Under the Indian Contract Act, 1872
Breach of Contract
A breach occurs when one party fails to perform their contractual obligations or refuses to perform without lawful justification.
Types of Breach
Actual Breach
Occurs at the time of performance when one party either fails or refuses to perform the contract.
Anticipatory Breach
Occurs before the due date of performance when one party communicates, by words or conduct, that they will not perform their part.
Example: A agrees to deliver goods on 15th July. On 1st July, A informs B of non-performance. This is anticipatory breach.
Remedies for Breach of Contract
Under the Indian Contract Act, the following remedies are available to the aggrieved party:
Damages (Section 73)
Monetary compensation for the loss suffered due to breach.
- Ordinary Damages: For direct loss arising in the normal course of events.
- Special Damages: For losses due to special circumstances known to both parties at the time of contract.
- Exemplary Damages: Rare; awarded for breach of promise to marry or dishonour of cheque.
- Nominal Damages: Token damages where no actual loss is proved.
- Liquidated Damages and Penalty: If a sum is pre-agreed upon for breach, court awards reasonable compensation not exceeding this amount.
Specific Performance (under Specific Relief Act, 1963)
The court directs the party in breach to perform their contractual obligations.
Granted in cases where damages are inadequate and the subject matter is unique (like land or rare goods).
Injunction
A judicial order restraining a party from committing a breach.
Applicable in cases of negative stipulations or continuing breaches.
Rescission of Contract
Cancellation of the contract by the aggrieved party, who then is not bound to perform further obligations.
Restitution (Section 65)
Restoring benefits received under a void or rescinded contract.
Quantum Meruit
Latin for “as much as earned.” Allows a party to claim payment for work done when the contract becomes void or incomplete.
Example: A is hired to write a book. After 3 chapters, the contract ends. A can claim payment for the completed chapters.
Important Case Law
Hadley v. Baxendale (1854)
This case established the principle of remoteness of damages. Damages can only be claimed for losses that are foreseeable or naturally arise from the breach.
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Summary Table
| Remedy | Purpose |
|---|---|
| Damages | Monetary compensation for loss |
| Specific Performance | Order to fulfill contractual obligations |
| Injunction | Prevent specific actions leading to breach |
| Rescission | Cancellation of contract obligations |
| Restitution | Return of benefits received under invalid contracts |
| Quantum Meruit | Payment for part performance or services rendered |