What is a breach of contract?
The Indian Contract Act 1872 is one of the oldest mercantile laws of the country. The law was enacted on the 1st September 1872 and is applicable to the Whole India.
A contract defined under Section 2 (h) of the Indian Contract Act 1872 means, “any agreement which is enforceable by the law.” The contracts can be written using formal or informal terms and can be entirely spoken or verbal.
A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. The breach can be anything from a late payment to a more serious violation such as the failure to deliver a promised asset.
Breach of Contract Lawsuit
“Breach of contract" is a legal term that describes the violation of an agreement or a contract that occurs when one party fails to fulfill its promises as per the provisions given in the agreement. The fundamental of Breach of contract also involves interfering with the ability of another party to fulfill his/her duties. A contract can be breached in whole or in a part.
Most of the contract end when both the parties fulfill their contractual obligations, but when one of them violates it, breach of contract happens. Breach of contract is one of the common reasons why contract disputes are brought to the court for resolution.
Types of Breach of Contract
1. Material breach of contract:
Material breach of contract happens when a key element of a contract doesn’t get fulfilled as agreed. It defeats the purpose of agreement. In this case, mostly the aggrieved party goes to the court and tries to collect damages caused by the breach.
For example: (1) If you went to buy the computer, but you received only the monitor. It will be considered as a breach of contract and you will be entitled to take a legal action.
(2) You entered a contract with a media house to publish the article about the recently held event, but they failed to do so. Then, it will be considered as a breach of contract.
2. Minor breach of contract: A minor breach, also known as a partial breach or an immaterial breach where the important aspects of a contract were received, however the small part of obligations remained missed. In such a case, the suffering party can prove that they are able to pursue a legal remedy if they can prove that the breach has resulted in a financial loss.
For example: (1) If a website developer was asked to build a website, but he skipped the page of the team. Then, this will be considered as a minor breach, because nothing significant like - company details, testimonials etc. have been skipped.
(2) A shipment of goods got late. In this case also, there can be no legal remedy unless one could show how the delay caused a financial loss.
(3) Anticipatory breach of contract: An anticipatory breach of contract happens when the breaching party notifies the other party that it will not be able to fulfill their obligations by the agreed time.
For example: (1) An interior designer finds that it is impossible to meet a deadline, hence stop the work and invest all his/her resourced into a new project. The party can take a legal action against the architects.
(2) If a person receives an internet connection of monthly services, but the recipient says that he/she won’t be paying for a particular month, but still expects the services. It would lead to an anticipatory breach of contract.
(4) Actual breach of contract: An actual breach of contract happens when a person fails to meet the certain obligations stated in a contract complying with authoritative time constraints to finish nonperformance.
For example: (1) Shyam enters in a contract with Ram and promises that he will deliver 30 bags of cotton on 12th February 2021. But on the scheduled day, he fails to deliver the same. This is an actual breach of contract.
(2) Peter enters into a contract with John and promises that he will sing every Saturday and Sunday on his club for 1 hour during next four months in the exchange of Rs. 5,000. However, on the 4th night, he didn’t turn up. This is an actual breach of contract on the part of Peter.
Breach of contract and its remedies:
Under Section 73 of Indian Contract Act 1872, “When a contract is broken, the party who suffers from the breach of contract is entitled to receive from the party who has broken the contract, compensation for any or damaged caused to him, which naturally arose in the normal course of things from the breach or which the parties knew when they made the contract to be likely to result from the breach of it.”
Section 73 of Indian Contract Act 1872 also mentions that the damage is only payable if the loss has occasioned by the breach. No loss from the breach automatically leads to any damages. Compensation is not paid for any remote or indirect loss or damage sustained because of the breach.
The section also adds that ‘In estimating the damage or loss from the breach of contract which existed of remedying the inconvenience caused by the non - performance of the contract must also be taken into account. At the date of the breach, the measure of damages upon a breach by the buyer is the difference between the market price and contract price at the time of breach.
Elements of Breach of Contract Claim:
In order to qualify as a claim for breach of contract in a court of law, one must prove a number of qualifications. Here are the 5 important elements of breach of contract claim:
1. Prove the existence of contract: In order to show the court that contract was valid, they must be shown (1) An ‘offer’ (2) ‘Acceptance’ of the offer (3) Consideration of money must be involved in accepting the offer.
2. Prove that you have performed your obligations: Even if the details of the contract haven’t been carried out exactly what was asked for, but still the defendant received the services substantially what was asked for. At this point of time, the defendant is liable to pay. For
Example: If a person painted the room, but the recipient didn’t like the color clarity, then in that case, he/she will be liable to pay, even if not the full amount, but something needs to be paid. If the color was an important term in the contract, then he/she may refuse to pay the full amount.
3. Prove that other party failed to perform on its party: The defendant can’t argue that plaintiff should not be paid because of his/her own fault. If the plaintiff was not able to complete the certain tasks because the defendant makes it impossible to finish, then the plaintiff will not be at his/her fault. He/she has a right to claim.
3. Prove that other party failed to perform what was expected out of it: The defendant can’t argue that payment should not be done when he/she himself/herself makes it impossible for the other person to finish. Then, the other party wouldn’t be at fault.
4. Prove that other’s party failure caused you damages: Your contract should specify exactly what each party had promised. Whether there is a breach of contract or not would greatly be dependent on how well the contract was prepared. It becomes really helpful if an attorney reviews your contracts before entering into an agreement.
Penalties of Breach of Contract
When the sum payable becomes excess of the probable damage on breach of the contract, then it is known as a penalty.
In general, there are two types of penalties that a party can receive for breach of contract: Legal remedies or equitable remedies. Legal remedies allow the non-breaching party to recover monetary or compensatory damages. However, equitable remedies are a particular set off remedies prescribed by a court. They are often used to resolve a substantial breach or contract dispute when money damages are considered insufficient to resolve the issue or protect the parties from harm. Also, equitable remedies are cannot be availed unless and until the parties show that the legal damages will not be enough to resolve the contract issue.
FAQs about breach of contract
Q1. What is the breach of contract?
One party's failure to fulfill any of its contractual obligations is known as a "breach" of the contract.
Q2. What are the available remedies for breach of contract?
Remedies for breach of contract include specific performance, award of damages and restitution.
Q3. What are the consequences of breach of contract?
When a contract has been broken, the defendant party is entitled to pay the damage of breach of contract to the aggrieved party.
Q4. How to prove breach of contract in India?
A breach of contract can only be proved if the evidence of promise made between the parties is shown in the court.