Introduction
When one of the contracting parties refuses or fails to perform his part or obligation which he has promised to perform, is a breach of contract. A breach may be one by non-performance, by repudiation, or by both. Every breach gives rise to a claim for damages & may also give rise to other remedies.
Relevant Provisions
Section 73 of the Contract Act 1872
Definition of Breach of Contract
According to Section 73, the breach of contract is defined as
“Breach of contract is failure to perform the obligations under the contract”
Kinds of Breach of Contract
There are four types of breach of contract recognized by law.
i) Minor Breach
A minor or partial breach is that in which the non-breaching party of the contract is not entitled to an order for the performance of its obligations but only to collect the damages for which they are owed.
For example, if a homeowner hires a contractor to install new windows in a home and asks for wind-resistant windows but the contractor uses windows that aren’t wind resistant. The homeowner will ask the contractor for damages incurred. Since there is no difference in value between the two windows, the homeowner will not be awarded any damages. If there was a difference between the two windows then the homeowner would have been awarded damages that amount to the difference between the two windows.
ii) Material Breach
A material breach is when there is a failure to perform a part of a contract that permits the other party of the contract to ask for damages because of the breach that has occurred.
For example, if the contractor mentioned above, uses windows that aren’t wind resistant and the windows break, the homeowner can collect damages for replacing the windows with the wind resistant ones.
iii) Actual/Fundamental Breach
It may also take place during the performance of a contract, where a party apparently performs the promise, but the other party says it is not a proper performance then the other party is exonerated from the performance of his part of the bargain if the breach is of a condition vital to contract.
An actual/fundamental breach of a contract is when the person that has had the contract breached against can sue the breaching party for damages incurred as well as terminate the contract if they wish to do so.
iv) Anticipatory Breach
It is a breach before the performance of a particular task is due. It may take place;
(a) By the promisor doing an act that makes the performance impossible
(b) By the promisor showing his intention not to perform his promise
Damages for Breach of Contract
The damages that are available to the aggrieved party for the breach of contract are the following.
1. Compensatory Damages
In these types of damages, it is noticed what you have lost as a result of the other party’s breach of contract.
For example, If you agreed to pay Company A to remove waste from your property for $500 but they failed to appear and as a result, you had to pay Company B $800 to come and remove the waste from the property, you have damages of $300. The difference between what you contracted to pay and what you actually ended up paying for the work.
2. Consequential Damages
These are those types of damages that indirectly result from the breached contract and that were reasonably foreseeable at the time you enter into the contract.
For example, in the above-said example, if you own a small business and you did some repainting and renovations on a day when you were typically closed. Company A was supposed to come to remove the renovation waste from your business in time for you to reopen for business the next day. If they failed to show and you had to hire Company B to come to do the job, but Company could not come until the following day, forcing you to remain closed an extra day, your loss of business for that extra day is consequential damage of the broken contract.
3. Liquidated damages
Liquidated damages are those damages that are specified in the contract itself.
For example, If Party X fails to perform this contract by the deadline specified, he will owe damages to Party Y in the amount of $1000 per day for every past the deadline that his performance is not complete.
4. Exemplary damages
These are those damages that are requested or awarded in a lawsuit in the case when the defendant’s willful acts were malicious, violent, oppressive, fraudulent, or grossly reckless.
For example, All the acts are warranting exemplary damages like publishing that someone had committed a murder and the publisher believed that it was not true but hated that person.
5. Nominal damages
A sum of money is awarded to a plaintiff whose legal right has been violated but who has not established that they are entitled to damages because there was no accompanying loss or harm. These are nominal damages.
Remedies for Breach of Contract
1. Rescission of contract
Where one of the parties to a contract commits a breach, the other party may treat the contract as rescinded and the aggrieved party is free from his obligations and becomes entitled to compensation.
2. Suit for damages
When a contract has been broken, the injured party is entitled to either ordinary damages or special damages.
3. Suit on Quantum Meruit
It arises only where one of the parties has not performed his part of the promise but has been discharged because of a breach of the other party. This right is founded not on the original contract but on the implied promise by the other party to pay for what has been done.
4. Suit for specific performance.
Where the breach of contract damages are inadequate to remedy, the party at fault may, at the discretion of the court, be ordered to perform the contract in specie.
Example: A agrees to sell B his painting, but commits a breach. B cannot sue for damages. A shall be ordered to make specific performance to B.
5. Suit for injunction
The injunction is granted by the court in cases where the damage is not adequate relief and it is appropriate in cases of anticipatory breach of contract. The court by issuing an injunction restrains a person from doing what he has promised not to do.
Example: A, a film actress, agreed to act exclusively for B, a film company, for two years and for no one else. But during this period, she contracted to act for C also.
Forms of Relief for Breach of Contract
Legal Remedies: These are those damages that are the monetary awards that are discussed above.
Equitable Remedies: They are rendered when monetary damages will not properly remedy to the situation.
Contract Reformation
It means to make the contract again with the required needs.
The former contract is rewritten with the new contract that reflects the parties’ true intent. Reformation requires a valid contract, to begin with, and often is employed where terms of the contract are mistaken or disagreed upon.
Former contract + New contract having the parties’ true interest = Reformed contract
Final Note
It is concluded that the breach of contract is a violation of a contractual obligation, either by failing to perform one’s own promise or by interfering with another party’s performance. Different kinds of remedies are available to the aggrieved party on breach of a contract.
FREQUENTLY ASKED QUESTIONS
What remedies are available to an aggrieved person for breach of contract? Discuss in detail.
(2019-A, 2018-A, 2017-A, 2016-S, 2016-A, 2015-A, 2014-5, 2012-5)
What is meant by breach of contract? Discuss various remedies available to an aggrieved party in case of breach of contract.
(2013-8, 2013-A)
What are the different remedies for breach of contract provided in the Contract Act?
(2009-A)
REFERENCES
- The Contract Act, 1872
- N-Series by M.A. Chaudhary
- Law of Contract by Avtar Singh
