This Article is written by Shivangi Singh Sisodiya & this article discuss the Remedies for breach of contract.
1) Introduction
2) Key Factors determining breach of contract
3) Factors determining the breach of contract under ICA 1978
4) Breach of contract
5) Factors influencing the remedial choices
6) Anticipatory breach of contract
7) Effects of anticipatory breach of contract
8) Measures of breach of contract
9) Conclusion
[i]The damage that is being made from a distance or indirectly related to the person who has being damage is known as, Remoteness of damage.
For ex- If person A and person B had an accident crashing their cars and person C who was standing nearby had a miscarriage by the accident then person A and B are not directly related to the cause done to person C.
But there are consequences and liabilities on how much repayment can be done to pay the damages or how much liabilities can be fixed on the factor that determines the damages.
An event constituting a wrong can constitute a single consequence or may constitute series of acts/wrongs. The damage may be closest or might be remote, or too remote.
Key factors that may lead to breach of contract: –
1) Failure to perform the conditions of the contract2) Delay in the performance of the contract3) Impossibility for the performance of contract4) Express the refusal to perform by one party can lead to breach of contract
Factors determining the breach of contract under ICA 1978
1)The test of reasonable foresight If the consequence of a wrongful act can be seen with reasonable mind, then it is not too remote.
2) The test of directnessThe person is reliable for the wrongful act and should have been directly liable for the responsibilities.
Breach of contract
A breach of contract occurs when a party who is entered in a contract failed to do their obligations it is known as breach of contract.Breach of contact occurs in the following way :
1) Discharged by performance : A contract will be discharged if the duty stated in the contract has been fulfilled by the parties. If only one person in a contract performs the promise which is mentioned then he alone is discharged.
2) Discharge by breach of contract: – When a contractual party refuses or fails to perform, hinders themselves from performing, or makes the execution of the contract impossible due to their actions it is called discharge by breach of contract.
3) By impossibility of performance : If the performance of the contract is impossible then it is void.
4) By agreement and novation : Whenone of the contracting parties in the original contract is replaced by an entirely new party that assumes the rights and obligations of the original party.
Factors influencing the remedial choices
The factors that influence the remedial choices for a breach of contract depends on the nature of contract1) Parties age 2) Mere silences don’t constitute to acceptance to form a contract3) The contract must be accepted[1]4) It should not be accepted by undue influence or through coercion5) The consent must be free for the acceptance
Because of such reasons the remedialchoices for the breach of contract varies and changes the nature of contract.
Caselaw :-Mohri Bi Bi v/s DhamodarGhorse, Husband of mohri bi bi, Brahmadutt and his agent signed a contract with DhamodarGhorse who was minor at the time of contract. He sells the land for 20k, the agent of Brahmadutt, Kedarnath give half the amount for the land. When the mother of the minor came to know about this, she wrote a letter to her husband that Damodar was a minor at the time of contract. Brahmadutt filed a case against the minor and the court decided, the contract is void as it was signed by a minor.
Anticipatory breach of contract
According to section 39, when a party to a contact has refused to perform or disabled himself from performing his promise, then the promise may put an end to the contract unless he has signified by words or his way in his acquiescence its continuance.
For example: –A, a singer enters into a contact with B, the manager of a theatre that A would sing at his theatre two nights every week during the next two months, and B will pay 100 rupees for each night’ performance. On the sixth night, A willfully absents himself from the theatre. B is at the liberty to put an end to the contract.
Effect of Anticipatory breach of contract
It means that in anticipatory breach of contract by one party then the other party is entitled to have [2]two alternatives: –
1) They may close the contact immediately and may treat a contract has come to an end without waiting for the appointed date of performance of contracT.He may not put an end to the contact but treat it as still existing and live contract and wait for the performance of the contract on the appointed date.
a. Election to rescind the contract: – In anticipatory breach of contract by the promisee, the party has a right to treat the contract at an end, even though the due date of the performance has not yet arrived.
Case law: – In Frost v. Knight: -In this case, the defendant promised to marry the plaintiff on his (defendant’s) Fathers death. While the defendant’s father was still alive, he broke off the engagement. The plaintiff did not wait till the defendants’ father death and she immediately sued him for the breach of contract and she was successful in her action.
b. Election to keep the contract alive: -Anticipatory breach of contract by one party does not automatically put an end to the contract. The injured party has the option either to treat the contract existence or regard themselves as discharged.
Remedies of breach of contract
According to the sec 73 of Indian Contract act, it is stated when a contract has been broken, theparty who suffers by such breach of contract is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to the party arose the breach of contract. But such compensation is not to be given for any remote and indirect loss or damage sustained by the reason of the breach.
It also sates that if the failure of compensation result in the discharge of obligation by the parties, then it must be taken into account in case of breach of contract.
Then in sec 74, Its further mentions the amount which is already mentioned in the contract to be be paid and the penalty acts with interest for the delaying of repayment for the breach of contract.
Basically, there are four ways in which we can measure the damages of the contract: –
1) Compensatory damages: –Compensatory damage is when money is awarded to the claimant to compensate for the damage that is being done, or loss.
2) Punitive damages: –In this type of damage, it’s when a jury grantsplaintiff to punish the defendant and make them pay for their wrongdoings.
3) Nominal damages: – In nominal damages case, a small sum of money awarded as damages to someone who has suffered a legal wrong but no actual financial loss.
4) Liquidated damage: –It allowsthe payment of a specified amount to be paid in case of breach of contract by the parties for loss repayment.
5) Recession: -It allows the innocent party to cancel or void the contract, if the contract is breached.
Conclusion
Here we have reached the conclusion where, the remoteness of damage determines whether the act is lethal or too remote. Then we determine how much damage can be repaid to the person who is wronged or has received the damage. We can determine the gravity of dame by the two ways which is reasonable foresight and the test of directness.
In the test of reasonable foresight, we see that the person who has received the damage is not much reasonable because the factors of the incident is not foreseeable nor it can be delayed to not cause the damage. The compensation is not provided here because the circumstances are not reasonable.
In the test of directness, we see that the person who has caused the damage is solely responsible for the damage which is caused and is in the reasonable circumstances. The compensation is provided here.
Further on we discussed on what basis can our contract of breach is discharged. In this we have learnt the anticipatory breach of contract with further continuing its effects on the other party. While we discussed this, we learnt about the two cases Frost Knight and above in breach of the contract.
After that we learned how are the damages are being compensated with compensation to the Party that was caused damage, we concluded that an agreement which is enforceable by law is a contract and thus has its Pros equivalent to its Cons.
References
· [1] Indian Contract Act 1983
· Singh, A. (2009) Textbook on law of contract and specific relief. Lucknow: Eastern Book Co.
