A breach of contract is the violation of the conditions given under a binding contract. The breach can be anything from minor to serious such as from late payment to failure to deliver the Asset. It can happen in both a written contract as well as oral contract and the parties involved in the breach of contract can solve the issue among themselves or in the court.
For example, if a person name A makes a contract with B to deliver his goods on 3 September, but, fails to deliver goods on the same day, has done breach of contract.
Breach of Contract
The breach of contract may be either complete or partial breach. When a case is filed in the court, the court will assess whether it was a partial breach of the complete breach, because, it will help the court to determine that what types of damage should be paid by the breaching party. To successfully claim the breach of contract, it becomes important to prove that the breach occurred.
What is a contract?
A contract is an agreement between two or more than two parties that created the legal obligations. The contract can be either written or oral. However, you should avoid the oral contract because it becomes more challenging to enforce the oral contract, though it is still a valid contract.
Essentials of a valid contract
There are some elements which must be present in an agreement to become a valid contract, which are:
- An offer
- Acceptance of the offer
- Promise to perform the contract
- The consideration
- The date or time when the performance must be done
- Terms and conditions for the performance of the contract
- Performance of the contract or delivery of the asset
Section 37 of the Indian Contract Act
According to section 37 of the Indian Contract Act, the parties to the contract are binding under the obligation to perform the terms and conditions given under the contract made between two or more than two parties in the contract, unless such terms and conditions are excused under the provision any Indian law.
Breach of Contract Meaning
A Breach of contract is a legal term which is used in contract law on the event where a party to a valid contract fails, breaks or refuses to fulfil the promise or terms and conditions given in the binding contract. Like, if the contract contains the terms and conditions that the party or parties must do and how they should do the work to fulfil the contract, but the party fails to apply these conditions shall be considered as a breach of contract. In that situation, the non-breaching party is allowed to file a lawsuit against the breached party in the court.
Don’t forget to read our article on The Importance of Free Consent under Indian Contract Act, 1872
When the non-breaching party claims a breach of contract, the court must answer the following questions given below:
- Did a legal contract exist?
- If the contract exists, what was the terms and conditions of the contract?
- Was the contract modified after making the contract?
- Is the claiming breach of contract occur?
- What is the defence of the breaching party?
- What damages are caused by the breached party?
Types of breach of contract under Indian contract act
Breach of contract is a risk which is faced by anyone who enters into a legal contract. If you deal with many agreements at the same time, then it becomes common that you will face a breach of contract. Here are the main types of breach of contract:
A minor breach of contract
A minor breach of contract is when one party received the product which was deliverable but the other party was failed to fulfil the part of their obligation. For example: if you order me to fix your house window by changing it with a new wind-resistant window, but I just fix a new simple window, this will come under minor breach of contract. But if there is no difference in the price of both windows, then you cannot claim it.
A material breach of contract
It occurs when there is serious failure to perform the part of the contract that allows the other party to ask for the damages because the breach has occurred. For example, if, it is written in the contract that this window should be used in the house, but I use the simple window, but the window break, then you can ask me for the damages to replace this window with wind-resistant window.
Actual breach of contract
The actual breach is when either of the party to contract is refuses to perform their obligation on the due date is called an actual breach of contract. It means the promisor party refuses to perform the promise which has to be fulfilled on the due date.
For example, Sohan make contracts with Mohan that he will buy his goods on 16th November of 5000. But on 16th November, he refuses to take his goods; it called the actual breach of contract.
Anticipatory breach of contract
The anticipatory breach is the breach where the breach of contract occurs but before the due date of performance. In this type, the one-party announces, in advance (before the due date) that he is not going to fulfil his side of which was mentioned in the contract.
Example: A promises B on 10th December that he will give 1000 unit of his products on 26 January, and he will charge 100rs per unit. Now, on 1st January, A said B that he cannot give him products. Here, A refuses to give his product before the due date which was 26th January. This is called the anticipatory breach of contract.
Section 73 of the Indian Contract Act, 1872
Breach of contract is covered under section 73 of the Indian contract act that, when a legal contract has been broken by either of the party to the contract, the suffering party is entitled to ask for the compensation from the breached party.
Remedies for breach of contract under Indian contract act
Let’s discuss the various remedies for breach of contract which are given under the Indian contract act:
Recession of Contract
The recession of contract means the cancellation of the contract. When either of the party of the contract has been failed to fulfil the obligations of the contract, then the other party has the right to cancel the contract and he can refuse to perform his obligation which was mentioned in the contract.
For example, A promises B to buy his goods on 3rd January at the price of 3000, but B failed to deliver the goods on the specified date. Now, A has the right to cancel the contract because B has not fulfilled his obligation.
Suit upon Quantum Meruit
The Quantum Meruit means, according to the quantity of work done. This occurs when one party is prevented by finishing his full work as mentioned in the contract, then the party has the right to claim the charges of the work which was done by him till now.
Let’s take an example. Ravi promises Mohit to buy his 1000 goods in instalments up to 24th January. But, on 21st January, Ravi refuses to take the last instalment and at that time, Mohit has sent him 900 goods. Now, the Mohit can claim the money for 900 goods which were sent by him to Ravi.
Suit for Specific Performance
According to specific performance, the breached party has to fulfil the conditions which are mentioned in the contract. In many cases, it happens that the court insisted the party perform the liability given under the contract.
For example, A promises B to sell his property. But on the date specified in the contract, he refuses to sell the property. Now, the court may pass the decree of specific performance against A to sell his property to B.
It is a decree of the court where the court restricts the party to do any specific work for a certain period of time. In this decree, the court may stop the party to do anything wrong which was not mentioned in the contract made between both the parties.
Example: A producer makes a contract with a film star that he has to work for one year only with him or he cannot work with another producer for one year. But after 6 months, the film star started working with another producer, it will be considered a breach of contract and now, the 1st producer has the remedy to take the decree of injunction from the court to stop the film star to do work with another producer.
Suit for Damages
It is mentioned in the contract act that if a party experiences a loss by breached contract, then they have the right to take compensation for the damages from the breached party. There are six types of damages given in contract law, which are,
- Compensatory Damages
- Incidental Damages
- Consequential Damages
- Nominal Damages
- Liquidated Damages
- Punitive Damages
The compensation will depend upon the nature of the damages.
The breach of contract is an event which can happen during the performance of the contract. So, it becomes more important to understand the terms and conditions of the contract before entering into the contract, otherwise, you may be getting in the trouble to pay for the damages done by you.