BREACH OF CONTRACT AND its REMEDIES

ABSTRACT

Contract is a legally binding agreement which is enforceable through law. When we say something is legally binding it implies that the entity holds some value and weightage in the eyes of law of the land. The parties that enter into contract are bound by certain contractual obligations and failing to do so would attract certain legal actions against the breaching party and the other would be compensated for their loss due to breach and would be called as breach of contract. There are different types of breach and several types of remedies which we would study in this article.

KEYWORDS

1. Contract,
2. Contractual obligation,
3. Breach,
4. Compensation,
5. Remedies

INTRODUCTION

Contract in the simplest way can be understood as a promise enforceable by law. The contract is made between two or more than two parties with their mutual consent which either obelizes to do something or refrain from doing something and when any party fails to perform task as per the contract then it is called breach of contract which brings itself several legal dues and many forms of compensation. When two parties or more parties enter into a contract then they are bound by contractual obligations. Contract existence can be traced back to every of even primitive society that ever existed in the form of debt, credit, slavery, bargain etc. All these contracts are framed by Indian Contract Act, 1872 which frames and validated each one of them. Indian contract Act defines the word contract under section 2(h) as an agreement enforceable by law of that land. Agreement is defined under section 2(e) of Indian Contract Act, 1872 which says that every promise and every set of promises forming the consideration for each other, further promise is defined in the act under section 2(b) as when the person to whom proposal is made signifies his/her assent thereto, then proposal became an accepted proposal it becomes a promise.

Breach of contract is a situation which arises when any party to contract with binding agreement fails to deliver according to the terms of the agreement or defies their contractual obligations. Breach of contract may lead to different types of legal dues and other types of compensation. There are four different types of breach of contract such as Anticipatory, actual, minor, and material. With different types of breach of contract comes different types of remedies which is available to the victim.

BREACH OF CONTRACT

Section 73 defines compensation for loss or damage which is caused by the breach of contract. When a contract is broken then the party who has suffered any type of loss due to the breach of contract is entitled to get compensated, exception to this occurs if there is a remote or indirect loss or if the damage is sustained by the reason of the breach. A contract is a legally binding agreement which has certain obligations and has weightage if taken to court. Breach of contract is not considered as a crime or in scope of tort and merely is fulfilled by compensating in certain way by several means. Today even the process of dealing with the contract is mentioned in the original contract itself and in case the violations rules in contract is not mentioned then involved parties may settle the breach compensation among themselves and if that doesn’t work out well then suit can be filed in the civil court or the high court or any other court of competent jurisdiction under section 73 of Indian contract act, 1872 and proceed accordingly.

DIFFERENT TYPES OF BREACH OF CONTRACT

1. Actual Breach: It occurs when a party to contract refuses to fully perform the terms of the contract. This breach can occur at time when the performance of contract is due or during the performance of the contract. This breach can be communicated through words or actions.

• Anticipatory Breach: When a party notifies in advance that there will be a contractual breach on their part. It is defined under section 39 of Indian contract act. For Anticipatory breach of contract to come into play the breach must be communicated with clarity through conduct, verbally or in writing in its entirety.

• Minor Breach: As the name suggests, it occurs when the important aspects of the contract is received and only a minor part is left out. It is also known as Immaterial breach or partial breach. At times minor breach is considered as a recourse to the legal action as its hard to show and prove damages caused due to minor breach.

• Material Breach: In this type of breach either key element to of a contract not being undertaken or provided as agreed. It is considered as the most severe of all types of breaches.

REMEDIES FOR BREACH OF CONTRACT

1. Restitution: It completely restores the original position of the party to be compensated as it was before it.
2. Reformation: It occurs when the court itself reforms the court to correct any imbalance.
3. Rescission: It occurs when contractual obligation of all the parties to the contract are terminated by the court.
4. Money damages: It refers to the financial compensation when a breaching party
5. Specific performances: It is a situation where the breaching party has to perform their duties as mentioned in the contract in good faith.

CONCLUSION

Contracts are specifically designed to be upheld and give all parties to the agreement peace of mind. However, there are cases when they are breached and a solution must be found to remedy a failure to perform promised obligations. While not strictly a crime, a contract is there to be honored, unless all parties agree to renege on it and it is not particularly easy to wriggle out of one. The punishment for breaching may be already outlined in the contract itself. Alternatively, a resolution might need to be found, which can result in the breacher being forced to abide by its original commitment. The goal of contract law is to ensure that anyone who is wronged is basically left in the same economic position they would have been in had no breach occurred. A breach of contract is not considered a crime or even tort, and punitive damages are rarely awarded for failing to perform promised obligations, with payouts limited to the figures listed in the contract. The doctrine of reliance damages, however, does offer some exceptions in very specific circumstances. Additional monetary damages may be awarded if it can be proved that a reliance on the contract being fulfilled triggered other connected expenses, such as lifeguard equipment being bought based on the assumption laid out in the contract that a pool would be built.

REFERENCES

1. https://www.britannica.com/topic/contract-law
2. https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-i/what-is-a-contract/
3. https://indiankanoon.org/doc/171398/#:~:text=(h)%20An%20agreement%20enforceable%20by,it%20ceases%20to%20be%20enforceable.
4. https://www.contractworks.com/
5. https://aavenir.com/glossary/breach-of-contract/
6. https://ironcladapp.com/journal/contract-management/breach-of-contract/
7. http://jec.unm.edu/education/online-training/contract-law-tutorial/breach-of-contract
8. https://www.investopedia.com/terms/b/breach-of-contract.asp

This article is written by Kushagra Bhagwat, B.A.L.L.B.(Hons.), 3^rd year, Amity University, Lucknow Campus during his internship at LeDroit India.

CLICK HERE TO JOIN LEDROIT‘S WHATSAPP GROUP