BREACH OF CONTRACT

Breach of contract occurs when a party thereto renounces his liability under it, or by his own
act makes it impossible that he should perform his obligations under it or fails to perform
such obligation.
Actual and anticipatory breach of contract
The breach of contract may be (i) actual or (ii) anticipatory. Actual breach of contract takes
place in course of or at the time of performance. For example, A is to supply certain goods to
B on March 1, and on that day he does not supply the goods to B. Anticipatory breach of
contract takes place before the due date of performance has come. Example, A is to supply
certain goods to B on March 1. On February 15, A informs B that he will not perform the
contract on March 1.
Anticipatory breach of contract
The breach of contract may take place not only in the course or at the time of performance
but also while the contract is still wholly executor, i.e before either party is entitled to
demand a performance by the other of his promise. In this last case the breach is usually
termed as ‘anticipatory breach’. Thus in case of anticipatory breach of contract promise
expressly or implicitly refuses to perform his part of the obligation before the due time of
performance has arrived.
Section 39 of the Indian Contract gives expression to the doctrine of anticipatory breach. The
sections is as follows: “When a party to a contract has refused to perform or disabled himself
from performing, his promise in its entirety, the promise may put an end to the contract,
unless he has signified, by words or conduct, his acquiescence in its continuance”.
Example: A, a Singer, enters into a contract with B, the manager of theatre, to sing at his
theatre two nights in every week during the next two months, and B engages to pay her 100
rupees for each night’s performance. On the sixth night A willfully absents herself from the
theatre. B is at liberty to put an end to the contract.
Example: A, a singer, enters, into a contract with B, the manager of a theatre, to sing at his
theatre two nights on every week during the next two months, and B engages to pay her at the
rate of hundred rupees for each night. On the sixth night, A wilfully absents herself. With
the assent of B, A sings on the seventh night. B has signified his acquiescence in the
continuance of the contract, and cannot now put an end to it, but is entitled to compensation
for damages sustained by him through A’s failure to sing on the sixth night.
Thus, if a party refuses altogether to perform the contract and the refusal relates to the whole
of the contract, the other party would be justified in putting an end to the contract.
Effect of anticipatory breach of contract:
In case of anticipatory breach of contract by one party, the other party has the following two
alternatives:
1) He may rescind the contract immediately. In case the contract comes to an end and he
is discharged from his obligation to perform the contract. At the same time he also
gets a right to bring an action for the breach of contract, if he so desires, even though
the due date of performance has not arrived.
2) He can wait unit the date of performance arrives. If he opts to wait he keeps the
contract alive for the benefit of the other party also. The promisor may perform the
contract although he had earlier repudiated it. If the promisor still fails to perform the
contract on the due date, the promise can bring an action for breach of the contract.
The promisor can also take advantage of any supervening circumstances which would
supervening circumstances which would justify him in declining to complete it.
Measure of damages in an anticipatory breach of contract: In case of anticipatory breach
of contract the aggrieved party acquires an immediate cause of action. He can either wait till
the day for performance arrives or treat the contract as discharged and take immediate
proceedings. If the contract is treated as discharged immediately; the damages will be
measured by the difference of price prevailing on the date of the anticipatory breach and the
contract price. If the aggrieved party opts to wait till the date fixed for performance, the
damages will be measured by the difference between the contract price and the price
prevailing on the date fixed for performance of the contract.
REMEDIES FOR BREACH OF CONTRACT
The following remedies are available to the aggrieved party in case of breach of contract.
1. Suit for damages
2. Suit upon quantum meruit
3. Rescission of the contract
 4. Suit for specific performance
5. Suit for injunction.
Damages:
Damages means the monetary compensation payable by the defaulting party to the aggrieved
party in the event of breach of contract. Where a party suffers by breach of contract he has
under section 73 a right to claim damages thereof.
Rules regarding damages :
The following principles for assessment of damages emerge:
1. The aggrieved party is entitled to receive compensation for any loss or damage caused
to him which naturally arose in the usual course of business from such breach or
which the parties knew when they made the contract to be likely to result from the
breach of it. Such compensation is not to be given for any remote and indirect loss or
damage sustained by reason of the breach.
2. The aggrieved party is to be placed, as far as money can do it, in as good a position as
if the contract had been performed.
3. The aggrieved party must take reasonable steps to mitigate the loss consequent on the
breach. He cannot claim any part of the damage which is due to his neglect to take
such steps.
4. The loss to be ascertained is the loss at the date of the breach of contract.
5. Damages are compensatory and not penal. Damages are given by way of
compensation for the loss by plaintiff (aggrieved party) and not for the purposes of
punishing the defendants for the breach.
6. In case of a contract of sale, where the goods are available in the market it is the
difference between the market price on the date of breach and the contract price which
is the measure of damages.
7. In case of service contracts, where the contract of employment was a fixed period, the
normal measure of damages for wrongful dismissal, subject to the rule of mitigation
would be the salary for the whole of the unexpired period of service if the contract of
employment is not for a fixed term, damages are awarded for a reasonable period.
8. When a contract has been broken, if a sum is named in the contract as the amount to
be paid in case of such breach, of it the contract contains any other stipulation by way
of penalty, the party complaining of the breach is entitled, whether or not actual
damage or loss is proved to have been caused thereby, to receive from the party who
has broken the contract reasonable compensation not exceeding the amount so named
or, as the case may be the penalty stipulated for.
9. Compensation can be awarded where contract becomes incapable of specific
performance without any default of the plaintiffs.
Types of damages
The following are the various types of damages:
1. General or Ordinary damages
2. Special damages
3. Nominal damages
General or ordinary damages
The aggrieved party is entitled to receive compensation for any loss or damage caused to him
which naturally arose in the usual course of business from such breach. Thus ordinary or
general damages are those which arise naturally in the usual course of business from such
breach.
Special damages
Special damages are those damages which the parties knew, when they made the contract to
be likely to result from the breach of it. Special damages are such that if they are not
communicated it would not be fair and reasonable to hold the defendant responsible for
losses which could not be taken to contemplate as likely to result from his breach of contract.
Nominal damages
Nominal damages may be awarded when the plaintiff does not suffer any pecuniary loss.
Amount of such damages is only nominal. For example, he may be rupee one. If no damage
is actually suffered by the aggrieved party, he is not entitled to claim any compensation.
Suit upon Quantum Meruit
In literal sense, the expression “Quantum Meruit” means, “as much as earned “. In legal
sense, it means payment in proportion to the work done. This principle provides for the
payment of compensation under certain circumstances, to a person who has offered the goods
or services to the other party under a contract, which under certain circumstance, could not
be fully performed.
Cases for Claim on Quantum Meruit
1. Where the work, which has been done and accepted under a contract, is subsequently
discovered to be void – Here the party who has effected part of the contract can rightfully the
amount for the work he has done. And the party, who accepts and reaps the benefit under
such contract, must make compensation to the other party.
2. Where one party abandons or refuses to perform the whole contract. Here the
compensation for the work done may be recovered on the basis of quantum meruit.
3. Where something is done without any intention to do gratuitously. In such cases, the other
person is bound to make the payment if he accepts such services or goods, or enjoys their
benefit.
4. Where the contract is divisible and the party has enjoyed the benefits of the work done – In
such cases, the party in default may sue on quantum meruit if the other party has enjoyed the
benefits of the part performance.
Rescission of the Contract
When one of the parties commits breach of contract, other party shall further treat the
contract as void or rescinded. When the contract is rescinded, the affected party is
automatically discharged from all the commitments under the contract.
Sec. 64 of the Act provides that the party who rescinds the voidable contract, shall if he has
received any benefit there under from the other party, restore such benefit to the person from
whom it was received. Further, the person who rightfully rescinds the contract is entitled to
compensation for any damage he faced from non-fulfillment of contract.
Suit for specific Performance
Specific performance is equitable relief, given by the court to enforce against a defendant, the
duty of doing what he agreed by contract to do. Thus, the remedy of specific performance is
in contrast with the remedy by way of damages for breach of contract, which gives pecuniary
compensation for failure to carry out the terms of the contract. The plaintiff seeking this
remedy must first satisfy the court that the normal remedy of damages is inadequate, the
presumption being that in cases of contracts for transfer of immovable property , damages
will not be adequate. Even in these cases specific performance is not always granted, as it is a
discretionary remedy.
The rule is based on the uncertainty of calculation of damages in cases where they cannot be
based on anything, but conjecture or surmise. Thus, where A agree to buy, and B agrees to
sell, a picture by a dead painter and two rare China vases, A may compel B specifically to
perform this contract, for, there is no standard for ascertaining the actual damage which
would be caused by its non-performance.

Suit for Injunction

The term ”Injunction” may be defined as an order of the Court instructing a person to refrain
from doing some act that has been the subject-matter of contract. Where a party has promised
not to do something and he does it, and thereby commits a breach of contract, the aggrieved
party may, seek the protection of the Court under certain circumstances and obtain an
injunction.
Example: A contracted to sing only at B’s theatre and nowhere else for a certain period.
Afterwards A made a contract with C to sing at C’s theatre and refused to sing at B’s theatre.
The Court refused to order specific performance because the contract was of a personal
nature but granted an injunction against A to restrain him from singing anywhere else.