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Breach of Contracts Disputes

The Indian Contract Law, 1872 governs all agreements and contracts in India. The Act lays out all of the provisions for contract performance and remedies in the event of a breach or non-performance of the contract.

We know, all those agreements which are enforceable by law are called “Contracts”. 

The essential elements for a valid contract are as follow: 

  1. More than One Party: There must be more than one person to enter into a contract, they must be major and should have a sound mind. They should not be disqualified by the law.
  2.  Agreement: There must be an agreement between the two parties to make it enforceable by law and called a contract. The agreement, as defined in the Indian Contract Act 1872, is “Every promise and every set of promises, forming the consideration for each other, is an agreement.” 
  3. Offer and Acceptance: There should be an offer and acceptance between both parties. One party must make an offer to the other party and the other needs to accept it in the said manner. 
  4. Intention to enter into a Legal Relationship: The intention of creating a legal relationship between both parties should be present. If any of the parties is unable to fulfill the legal obligation, he should be answerable to the law.
  5. Lawful Consideration: Any contract without any consideration can be called a valid contract. Hence, there must be a lawful consideration between the parties. By lawful means, it should not be forbidden by law or have any fraudulent or illegal purpose. 
  6. Capacity to enter into the Contract: To make a contract valid, the parties must not be minor, lunatic, idiot, or drunken persons. 
  7. Free Consent: The parties must give free consent to enter into a contract with each other. Any coercion, fraud, misrepresentation, undue influence, and mistake will not be said as free consent. 
  8. Lawful Object: The purpose of the contract is the most important. Any contract made for illegal or unlawful purposes cant be said to be valid. Hence, it should be lawful.
  9. Certainty of Meaning: The terms of a contract must be clear and shall not be uncertain, vague, or indefinite.
  10. Not expressly declared Void: Certain agreements are expressly said to be void by law. For example, agreement with unlawful consideration and object, Agreement having no consideration, Agreement in restraint of trade, marriage, legal proceedings, Agreement without certain meaning, Wagering agreements.

Breach of Contracts

Breach Of Contracts are disputes which arise when one party does not abide by the contract. In other words, It is the violation of the terms and conditions of the binding contract between two parties. It may occur due to failure in payment, late delivery of goods, etc. 

It can happen in two ways :

  1. Actual Breach of Contract 

Section 37 of the act states the Obligation of parties to contracts. The parties to a contract must either perform, or offer to perform, their respective promises unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.

If one party fails or refuses to honor or complete his part of the duties under the contract, he causes an actual breach of contract. For example, Jeh agrees to deliver 1 trolley of sand to Rish at his home on Sunday, for Rs.25,000. Rish pays Jeh the full amount upfront, but Jeh fails to deliver the trolley of sand on Sunday. It was not delivered till Tuesday, Rish now simply wants his money refunded. Jeh has committed an actual breach of his contract with Rish. 

  1. Anticipatory Breach of Contract 

It is the kind of breach in which it is intended or anticipated by one party about the failure or incompleteness of the contract. If one party informs about his unwillingness or failure to complete the contract on time, and the other party cannot wait for the other time or terms, then the contract is said to be an anticipatory breach. 

Siya, for example, pays a cleaning company Rs. 2500 to clean the house because she is renting a portion of the house and wants to clean it before renting it. Because the tenants were moving on Sunday, the cleaning day was Saturday. On Thursday, the cleaning company called Siya to inform them that the cleaners would be unavailable on Saturday. Siya and the cleaning company had an anticipatory breach of contract as a result of this.

The law protects anticipatory breach of contracts under Section 39 of the act which gives effect to the refusal of the party to perform promise wholly. It means, When a party to a contract has refused to perform or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

Remedies available on Breach of Contract

  1. Section 65 – Obligation of person who has received advantage under the void agreement, or contract that becomes void: When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.
  2. Section 75 – Party rightfully rescinding the contract, entitled to compensation: A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfillment of the contract.
  3. Section 73 – Compensation for loss or damage caused by the breach of contract: The party who has suffered, since the other party has broken promises, can claim compensation for loss or damages caused to them in the normal course of business. Such compensation is not to be given for any remote and indirect loss or damage sustained because of the breach.
  4. Sue for Specific Performance: This means that the courts may insist the party is in breach, to carry out the agreement. Therefore, if any of the parties fails to perform the contract, the court may order them to do so. This is a decree of specific performance and is granted instead of damages.

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