What is Breach of Contract?
Where one of the contracting parties does not perform his promise, it is called a breach of contract. The injured party is discharged from performing his part of the obligation. Breach of contract may be of two kinds.
Table of Contents
- 1 What is Breach of Contract?
- 2 Types of Breach of Contract
- 3 Remedies for Breach of Contract
In other words, A contract, being a fountainhead of a correlative set of rights and obligations for the parties, would be of no value, if there were no remedies to ensure the rights arising thereunder.
Types of Breach of Contract
We have seen that a contract must be strictly performed according to its terms. But where the promisor has neither performed his contract nor tendered performance and where the performance is not excused by consent, express or implied, or where the performance is defective, there is a breach of the contract by him.
Which entitles the other party to file a suit. If the contract is unilateral, the only remedy for the other party is to claim relief for the beach and also in certain circumstances is exonerated from liability to perform his part of the contract.
Anticipatory Breach of Contract
Anticipatory breach of contract occurs when a party repudiates the contract before the time fixed for its performance or when a party by his own act disables himself absolutely from performing the contract.
It may sometimes happen that even before the time of performance arrives the promisor may do some act which makes the performance impossible or may definitely renounce the contract or show his intention not to perform it.
Thus where A promised to assign to B within 7 years from the date of promising all his interests in 4 houses for ₹10,000 and before the end of the years assigned all his interests to another person, it was held that without waiting for the 7 years to elapse B could sue for breach of the promise.
In another case, a carrier was engaged in April to accompany his employer on a tour of three months to commence on June, 1. On May 11 the employer wrote to the courier that he had changed his mind and declined his services but refused to make him compensation.
On May 22 the courier brought his action for breach of contract, and the defence was that there could be no breach before June 1. It was held that the courier was entitled to treat the letter of May 11, equivalent to a breach of contract.
- A contracts to marry R. Before the agreed date of marriage, he marries C. In this case, A has committed anticipatory breach of contract.
- A contracts to supply B with certain articles on 1st of August. On July 20, he informs B that he will not be able to supply the goods. A has committed anticipatory breach of contract.
Actual Breach of Contract
Actual breach of contract may take place in any of the. two ways:
- Breach at the time when the performance of the contract is due.
- Breach of contract during tl~e pcrformance of the contract. Now let us study -about these two separately in detail. Actual breach of Contract at the time when performance is due. If a party to contract refuses or fails to perform his part of the contract at the time fixed for performance of that contract, he will be liable for its breach.
For Example, A agreed tossell his car to B on July 2. On July 2 A refused to sell his car to B. On A’s refusal to sell the car, there is an actual breach of contract. Now the question is whether it should be accepted or whether the promisee can refuse such performance and hold the promisor liable for the breach. The answer depends upon whether time was considered by’the parties to be the essence of the contract or not.
Remedies for Breach of Contract
Where there is a breach of contract on the part of one party, the injured party becomes entitled to any one or more of the following reliefs:
In one party has broken his contract, the other party may treat the breach as discharge, and refuse to perform his part of the contract. He may also successfully defend an action for non-performance, or action brought for specific performance. Sec.75 further entitles him to compensation for any damage he may have sustained through the non-fulfilment of the contract.
For instance, A singer, contracts with B manager of a theatre, to sing at his theatre for two nights every week during the next two months, and B engages to pay her ₹1000 for each nights’ performance.
On the sixth night, A willfully absents herself from the theatre, and B in consequence rescinds the contract. B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.
It is the monetary compensation awarded to the injured party for the loss caused to him due to the breach. The types of damages are of the following kinds:
General damage all compensation awarded to direct loss caused by the breach of contract. It is also called ordinary damage.
Exmaples: A contract with B tosell and deliver 50 kg sugar @ Rs. 500 per Kg on a particular date. On the due date he refuses to deliver because the price on the date increased to Rs. 60 per kg. B can claim damages at the rate of rupees 10 per kg.
Special damages are competition awarded for indirect loss caused by breach of contract special damages are provided only those circumstances where the promise see at the time of entering in the contract is known about the loss.
Example: A contract C to buy 1 ton iron for Rs. 80,000. A also contracts to sell B 1 ton iron for Rs. 100,000. A informs c about the purpose of contract. C fails to supply. As a result. As a result, A cannot supply to B. C is liable for loss of profit which A would have earned from B.
Exemplary damages are awarded with a view to punished the guilty party for the breach and not to compensate the injured party for the loss suffered.
Exemplary damages are awarded only in following cases:
- For the promise to marry amount of damage will be depend upon the extent of injury to feeling of the party.
- For wrongful dishonor of cheque by banker when there are also sufficient fund in account of customer. The rule is, the smaller of the cheque dishonor, the greater damage.
when party to contract fix the amount of damage for the breach of contract at the time of formation of contract such damages are called liquidated damages.
Example: A contacts to pay Rs. 20,00 as damages to B, if he fails to pay his Rs. 500,000 on given day. A fails to pay on that day. B can recover damages not exceeding Rs. 20,000.
When the beast party has suffered no loss due to the breach of Court may be awarded him nominal small amount as damage in recognition of his right.
Damages are said to be contemptuous, when the court finds that a breach has been committed, but that the breach is so insignificant or petty that a reasonable man would not have filed a suit. A rupee or even less may be awarded to mark the court’s disapproval of the plaintiffs conduct in bringing the action.
The law does not take account of trifling things; and where it does, it awards also something of a contemptuous character. Such damages have been awarded to male plaintiffs in breach of marriage actions.
Suit for Quantum Meruit
Quantum meruit as much as he has earned. Suing on quantum meruit is the suing for the value of so much as is done. The injured party can use for quantum meruit, i.e. if the injured party has done can estimate at a money value of so much as he has already done.
A places an order with B for the supply of 100 chairs to be delivered by installments. B delivers 20 chairs when A informs him that he will require no more. In this case A’s erudition discharges B from the obligation to supply the remaining chairs.
He can sue A for the breach of contract for the value of 20 chairs already supplied. The later will be called suit for quantum meruit.
Suit for Specific Performance
Instead of or addition to awarding damages to the injured party, a decree for specific performance may be granted. Specific performance means the actual carrying out by the parties carrying out their agreement.
This remedy, however, is discretionary and will not granted in the following cases:
- Where monetary compensation is an adequate remedy.
- Where the Court can not supervise the execution of the contract, e.g. a building contract.
- Where the contract is for personal services.
- Where one of the parties is a minor.
Specific performance is usually granted in contracts connected with land, e.g. purchase of particular plot of house, or to take debentures in company. In the case of sale of goods, it will only be granted in the case of specific goods and is not ordered as a rule unless the goods are unique and cannot easily be purchased in the marked or are of special value to the party suing by reason of personal or family associations.
Suit for Injunction
An injunction is a mode of securing the specific performance of a negative terms of the contract. It is an order of the court whereby an individual is required to refrain from the further doing of the act complained of.
It may be used to prevent many wrongful acts, e.g. torts, but in the context of contract, the remedy will be granted to enforce a negative stipulation in a contract in case where damages would not be an adequate remedy.
Thus, where a party to a contract is doing something which he had promised not to do, the court may in its discretion, issue and order to the defendant restraining him from doing what he promised not to do. Its application may be extended to contracts where is no actual negative stipulation but where one may be inferred.
In Metropolitan Electric Supply Company v. Ginder (1901) 2 Ch. 799, G agreed to make the whole electric required by his premises from the plaintiffs. Held, this was in substance an agreement not to take energy from any other person and it could be enforced by injunction.