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Shivani Jain

Shivani Jain | Updated: May 07, 2020 | Category: Legal

What are the Remedies for Breach of Contract in India

In general terms, the word “contract” means a legally binding agreement reached between two parties. Further, a contract must contain terms over which the courts have the authority and responsibility to enforce. Also, as per the provisions of section 2(h) of the Indian Contract Act, 1872, a contract is an agreement which is enforceable by law. In this article, we will be dealing in detail about the remedies for breach of contract. The phrase remedies for breach of contract include recission of contract, injunctions, suing for damages, suing for specific performance, and quantum merit.

Further, a contract is said to be breached or broken when any of the concerned parties either fails or refuses to perform its promised task under the contract. Furthermore, Breach of Contract is a legal cause of action in which either or more parties do not honor an enforceable agreement, and due to the non-performance of promises, the said contract renders impossible.

What is Breach of a Contract?

Whenever a promise or an agreement is broken or non-performed by any of the parties, that’s when a contract is breached. So, when either of the parties fails to keep their end of the said agreement or does not fulfill their responsibilities as per the terms and conditions of the contract, it is known as the breach of contract.

Further, Section 37 of the Indian Contract Act,1872, states that the parties to a contract are under a legal obligation to perform or offer to perform, their particular promises under the said contract, until and unless such performance is being dispensed with or excused under the provisions of the Indian Contract Act or of any other prescribed law. 

As per section 39 of the Indian Contract Act, 1872, where a party to the contract has denied to perform or disabled himself from performing the said promise on a complete basis, the other party concerned may put an end to the contract, until and unless that other party has impliedly or expressly showed its consent for the continuance of the contract.

Moreover, if in case the other party opts to put an end to the contract, then the contract is considered to be broken and results in a breach of contract by the party not performing or refusing to perform his or her promise under the contract. This is known as repudiation. Thus, repudiation will occur when either of the party refuses to perform his or her part or makes it impossible or improbable for him to perform his part of the contract in each of the cases in such a way as to show an intention not to fulfil his part of the contract.

What are the Consequences of a Breach of the Contract?

Section 73 to 75 of Chapter VI of the Indian Contract Act,1872 dealt with the consequences of the breach of the contract. These consequences basically act as the remedies for breach of contract that can be offered to the aggrieved party of the said contract.

Remedies for Breach of Contract

The following listed are the few remedies for breach of contract available to the aggrieved party –

  1. Recession of a Contract – Recission of a contract in one of the available remedies for breach of contract. In this, whenever one of the parties to the contract does not obey his obligations, then the other concerned party has a right to rescind the contract and also to refuse the performance of his obligations and promises. Further, as per section 65 of the Indian Contract Act, 1872, the party that rescinds or cancels the contract must reinstate any benefits he got under the said agreement. Whereas according to section 75, the party that rescinds or cancels the contract is authorized to receive damages or compensation for such a recession.
  2. Sue for Damages – According to section 73 of the Indian Contract Act, 1872, the party who has suffered damages, as the other party has broken promises, then the said party can claim compensation for the loss incurred or the damage caused to them in the normal course of business. Further, it is noteworthy to note that such type of damages is not payable if the loss incurred is abnormal in nature, i.e., not happens in the ordinary course of business. Furthermore, as per the contract law, there are two types of damages as listed below –
    1. Liquidated Damages – Sometimes, the parties to the said contract will agree beforehand regarding the amount payable in case of a breach. This is called as the liquidated damages
    2. Unliquidated Damages – Here, in this case, the amount payable for damages due to the breach of contract is determined by the courts or any other appropriate authorities. Moreover, the concept of unliquidated damages is further bifurcated into six subparts. The following listed are the types of unliquidated damages –
      1. Nominal Damages – These are basically the small amount of money provided to the plaintiff or the aggrieved person when he has not suffered any significant losses or injury caused. Further, these damages are given when there has been a breach of contract, but the aggrieved party fails to prove the actual loss incurred due to the breach of contract.
      2. Substantial Damages – This compensation is provided where although the extent of the breach of the contract is proved, but there are some uncertainties concerning the calculation of the amount.
      3. Aggravated Damages – In this case, the damage determined previously exceeds due to the malafide conduct of the defendant. As a result, the damage caused to the plaintiff or the aggrieved person is aggravated because of the conduct or the manner in which the injury has been caused to the plaintiff.
      4. Exemplary Damages – These are those damages which are provided to set an example in the society that such crimes will not be tolerated at any cost. Hence, the actual idea behind this specific damage is to punish the defendant not to ascertain any benefit out of him.
      5. General Damages – Damages that arise out during the normal course of action are known as general damages.
      6. Special Damage – These are the damage that ascends out of the circumstances or situation which were reasonably anticipated or projected by the parties during the time of entering into the contract. Further, instead of the normal proof of damage, the special proof of such damage is needed in order to claim special damage.
  3. Sue for the Specific Performance – This means the party involved in the breach will really have to carry out all his duties and obligations as per the contract. Further, in certain cases, the courts may also insist that both the parties should carry out the agreement. So, if in case any of the parties fails to perform the said contract, the court may pass any order it may deem fit to do so. Also, this is known as the decree of specific performance and is issued instead of damages. 

For Example – S decided to buy a piece of land from K. K then refuses to sell. So, in this particular case, the courts may order K to perform his or her duties under the said contract and sell the land to S.

  • Injunction – Injunction is one of the most significant remedies for breach of contract. As, injunction is fundamentally like a decree for specific performance but is granted for a negative contract. An injunction is basically a court order limiting a person from doing a particular act. So, a court may grant an injunction in order to stop a party of the said contract from doing any act he promised not to do. Further, in the case of a prohibitory injunction, the court totally stops the happening of an act. Whereas in the case of a mandatory injunction, the court will stop the continuance of an act which is unlawful.
  • Quantum Merit – The term Quantum merit in a literal sense means “as much is earned.” At times, when one of the parties of the contract is restricted by the other party from finishing his performance of the contract, then, in that case, he can claim quantum merit. This means that the aggrieved party must be paid with a reasonable remuneration for doing his part in the contract. This could either be the remuneration of the services that he has provided or the value of the work done by him.

Conclusion

After meticulously analyzing all the sections relevant to the breach of contract, it will be right to state that the Indian Contract Act, 1872, has provided remedies for breach of contract in both the liquidated damages and the unliquidated damage in the Act. Further, the former is pertinent when any amount is specified or prescribed in the contract form its commencement. Whereas the later, when no amount has been prescribed or specified, and the court must award a certain amount after duly analyzing the facts and circumstances of the said case.

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Shivani Jain

Shivani Jain

Shivani has completed her B com LLB (Hons) and has the experience of writing various research papers during her college time. Earlier she was working as an Associate in a Delhi based Law Firm, but her interest in writing made her pursue Legal Content Writing as a career. Her core area of interest is in writing about various legal enactments, tax and finance.


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