contract takes place when a person does not fulfill their obligation within a period. Let us see its meaning and different types of breach of contract. Let us begin the topic in brief.
WHAT IS BREACH OF CONTRACT?
Breach of contract refers to the violation of any terms and conditions which led to binding of contract, where a person does not fulfill all their obligations. When the plaintiff files suit for the case of breach of contract in the court, the remedy will be granted to the victim if it has been proven that the defendant has breached a contract. It is not a crime or tort. Punitive damages are rarely awarded to the victim for the failure of the performance of a contract. Here we have to understand the concept of breach of contract.
Let us talk about some of the steps or ways from which we can avoid a breach of contract.
If a person wants to avoid it one should check three things while signing the contract. These include;
- There should be clarity in the entire contract, in which you should have to mention the rights and obligations of the parties. However, we can also hire an interpreter who can make a contract deed which ensures that everyone understands their role under the contract and other expectations of the contract too.
- The contract should underline the expectations while signing the contract, where you will already know the expectations that both parties have to fulfill under the contract. The ability to meet entire expectations should not rely on future amendments, because it will not entertain in the contract law.
- The contract should be legal with all its essentials which is required. The binding contract should be signed by the parties on its sign which should be legal. If you have double thoughts that the contract is not in a proper manner or anything else, then you can work with another lawyer who specializes in it and clear your all doubts before signing the contract.
TYPES OF BREACH OF CONTRACT
There are four types which include;
- Anticipatory breach of contract:
In this type of breach of contract, a person indicates through his conduct that the obligations of the contract is not performed by him before the performance is due. It can be clear or confirmed in two ways which are communication, or an act, that makes it impossible to perform such obligations. One leading case of this type is Hari Shankar v. Anant Ram (1999).
- Actual breach of contract:
An actual breach of contract refers to when a person is not able to perform their specified obligations which are mentioned in the contract within a specific time. Some examples of an actual breach of contract are, non-payment, delivery of goods or services, etc. One leading case name is R. Venkataraman v. Hindustan Petroleum CO. Ltd (1988).
- A material :
This type of breach of contract occurs when a party fails to perform such obligations that defeat the entire motto of the contract. The leading case of this type is State Bank of India v. Mula Sakhar Karkhana Ltd (2006).
- Repudiatory:
The repudiatory form of breach of contract means it allows the aggrieved party to either accept the breach of contract or terminate the contract and begin or continue with its performance. The leading case under this case is Indian Oil Corporation Ltd. v. Amritsar Gas Service (1991).
CONCLUSION
Here in this topic, we have seen how the contract is the foundation of any business or legal transaction which provides a path or framework for the rights and obligations of a party under the contract. By breach of contract, one party to a contract breaches their duties and obligations to their performance of the contract, which can be sueable for the damages and loss under the contract.
