Discharge by Breach of Contract

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This article has been written by Kritika Narwariya, first-year BALLB student of The ICFAI University, Dehradun. In this article, the author has done a wide study Discharge By Breach Of Contract.

INTRODUCTION

According to the Indian contract act[1] every contract has to come to an end. When the contractual obligations are no more in existence, it gets discharged. However, parties are not bound anymore by the contractual obligations.

There are many ways in which the contract gets discharge:

  1. Discharge by performance
  2. Discharge by agreement
  3. Discharge by breach of contract
  4. Discharge by impossibility of performance.

Discharge of contract by the breach is a case in which contractual obligation gets discharge when the party breach the contract. Breach of the contract includes anticipatory breach and actual breach.

Discharge by Breach of Contract

When a party having a duty to perform a contractual obligation fails to do that or does an act whereby the performance of the contract by him becomes impossible, or he refuses to perform the contract, is known as breach of contract.

Due to breach of contract, the innocent party gets discharge from the contractual obligations and contract comes to an end because of that breach.

Breach of contract is of two kinds:

Anticipatory Breach of Contract  (Section 39)

According to section, when a party to a contract has refused to perform or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

In this, promisor refused to perform or disabled to perform the contractual obligation before the date of the performance[2]. However, the innocent or aggrieved or injured party suffers losses due to the breach by the repudiating party.

Options available to Aggrieved Party

1. Immediate right of action

The aggrieved party has an immediate right of action against the repudiating party. An aggrieved party may sue immediately after the repudiation to the repudiating party by considering anticipatory breach as an actual breach. He may rescind the contract immediately that means contract comes to an end and can bring an action for the breach of contract without waiting for the date of performance[3]. Immediate right of action was recognized in Hochester v. De La Tour (1853).

  Certain conditions that are needed to be fulfilled as follows:

Aggrieved party (Promisee) must accept the repudiation

Repudiation by one party alone cannot terminate the contract. It is a two way process which requires acceptance of the repudiation from the other. Hence, repudiation must be accepted by the innocent party and. Acceptance of repudiation must be made clear to the repudiating party besides any ambiguity. It can be through conduct or by words. Termination of the contract occurs not on the date of repudiation but when the aggrieved party gives the acceptance on the repudiation[4]. Silence and inaction are inconsistent with the affirmation of the contract and not amounts to acceptance. When acceptance is not made, then the contract will sustain alive and hence contractual obligations are still binding.

Breach of contract must be in entirety

Refusal to performance must be for the whole contract[5], otherwise, the innocent party must not be able to avoid the contract. If the promisor has performed the partial contractual obligation and released repudiation for the remaining performance, he must be entitled to benefits of the amount of performance done.

Waiting for the performance

Aggrieved party can still treat the contract alive and binding until the date of the performance by not accepting the repudiation of the contract by the repudiating party. As a result, the repudiating party is still under the contractual obligation and has to perform the obligation as per the date of the performance by neglecting the repudiation he had made before.

However, there may be instance in which even after making the contract alive, the repudiating party may faced certain circumstances and instances before the date of performance in which it is difficult to perform the contractual obligation as per the contact. Hence, both the innocent and the repudiating party will be discharged from the contractual obligation, the contract will comes to an end and innocent party can only recover damages in spite of the performance. This was led down in case Avery v. Bowden (1885)

Actual Breach of Contract

When the promisor on the date of performance refused to perform the contractual obligation makes the actual breach of the contract as a result promise suffer losses. The innocent party will be exempt from the obligations and can avail remedy by suit against the breach.

Remedies available to Injured Party

According to section 73 of the act, any party who suffered losses or damage by the breach of the contract can avail damages from the party who breached the contract. Provided that, the damage is not too remote and indirect consequence of the breach.

Following are the damages which can be avail :

1. General Damages

Damages which are obvious are natural as a consequence of the breach of contract.

2. Special Damages

Damage which caused unusual circumstances affecting the plaintiff. If some special circumstances or instances happened then only this kind of damages is provided.

3. Special Performance

This is provided to suffered party mostly in case of an actual breach of contract. This is because a breach of contract is done on the date of performance of the contract. And this creates a huge loss to the innocent partner. General or special damages could not sustain the loss of the sufferer.

4. Quantum Meruit

This is provided generally in anticipatory breach of contract. In which the promisor might perform part duty but may not perform the remaining work. An innocent party could recover damages for the partial performance.

CONCLUSION

Breach of contract leads to the discharge of contract as one of the contracting party refused or disabled himself from the contractual obligation and as a result, other party suffer losses thereafter. This brings the contract in end and contractual obligations are no more in existence. However, an injured party can look for the damages and remedies.

BIBLIOGRAPHY

Research on the topic has been done by following resources:

  1. Avtar singh book, twelfth edition
  2. R.K.Bhnagia book
  3. www.lawteachers.net
  4. www.oxfordlawtrove.com

[1] 5 september 1872

[2] West Bengal Financial Corporation v. Gluco Series A.I.R. 1973

[3] Frost v. knight 1872

[4] White & carter (council) ltd v. McGregor ,1962

[5] Rash behary shaha v. nrittya gopal nundy ,1928-29

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