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Parties to a lawful contract are bound to perform their respective obligations. But when one of the parties of a contract fails to perform his part of contract, he is said to have committed breach of contract.
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Breach of ContractLegal Environment of Business
Prepared By
Manu Melwin Joy
Assistant ProfessorIlahia School of Management Studies
Kerala, India.
Phone – 9744551114Mail – [email protected]
Kindly restrict the use of slides for personal purpose.Please seek permission to reproduce the same in public forms and presentations.
Definition
• Parties to a lawful contractare bound to perform theirrespective obligations. Butwhen one of the parties ofa contract fails to performhis part of contract, he issaid to have committedbreach of contract.
Definition
• Breach of contract confersa right of action upon theparty injured. This right ofaction is the remedyavailable for the injuredagainst the partycommitting breach ofcontract.
Remedies for breach of contract
• Rescission of contract(Cancellation).
• Restitution.
• Suit for specificperformance.
• Suit for Injunction.
• Suit from ‘QuantumMeruit’.
• Suit for damages.
Remedies for breach of contract
• Rescission of contract(Cancellation) - Rescissionof contract meansannulment of it. It is therevocation of thecontract. When all orsome of the terms ofcontract are cancelled,rescission of a contracttakes place.
Example
• A promises to supply
certain goods to B for
price. A does not supply
the goods. B is discharged
from his liability to pay
the price.
Remedies for breach of contract
• Restitution – Restitution meansreturn of the benefit receivedby one party from the otherparty in a void contract. Whenan agreement is, laterdiscovered to be void or whenthe contract becomes void, anyperson who received anyadvantage under suchagreement or contract is boundto restore it or makecompensation for it to theperson from whom he receivedit.
Example
• A pays B Rs. 1,00,000 in
consideration of B’s promising
to marry C, daughter of A. But
C is dead at the time of
promise. The agreement is
void at the time when the
death is known. So B must
repay the amount of Rs.
1,00,000.
Remedies for breach of contract
• Suit for specific performance –Specific performance meansactual performance of theparticular contract as peragreement. Specificperformance will be granted inthose cases wherecompensation will not be anadequate remedy or actualdamage cannot accurately beassessed and it will usually begranted in contracts connectedwith purchase of land or house.
Example
A agrees to sell his land to B. If
A subsequently refuses to sell
the land, B can file a suit for
special performance and the
court can compel A to sell and
to execute the sale deed in
favor of B in respect of the
land agreed to be sold.
Remedies for breach of contract
• Suit for Injunction – Anotherremedy for breach ofcontract is an injunctionwhich is an order of thecourt restraining orpreventing a person fromdoing a particular act. It isanother mode of securingthe specific performance bythe negative terms of acontract.
Example
A contracts with B to sing for
12 months at B’s theatre and in
no other place. Later A entered
into a contract with C to sing in
C’s theatre and refuse to sing
in B’s theatre. Now B can file a
suit and obtain an order of
injunction restraining A from
singing in C’s theatre.
Remedies for breach of contract
• Suit from ‘Quantum Meruit’ –The phrase ‘Quantum Meruit’literally means ‘ as much asearned’. When a person hasdone some work under acontract and the other partyrepudiates the contract orsome even happens whichmakes further performance ofthe contract impossible, thenthe party who has performedthe work can claimremuneration for the work hehas already done.
Example
Under a contract, A agrees to do
a certain piece of work for a lump
sum of Rs 1000 which is payable
on its completion. When A has
done 50 % of work, B repudiates
the contract. In such a case, A
can claim “ Quantum Meruit” ie
Rs 500 being the reasonable
remuneration of 50 % of the
work done.
Remedies for breach of contract
• Suit for damages – Damagemeans monitorycompensation payable bythe defaulting party to theinjured party in the event ofbreach of contract. Theobject of awarding damagesis to put the aggrieved partyin the same financialposition, had the contractbeen performed.
Different types of damages
• General damages
• Special damages
• Vindictive damages
• Nominal damages
• Liquidated damages
• Penalty
Different types of damages
• General damages –Damages that arisenaturally in the usualcourse of things from thebreach itself are calledgeneral damages. Thesedamages are awardedonly for consequenceswhich arise out of breachof contract.
Different types of damages
• Special damages – Special
damages are those which
arise from the breach of
contract under special
circumstances.
Different types of damages
• Vindictive damages –These damages areawarded with a view topunish the defaultingparty who injured thefeelings of the others andnot solely with the idea ofawarding compensationto the injured party.
Different types of damages
• Nominal damages –Nominal damages areawarded in cases wherethe injured party is ableto prove a breach ofcontract but he has notsuffered any real andsubstantial loss.
Different types of damages
• Liquidated damages –This represent a sum fixedor ascertained by theparties of the contract. Itis a fair and genuine pre –estimate of the probableloss that might ensure asa result of the breach.
Different types of damages
• Penalty – It is a sum fixedin the contract at the timeof its formation which isdisproportionate to thedamages likely to accrueas a result of the breach.It is used for forcing theother party to performthe contract.
• Breach of contract.
