Most Effective Ways To Overcome Breach Of Contract's Problem

Remedies for Breach of Contract

When one of the parties to the contract makes a breach of contract, then the other party has the following remedies available for Breach of Contract-

a) Damages

b) Quantum Meruit

c) Specific Performance

d) Injunction

e) Rescind the contract and refuse further performance of the same.

Read Also: Contract of Indemnity

• Damages

The remedy by way of getting damages is perhaps the most common remedy available to the injured party. This entitles the injured party to recover compensation for the loss caused or suffered by him due to the breach of contract, from the party who caused the same.

Section 73 of the Indian Contract Act, 1872 makes provisions in this regard. It talks about the right of an injured party to recover compensation for the loss suffered by him due to the breach of contract. The Section has 18 illustrations to elaborate the section further.

In action for breach for a contract, there are usually two kinds of problems –

• Firstly, the loss suffered by the plaintiff needs to be determined, whether it is a proximate consequence of the breach of contract by the defendant or not. The defendant shall only be liable for the proximate consequences of the breach of contract. He will not be liable for damages which are remotely connected with the breach of contract. This is known as “Remoteness of Damages.”
• Secondly, if it is deciphered that particular damage is in proximate result to the breach of contract, then how much compensation is to be paid by the defendant to the plaintiff, for the same?

This question was answered in the case of Hadley v. Baxendale where it was held that damages which as may fairly and reasonably be considered arsing to the usual course of things from such breach could be recovered. Secondly, damages which as may reasonably be supposed to have been in the contemplation of both the parties at the time they made the contract.

• Quantum Meruit

The expression “quantum meruit” means “as much as earned.” In other words, it means reasonable remuneration. The general rule is that when a party to a contract has not fully performed what the contract stipulates, he cannot sue for the same. But when there is one party who hasn’t performed part of his contract and is prevented by the other party from further completion, he may bring an action on a quantum meruit, for the amount of work he has done. This claim arises when one party has abandoned the contractor accepts the work done by another under a void contract.

• Specific Performance

This refers to the actual carrying out of the task by the parties as stipulated in the contract. Where a party fails to perform the contractual obligations, the Court may at its discretion order the defendant to perform his undertaking according to the terms stated in the contract. A decree for specific performance of a contract may be granted along with damages or in place of damages.

Specific performance is not granted when –

a) where monetary compensation is an adequate remedy;

b) where the court cannot supervise the execution of the contract;

c) where the contract is for some personal service;

d) where one of the parties to the contract is a minor.

The law which governs the specific performance of a contract is the Specific Relief Act, 1963.

• Injunction

An injunction refers to an order of a court restraining a person from doing an act. It is a way to secure the specific performance of a negative term of the contract, where the court may give an issue an order to the defendant restraining him from doing something that he promised not to do.  Injunctions can be prohibitory or mandatory; and temporary or perpetual.

• Rescission of Contract

When a party to a contract has committed a breach of contract, the injured party may put a contract to an end, i.e. rescind it, and he will be absolved from all the obligations under the contract. Section 65 says that when a party treats the contract to an end, then he makes himself liable to restore any benefits which he has received under the contract to the party from whom such benefits were received originally. Section 75 says that if a party to a contract rightfully rescinds the contract, then he is entitled to receive compensation for damage which he has sustained through non-fulfillment of the contract by the other party.

Read Also: Frustration of Contract

CONCLUSION

No one should get benefit from others unjustly. A remedy must be provided to the injured as quickly as possible. This is just not in morality but also in contractual obligations. The Indian Contract Act, 1872 is the primary legislation governing contractual relations in India clearly mentions five distinct grounds for awarding remedies to the injured party. This helps the parties to freely enter into contracts without any risk of getting cheated or bluffed from the other side. The essence of law is justice and remedy to the affected party is a way to provide justice. Therefore, damages, specific performance, injunction, rescission, and quantum meruit are the five remedies which the court grants in contractual relations.

Learn The Truth About Overview To Indian Contract Act 1872 In The Next 60 Seconds

The Law of Contract is a very important part of the mercantile or commercial law in India. It mostly affects people from trade and commerce and industry.

Introduction To Indian Contract Act, 1872

The Indian Contract Act, 1872 is the law which governs contracts in India. It entered into force in the year 1872. It is enforceable in all the states except the State of Jammu and Kashmir. It determines the situations in which the promises made by the parties to a contract shall be legally binding on them.

Provisions

• General Principles of Law and Contract  —– Section 1 – 75
• Contracts relating to the Sale of Goods ——– Section 76 to 129
• Special Contracts ——- Section 125 to 238
• Contracts relating to Partnership —— Section 239 to 266

Previously, the Indian Contract Act, 1872 contained provisions relating to Sale of Goods (Movable Property) and Partnership. But now these two provisions have been removed from the Act and are placed in two separate acts known as the Sale of Goods Act, 1930 and the Indian Partnership Act, 1932. So at present, the Indian Contract Act includes the General Principles of Contract and Special Contracts only.

The Rights are available under the Indian Contract Act –

There are two kinds of rights, one is Right in rem, and the other is Right in personam.

The Indian Contract Act, 1872 provides right in personam to the parties who have bound their promises in a contract. Thus, the parties in such a situation can only enforce their contractual rights against each other only and not against the world at large.

Example – X and Y enter into a contract for delivering ten books on a specified date. If Y fails to deliver the same to X, then X can sue only Y and not anybody else. The rest of the world is concerned with this contract.

Read Also: Validity of Stamp Papers

Definition of a Contract –

Section 2(h) of the Indian Contract Act defines the term contract as “an agreement enforceable by law is a contract.” So, a contract is an agreement plus legal enforceability.

Important Terminologies –

• Agreement – Section 2(e) defines agreement. An agreement results when two minds meet upon a common purpose. They agree to the same thing in the same sense. Section 2(e) defines the term agreement as “every promise and every set of promise, forming the consideration for each other.” An agreement only happens when there is an offer by one party and acceptance by the other party. Therefore, offer + acceptance = agreement.
• Offer – Section 2(a) defines the term offer or proposal as, “When one party signifies to another his willingness to do or to abstain from doing anything, to obtain the assent of that other to such act or abstinence, he is said to propose.” Offer is the first step for agreeing. An offer can be made to a person or the public at large, known as general offers.
• Acceptance – When the person to whom the offer is made signifies his assent for the same, then the offer is said to be accepted. Section 2(b) defines the same.
• Promise –  Offer + Acceptance = Promise. So, when the offer is accepted, it becomes a promise. Section 2(b) defines the same.
• Consideration – Consideration refers to getting “something in return.” In India, consideration can be past, present or future. A contract without consideration is void. The consideration must be lawful and real, and it need not be adequate.
• Free Consent – A contract can only be made when there is free consent between the parties. A contract without free consent is voidable, and a contract without consent is void. A contract has to be free of coercion, undue influence, fraud, misrepresentation or mistake.
• Contract of Indemnity – A contract of indemnity is a contract wherein, one party promises to protect the other party from causing loss to him by the conduct of the promisor himself, or by the conduct of any other person.
• Bailment –  Bailment refers to transactions whereby one person delivers goods to the other for some purpose based upon a contract that they are when the purpose is accomplished to be returned or otherwise disposed of according to the directions of the person delivering them.

Read Also: Non-Compete Clause in Employment Agreement

Classification of Contracts –

Contracts can be classified into three broad branches –

1. Based on Enforceability –

•  Contract
• Voidable agreement
• Void Agreement
• Agreement
• Illegal agreement
• Voidable contract

2. Based on formation –

• Express contract
• Tacit contract
• Implied/Quasi contract

3. Based on performance –

• Executed contract
• Executory contract  —- a) Unilateral contract             b) Bilateral contract

Remedies for Breach of Contract –

In case of a breach of contract, the injured party has the option to –

• Rescind the contract and refuse further performance of the same
• Sue for damages
• Sue for specific performance
• Sue for an injunction
• Sue on quantum meruit

CONCLUSION –

Every man in his day to day life makes contracts. Man’s contract making ability increases with increasing trade, commerce and industry in modern society. The conferment and protection of the law enable people to strike the best bargain for the contract making purpose. People are permitted to regulate and define their relations in the best possible manner they choose. In India, these general principles are statutorily presented in the Indian Contract Act, 1872. This helps contracts to function legitimately and also provide remedies to the ones affected by it. Therefore, the Indian Contract Act, 1872, is undoubtedly one of the most important statutes in India.