The Indian Contract Act, 1872

Breach Of Contract

“After the contract has been entered into, after a few months, Priya does not get her monthly money from Arjun for delivery of the Fruits to his shop. Now, Priya turns to Mr. Lexi for help.”

Mr Lexi tells her that Arjun has committed a “Breach of contract” and explains the following concepts:

What is breach of contract?
A contract is breached when any of the parties to the contract fails or refuses to perform his/her obligation under the contract.
What are the remedies for breach of contract?
  • Recession of contract
  • Sue for damages
  • Sue for specific performance
  • Injunction
What is recession of contract?
When one of the parties to the contract fails to fulfill his obligations under the contract, then the other party can revoke the contract and refuse to perform his obligations under the contract. Example: X promises Y to sell and deliver 100 bales of cotton on 1st Oct his go down and Y promises to par for goods on 1st Nov. X does not supply the goods. Y may rescind the contract.
What are damages? (Section 73 of the Indian Contract Act, 1872)
Damages basically mean compensation. When one party to the contract fails to perform his obligations under the contract which causes irreparable loss to the other party, such party can claim compensation for the loss incurred by him in the normal course of business.
What are the kinds of damages?
  • Liquidated damages: When the party failing to perform his obligation in the contract agrees to compensate the loss by paying money it is called liquidated damages.
  • Unliquidated damages: When the amount payable to compensate the loss suffered in a contract is assessed by the Court or appropriate authorities it is called as unliquidated damages.
What is specific performance?
When the party to the contract fails to perform his obligation, the other party may approach the court to insist the failing party to perform his obligation under the contract. This is known as specific performance. The court grants a decree for such specific performance.
Example: A decided to buy a parcel of land from B. B then refuses to sell. The courts can order B to perform his duties under the contract and sell the land to A.
What is an injunction?
An injunction is a court order preventing a person from doing a particular act. An injunction order may be passed preventing one of the parties to the contract to perform his obligation under the contract.

In A Nutshell

  • When a contract is breached the party can claim relief as per the remedies provided by the Indian Contract Act,1872
  • There are four kinds of remedies for breach of contract – recession, specific performance, damages and injunction
  • Damages are compensation claimed by parties who have faced the breach of contract. There are two kinds of damages – 1. liquidated damages 2. unliquidated damages.
  • Specific Performance is a remedy in which a parties to the contract goes to court to impose the other party to complete the obligation as mentioned in the contract

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