This Article is written by Kotireddy rani & this article disscuss the REMEDIES FOR BREACH OF CONTRACT.
- Definition of contract
- Essential elements of contract
- Breach of contract
- Causes of breach of contract
- Types of breach of contract
- Consequences of breach of contract
- Remedies for breach of contract
- Rescission of contract
- Sue for damages
- Types of damages
- Sue for specific performance of contract
- Injunction
- Quantum Meruit
- Conclusion
Contract:
The term “contract” defines under section 2(h) of Indian Contract Act,1872. An agreement made by two or more parties which are legally enforceable by law known as contract.
Essential Elements of the Contract
Offer & Acceptance, Consideration, Capacity, Free Consent, Lawful Object.
Example: A agrees to sell his car for 10 lakhs to B. Here, the both parties mutually agreed where consideration is present.
Breach of Contract
A breach of contract occurs when one party failed to fulfil the agreed terms of the valid contract. The party which suffered loss can sue on another party for compensation.
Example: X promises to deliver furniture on 2nd December to Y. Later X fails to deliver furniture on certain day. Here, X fails to fulfil his promise. Here the parties failed to fulfil essential elements of the contract.
Causes of Breach of Contract
- When one of the parties not perform the contract upon agreed terms.
- Misrepresentation or Fraud.
- Disclosure of terms of the contract.
- When one party performs the contract and other party rescinds it.
- Delayed performance of the contract.
- Violation of any term of the contract.
- When both parties rescind the contract.
- Not fulfilled any essential terms of the contract.
- Act of god i.e. unforeseen natural calamities.
Types of Breach of contract
- Anticipatory Breach
- Actual Breach
- Minor Breach
- Material Breach
Anticipatory Breach
Anticipatory Breach occurs one of the parties indicates through actions or words that the party won’t perform the contract before the time of performance of the contract.
Key Takeaways
- Expressing unwillingness to perform contract through actions or words.
- Before performance of the contract.
Example: A makes a contract to B that he will sell his house to him on 15th March for 50 lakhs. Before the scheduled day, A sells his house to C. Here breach of contract occurs before the time of performance of contract (due date).
Actual Breach
Actual Breach occurs when one of the parties completely refuses to perform the contract.
Key Takeaways
- Express unwillingness on the due date.
- Not performance of contract till the due date.
Example: X makes a contract that he will deliver flowers on the marriage day of the Y. On the marriage day of the Y, X expresses his unwillingness to deliver the flowers.
Minor Breach
Minor Breach occurs when the contracting party fulfils majority term of the contract and refuses to perform minor term of the contract. It does not have much impact to the term of contract.
Key Takeaways
- Not fulfilled minor term of the contract.
- Not have much impact to the terms of the contract.
Example: A seller delivered computer to the buyer one day late. There may be no legal remedy unless the loss showed.
Material Breach
A Material Breach occurs when the contracting party fails to fulfil majority term of the contract. Indirectly, it is complete breach of the contract.
Key Takeaways
- Not fulfilled majority of the contract which is directly complete breach.
- Not received which have contracted.
Example: A seller delivers computer without monitor on the day which agreed to deliver the computer. Without monitor there will be no use of computer. Here, it is indirectly complete breach which occur great loss to the non- breaching party.
Consequences of the breach of contract
Financial Loss: Due to the breach of contract the non-breaching party can suffer financial loss, postponement of work etc.
Reputation: Due to breach of contract, Reputation of both parties will damage. Again, there will be no trust between parties and to others.
Emotional Distress: Due to breach of contract, the non-breaching party may suffer for emotional distress due to damages.
Legal damage: Due to breach of contract, both parties need to spent money for legal action. Most importantly, the non-breaching party need to suffer loss if there is no favour of case on his side.
Waste of time: The both parties need to spent their time for litigation and to make new contract with others.
Remedies for the breach of contract
If the breach of contract occurs then the non-breaching party can seek for loss that happened to them through remedies which are provided under the law.
- Rescission of contract
- Sue for damages
- Sue for specific performance of contract
- Injunction
- Quantum Meruit
Rescission of contract
Recession of contract deals under section 65 of Indian Contract Act,1872 and under sections 27- 30 of Specific Relief Act,1963.
In simple term, Recession of contract means end of the contract or cancellation of the contract by one of parties or mutually. If one party refuses to perform the obligations of the contract then the other party can rescind it. If the both parties agreed to rescind the contract then it is mutual rescission.
Reasons for rescission of contract
Contract may rescind by any of the parties if there is any Coercion, Dureness, Lack of mental stability, Fraud, Minor, Undue influence and misrepresentation. If there is any material error then also contract may be rescinded. A rescinded contract is void.
If any loss occurred to one of parties, then the injured party may restore as compensation from offending party.
Examples
- X by misrepresenting that he has lot of business shares with other companies and made contract with Y’s Company. Y’s company rescinded the contract by knowing it with X.
- A& B made a contract to build a factory. Due to lack of material, they both rescinded the contract. It is mutual rescission by both A&B.
Sue for Damages
Section 73 deals with compensation loss or damage caused by breach of contract.
If any one of the parties breach the contract which results loss to another party. The injured party can file suit for damages and seek for compensation. The court decides the compensation based on how much loss occurred to the injured party. Compensation will not be given if it is indirect or remote damage.
Examples:
- A contract with B hat he will finish construction of mall by 2nd January 2024. So, B prepared everything for inauguration. On the subsequent day, A didn’t finished construction. Due to this B suffers loss which he had spent for inauguration. Here A is liable to pay damages to B.
Based on the circumstances the court may order the offending party to compensate the injured party.
Types of Damages
- General damages
- Special damages
- Nominal damages
- Vindictive damages /Exemplary damages
General damages
General damages awarded when the injured party suffered direct loss due to breach of contract. It is natural and probable cause. Damages are measured by estimated loss occurred due to breach of contract.
Special damages
Special damages can be covered any loss suffered by injured party due to breach of contract. These is not immediate loss. The injured party need to mention the special circumstances before or while the contract was signed. The non-breaching party should mention loss if the contract was not performed before head. It is an indirect loss.
Nominal damages
Nominal damages are awarded if any legal rights breached even though there is no loss. Nominal damages will be awarded if injured party didn’t show any loss. It is very small sum of amount. It is spoken through words.
Vindictive Damages/Exemplary damages
Vindictive damages awarded when monetary loss occurred and in addition mental agony suffered by injured party due to breach of contract. The main aim of awarding these damages is to deter the offending party from committing such breach of contract. These damages were given when the injured party suffered from mental loss, emotional distress which can’t be measured.
Specific performance of contract
Specific performance of a contract is a type of remedy that non-breaching party can sue against offending party to perform the contract as per the obligations mentioned in the contract. The court may order the offending to perform the contract as per conditions mentioned in the contract.
Specific performance implemented when there is no standard in calculating the damage occurred due to breach of contract.
Examples
- A is a singer. B contracts with A that “A” need appear on the stage to sing a song on their marriage. A refused on the subsequent day. Here B can sue for specific performance on A.
- X taken loan from the ABC bank. X refused to pay the loan. The bank can sue for specific performance on X.
- P contract with Q to buy shares of his company for 50 lakhs. Q receives 15 lakhs at the day of the contract. After 3 months Q refused to give shares. Here, P can sue for specific performance.
Injunction
Injunction is the order of the court to restrain from doing an act. Injunction mainly applicable in anticipatory breach which prevents from loss. When adequate loss cannot be calculated, the non- breaching party can seek for injunction from court before the complete breach of contract by other party.
Injunction is two types:
- Temporary injunction
- Permanent injunction
The non-breaching party can seek Temporary or permanent injunction depends upon the contract terms & obligations.
Example
- A makes contract with B that he works for 3 months at his company and not work anywhere. Before completion of 3 months A started working for C. Here B can seek injunction from court on A to stop working for another company.
Quantum Meruit
When one party performs his part of contract and other party refuses to pay his part. Then the party which performed the contract can seek for quantum meruit. The injured party can seek for compensation for the services rendered by them.
Quantum Meruit means “as much as they earned”. It is claim under quasi contract.
Example:
- X was the writer. Y makes contract with X that he will publish series of his books. After publishing two books he stopped publishing and closed his publishing book store. Here x can sue for quantum meruit as he had completed his part of contract. It is Y who breached the terms of the contract. So, X can seek for compensation by using remedy “Quantum Meruit”.
Conclusion
In conclusion, the breach of contract happens when one party did perform the terms of valid contract. By breach of contract, the non-breaching party suffers loss. The offending needs to compensate the injured party. According to law, there are remedies to protect the injured party from offending party. The injured party can seek for remedies to restore the loss occurred. The remedies are available to restore the situation of the injured party. Rescission of contract, sue for damages, Sue for specific performance of contract, Injunction, Quantum Meruit are remedies available for the injured party to seek for compensation and to restore the loss obtained to them. The injured party need to seek the compensation fairly or based on the assessment of loss occurred.
References
- https://www.mondaq.com/india/contracts-and-commercial-law/730258/method-for-computation-of-damages
- Singh, A. (2009) Textbook on law of contract and specific relief. Lucknow: Eastern Book Co.
