Breach of Contract
Meaning of Breach of Contract
A breach of contract occurs when a party to a valid contract fails or refuses to perform his or her contractual obligation, or performs it in a manner inconsistent with the terms of the contract.
In simple words, when one party does not fulfill the promise made under a contract without a lawful excuse, it is called breach of contract.
Example
A agrees to sell 100 bags of rice to B for ₹2,00,000 and promises to deliver them on 10 October. If A refuses to deliver the rice without any lawful reason, A has committed a breach of contract.
Types of Breach of Contract
1. Actual Breach of Contract
An actual breach occurs when a party fails to perform the contract on the due date or performs it improperly.
Example:
A agrees to deliver goods to B on 15 November but fails to deliver them on that date. This is an actual breach.
Actual breach may occur:
- On the date fixed for performance, or
- During the performance of the contract.
2. Anticipatory Breach of Contract
An anticipatory breach occurs when, before the due date of performance, one party clearly indicates that they will not perform the contract.
Example:
A agrees to deliver machinery to B on 30 December. On 15 December, A informs B that A will not deliver the machinery. This is an anticipatory breach.
Under Section 39 of the Indian Contract Act, 1872, where a party refuses to perform or disables himself from performing the promise in its entirety, the promisee may put an end to the contract, subject to the provisions of the Act.
Remedies for Breach of Contract
The party who suffers because of a breach may have various remedies under the law.
1. Damages
The injured party may claim compensation for the loss caused by the breach, subject to the rules governing damages.
2. Rescission
The aggrieved party may, in appropriate circumstances, rescind or terminate the contract.
3. Specific Performance
In appropriate cases, a court may order the defaulting party to perform the contractual obligation, subject to the requirements and limitations of the Specific Relief Act, 1963.
4. Injunction
In suitable cases, the court may issue an injunction preventing a party from doing something contrary to the contractual obligation.
5. Quantum Meruit
In appropriate circumstances, a person may claim reasonable compensation for work already performed where the law permits such a claim. Quantum meruit literally means “as much as is earned.”
Example of Breach and Remedy
Suppose A agrees to supply machinery worth ₹5 lakh to B by 1 June. A refuses to supply the machinery without lawful justification. B suffers a financial loss because of the breach.
In such circumstances, B may have a legal claim for damages, subject to the applicable rules regarding proof and remoteness of loss.
Conclusion
A breach of contract means the failure or refusal of a party to perform a contractual promise without lawful justification. It may be actual or anticipatory. The aggrieved party may seek appropriate legal remedies such as damages, rescission, specific performance, injunction, or quantum meruit, depending upon the circumstances and applicable law.
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