Breach of contract

Breach of contract

Breach of contract is a term used where there is violation of any terms and agreement mentioned in a binding contract. The breach can be of any nature like failure to perform the duties mentioned in the contract, delay in payment or non- payment of goods and services rendered, failure to deliver the goods or services. The terms of these contracts are binding and will be taken into consideration if a suit is filed in the court.

In order to claim compensation, it is necessary for the party to prove the occurrence of the breach. In some cases, the consequences of the breach of contract is mentioned in the contract itself. For example, if the clause in the contract states that upon the breach of the contract by any of the parties a fine of 1 lakh will be imposed on the party who breaches the contract. Then if any of the party in future breaches the terms and conditions mentioned in the contract will have to pay the amount of 1 lakh rupees as fine, failure to do so the other party will have the option to sue the other party who breached the contract and the court will take this 1 lakh fine in consideration while deciding the cases.

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There are four types of breach of contract. These are

  1. Material Breach of Contract
  2. Minor Breach of Contract
  3. Anticipatory Breach of Contract
  4. Actual Breach of Contract

Material breach of contract

It is a type of breach of contract in which the receiver receives something different from what is stated in the contract. For example, you made a contract for 20 kg apples but during the delivery you received 20 kg oranges. This type of breach is called material breach of contract.

Minor breach of contract

Minor breach of contract occurs when you don’t receive your goods or services by the due date, or the delivery gets delayed beyond the agreed date. For example, you went to purchase a television on 20th January and the shopkeeper agreed to deliver it on 21st January, but he failed to deliver the television on 21st and delivers on 25th instead.

Anticipatory Breach of Contract

Anticipatory breach of contract takes place when one party informs in advance that they will not be able to deliver the goods or services on the date decided in the contract. For example you made an order of 20 dozen cold drink cans on 1st June for a party on 10th June and it was agreed that the supplier will deliver the items by 9th 

June but before 9th he call you and informs that due to some reason he will not be able to deliver the items by 9th , he will deliver on 15th june instead. So here it is the case of anticipatory breach of contract.

Actual breach of contract

Actual breach of contract occurs when one of the parties refuses to fully perform the terms of the contracts. Foe example you promised someone to deliver their medicines on 15th may but on the delivery date you failed to do so. This is a case of actual breach of contract.

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Consequences of breach of contract

Compensation for the damage or loss caused by the breach of contract.

When the contract is breached the party, who has suffered from the breach of that contract gets compensated by the party breaching the contract. For example A made a contract with B to supply 1000 bottles of cold drink to B on his marriage party, which was scheduled on 9th February 2020 but on the date of marriage party A failed to deliver the bottles due to this B felt very embarrassed on front of his guest. Later B filed a suit in the court of law calming the compensation from A and court directed A to compensate B on the account of the failure to provide the goods.

Compensation for failure to discharge obligation resembling those created by contract.

When an obligation similar to those created by the contract has taken place and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. For example, A contracts to buy B’s ship for 60,000 rupees but A breaks his promise. Here A must pay to B as compensation the excess of any of the contract price over the price which B can obtain for the ship at that time of the breach of promise.

Defenses to the breach of contracts

  • Fraud
  • Coercion
  • Undue influence
  • Mistake
  • statute of limitation

Fraud

Fraud means intentionally hiding the truth or misrepresenting the truth or concealing the important facts of the matter to persuade someone to enter into the contract. This type of contract is voidable in nature meaning the party with whom the fraud has been done has the option to revert.

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Coercion

Coercion occurs when one person threatens or uses physical force against other and compel the other party to enter into the contract. For example, A threatens B that if B does not sign a contract to sell his land to A for 50 lakh rupees then A will shoot B. Here B signs the contract and but later on he can take the defense of coercion to make the contract void.

Undue influence

This means that one party has the power over another, and they used their power as their advantage and made the other party to sign the contract.

Mistake

This takes place where both the parties to the contract is mistaken about the terms and condition of the contract. They can take the defense of mistake to make the contract void.

statute of limitation 

Many types of cases have time limits imposed by law, or deadlines by which a case must be brought and filed. A breach of contract case can be thrown out of court if the defendant can show that the statute of limitations has expired. The statute of limitations is set by the laws of individual states, so they can vary. They tend to average from three to six years for a written contract.

Author: Rohit Soni,
NMIMS Kirit P Mehta School of Law, First year student

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