Breach of Contract and Remedies Available

Author Details:-

Rudra Mahendra Lad.
2^nd year- 3 years LL.B.
University of Mumbai

Introduction

Contracts are crucial aspects of any business, dealings, and transactions to secure the party’s interest. Nevertheless, when the party fails to comply with the covenants and stipulations it might lead to a breach of contract therefore, This Article aims to understand the breach of contract and what are the variations in consequences which could include the loss of the party despite which components of remedies are available for the party if there is any percent possibility of breach of contract. The reader will know about the circumvention of the breaches and ways to tackle them as well. There are many instances curated through which the idea of remedies available can be applied in a situation. These remedies delve to allow the party to protect their business and interest in case of violations and non-performance of obligations.

Definition of breach of contract

Breach of contract happens when one party becomes reluctant to fulfill their stipulations as set out in the covenants. If a party failed to perform the duty or performed but inadequately or if violated the terms of the contract. There are two types of branches: material breach and minor breach. Material breach affects the party’s main purpose hence it can lead to termination. Therefore, it instills to consider options of remedies. A minor breach doesn’t affect the contract to termination. An ideal contract provides an exhaustive list of the non-compliance of activities that might fall under the ambit of a breach, also including a cure period, and notice necessities after the breach.

Components of Breach

i. Notice

When parties do not perform their obligations according to terms agreed on that party is considered as a breaching party. Therefore, a reminder about the breach is enough to correct their mistake. A breach is not always reacted to through lawsuits unless it is material and severe. The tone of notice must be professional having a timeline of cure and remedial actions. It must be included that the breach of obligations would not be reiterated again.

ii. Consequences of uncured breach

If a breach is not remedied, the party can terminate the contract, court can force to breaching party to fulfill their covenants or to compensate the other party for damages.

Therefore, the role of predetermined damages is important to allow 10% late delivery or service will be considered as delay charges.

iii. Limitation of Liability

Limitation of the extent of liability means, that when a party has suffered a severe loss that cannot be fulfilled by monetary compensation, in that case, liability of the breaching party will exceed the contract value and the escalated damage should be paid by the party as per the court’s order.

iv. Remedies Available For Breach of Contract in India

Recission

Recission is about the cancellation of the contract due to providing or facilitating void or misrepresented services. The decision by the court’s discretion. This remedy is applicable when the parties have entered into a void, misrepresented, voidable purpose and it facilitates keeping the contract to the pre-contractual term.

For example, X sells a bike to Y with misrepresentation, hence Y can use rescission to cancel the contract and the consideration that has been exchanged will be returned to the party and the Bike as well.

Termination

It means to end the contract by one party with a cause or will.

For example, A Tech company terminates the service contract with the service provider the reason for the continuous failure of unsatisfactory quality of software.

Specific Performance

As per sec 10 of the Specific Relief Act, 1963 a specific performance remedy is an order by the court to accomplish the service to the non-branching party because of inadequate monetary compensation. This remedy is for the unique nature of goods or property except for personal performance with personal skills when the same delivery of performance is impossible.

For Example, B made a promise to C that B would sell the ancient vase to C but B refused to deliver at the time of delivery to C. So, the court may allow the order to B to fulfill the contractual obligation as no monetary compensation can fulfill the uniqueness of the ancient vase.

Injunction

An injunction remedy is a prevention order to make party not to do something which infringes the contract.

For Example, A Software company can seek an injunction to secure their trade secrets not to be disclosed by any employee.

Damages

There are four types of damages such as compensatory damages, punitive damages, nominal damages, and liquidated damages. Explained as follows:

i. Compensatory Damages
Compensatory damages include actual loss suffered because of the breach of contract.

ii. Punitive Damages
It applies when the misconduct happens and it becomes a cause of the breach.

iii. Nominal Damages
These damages are granted by a court when there is no substantial loss or injury in the contract.

iv. Liquidated Damages
Actually, liquidated damages are already mentioned in the contract which is mutually decided for delay of delivery of obligation.

For example, A Factory will pay Rs. 500 each day when substantial completion is not achieved of all the deliveries within the deadline.

Conclusion

In conclusion, the parties have remedies to protect themselves or to consider legal action for the breach of contract. The breach of contract happens in business or commercial dealings but there are recourse remedies. To secure the interest of the non-breaching party, it can leverage all the above-mentioned remedies such as compensatory, punitive, nominal, and liquidated damages. The breach clause is more important and both parties should sit and discuss this clause more carefully the most important is to curate the definition of breach-specific remedies available while drafting the contract to curate the part of both the parties specifically. Always taking the advice of a legal expert will help more than forecasting the risks on our own therefore the best way to communicate with a lawyer is to disclose all the information and obligations that a client seeking to achieve in the contract.