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Breach of Contract

Updated: May 12


Breach of Contract (Contract Act)
Breach of Contract (Contract Act)

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Understanding Breach of Contract


A contract is a legally binding agreement between parties, wherein each party agrees to perform certain obligations. However, there are instances where one party fails to fulfil its obligations, leading to a breach of contract. Breach of contract can occur in different ways, such as anticipatory breach and actual breach.

 
 

Anticipatory Breach of Contract


Anticipatory breach occurs when a party repudiates the contract before the specified time for performance or renders themselves unable to fulfil the contract. This can be illustrated through examples:



  1. Marriage Promise: Suppose M promises to marry G on a specific date but marries someone else before that date. This action constitutes an anticipatory breach, allowing G to sue M for breach of contract. In Frost vs Knight, M promised to marry G soon after the death of his father. However, even during his father's lifetime, M categorically declined to marry G. Despite the agreed time for performance not arriving, M was held liable for breach of promise.

  2. Conditional Promise: If M promises to marry G after the death of his father but refuses to marry her even before his father's demise, it constitutes an anticipatory breach, enabling G to take legal action.

  3. Supply Agreement: In a scenario where a wholesale dealer (W) agrees to supply materials to a local merchant (M) by a certain date but notifies M in advance that they cannot fulfil the agreement, M can file a lawsuit for breach of contract. 



In Avery vs Bowen (1856), A agreed to load cargo of wheat on B’s ship at Odessa by a particular date. However, when the ship arrived, A refused to load the cargo.


Before the expiry of the last loading date, the Crimean War broke out, rendering the contract illegal. B couldn't sue A for damages as the contract was discharged.



Consequences of Anticipatory Breach


When faced with anticipatory breach, the promisee has two options:



  1. Rescind the Contract: The promisee can choose to terminate the contract immediately and sue the promisor for damages.

  2. Wait for Performance: Alternatively, the promisee can opt to keep the contract in force, wait for the agreed performance time, and then hold the promisor accountable for non-performance. However, this choice carries a risk.



Acceptance of repudiation by the aggrieved party determines whether the contract is discharged. If the repudiation is not accepted, and an event occurs that legally discharges the contract before the performance time, the aggrieved party loses the right to claim damages.



Actual Breach of Contract


Actual breach of contract can occur either at the time of performance or during the performance of the contract.



  1. Breach at Agreed Time: If a party fails to perform their obligation at the specified time, it constitutes an actual breach. For instance, if a seller refuses to execute a sale deed unless the buyer pays a higher amount, it amounts to breach of contract.



In Jaggo Bai vs Hari Har Prasad Singh (1947), the seller S offered to execute a sale deed only if the buyer paid a higher amount than originally agreed upon. S's refusal to execute the sale deed constituted an actual breach.



  1. Time as Essence of Contract: Whether time is considered essential depends on the intention of the parties. If time is deemed essential and the promisor fails to act within the stipulated time, the contract becomes voidable at the option of the promisee.

 
 

Notice Requirement for Claiming Compensation


In cases where time is essential, if the promisee accepts the promisor's offer to perform at a later date without giving notice of intent to claim compensation, they waive their right to compensation. However, if notice is given, the promisee retains the right to claim compensation.



Breach During Contract Performance


Actual breach can also occur during contract performance, where one party fails or refuses to fulfil their obligation. For example, if a supplier is contracted to provide goods in instalments but is asked by the buyer to cease further supply, it constitutes breach of contract.

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