What is Contract?

A contract is a legally binding agreement that recognizes and governs the

rights and duties of the parties to the agreement. A contract is legally enforceable
because it meets the requirements and approval of the law. An agreement
typically involves the exchange of goods, services, money, or promises of any of
those.

An example of contract is a loan agreement between buyers and sellers of a car.

What Is a Breach of Contract?

A breach of contract is a violation of any of the agreed-upon terms and
conditions of a binding contract. The breach could be anything from a late
payment to a more serious violation such as the failure to deliver a promised
asset. A contract is binding and will hold weight if taken to court. To successfully
claim a breach of contract, it is imperative to be able to prove that the breach
occurred.

A contract can be breached in whole or in part.Most contracts end when both

parties have fulfilled their contractual obligations, but it's not uncommon for one
party to fail to completely fulfill their end of the contract agreement. Breach of
contract is the most common reason contract disputes are brought to court for
resolution.

Example :

“My business sells office furniture to businesses. Recently a company

purchased a lot of furniture for their office. We took a deposit and had it all
delivered and set up for them. They still haven’t paid the account and seem to
have a million excuses as to why they can’t do it."

1
Types of Breach of Contract
Breach of contract can be Material, Minor, Anticipatory and Actual .

Material Breach of Contract :

A material breach occurs when one party receives significantly less benefit or a
significantly different result than what was specified in a contract. Material
breaches can include a failure to perform the obligations laid out within a
contract or a failure to perform contracted obligations on time. When a material
breach occurs, the other party may pursue damages related to the breach and
both its direct and indirect consequences.

Minor Breach of Contract :

Also sometimes called a Partial Breach of Contract or an Immaterial Breach of

Contract, a Minor Breach of Contract refers to situations where the deliverable of
the contract was ultimately received by the other party, but the party in breach
failed to fulfill some part of their obligation. In such cases, the party that suffered
the breach may only be able to pursue a legal remedy if they can prove that the
breach resulted in financial losses. A late delivery, for example, may not have a
remedy if the breached party cannot show that the delay resulted in financial
consequences.

Anticipatory Breach of Contract :

A breach need not actually occur for the responsible party to be liable. In the
case of an Anticipatory Breach, an actual breach has not yet occurred, but one of
the parties has indicated that they will not fulfill their obligations under the
contract. This can occur if the breaching party explicitly notifies the other party
that they will not fulfill their obligations, but such a claim could also be based on
actions that indicate one of the parties does not intend to or will not be able to
deliver.

2
Actual Breach of Contract :

An Actual Breach of Contract refers to a breach that has already occurred,

meaning the breaching party has either refused to fulfill their obligations by the
due date or they have performed their duties incompletely or improperly.

When a breach does occur, there are several types of remedies the other party
may pursue. These include compensatory damages to address direct economic
losses stemming from the breach, and consequential losses, which are indirect
losses that go beyond the value of the contract itself but are the result of the
breach.

3
General Requirements
A breach of contract suit must meet four requirements before it will be upheld by
a court.

 The contract must be valid. It must contain all essential contract elements
by law. A contract isn't valid unless all these essential elements are present,
so without them, there can be no lawsuit.
 The plaintiff or the party who's suing for breach of contract must show that
the defendant did indeed breach the agreement's terms.
 The plaintiff must have done everything required of them in the contract.
 The plaintiff must have notified the defendant of the breach before
proceeding with filing a lawsuit. A notification made in writing is better
than a verbal notification because it offers more substantial proof.

4
Remedies for Breach of Contract
When a promise or agreement is broken by any of the parties we call it a breach
of contract. So when either of the parties does not keep their end of the
agreement or does not fulfil their obligation as per the terms of the contract, it is
a breach of contract. There are a few remedies for breach of contract available to
the wronged party. Let us take a look.

1] Recession of Contract

When one of the parties to a contract does not fulfil his obligations, then the
other party can rescind the contract and refuse the performance of his
obligations.

As per section 65 of the Indian Contract Act, the party that rescinds the contract
must restore any benefits he got under the said agreement. And section 75 states
that the party that rescinds the contract is entitled to receive damages and/or
compensation for such a recession.

2] Sue for Damages

Section 73 clearly states that the party who has suffered, since the other party
has broken promises, can claim compensation for loss or damages caused to them
in the normal course of business.

Such damages will not be payable if the loss is abnormal in nature, i.e. not in the
ordinary course of business. There are two types of damages according to the Act,

Liquidated Damages: Sometimes the parties to a contract will agree to the

amount payable in case of a breach. This is known as liquidated damages.

Unliquidated Damages: Here the amount payable due to the breach of contract is
assessed by the courts or any appropriate authorities.

5
3] Sue for Specific Performance

This means the party in breach will actually have to carry out his duties according
to the contract. In certain cases, the courts may insist that the party carry out the
agreement.

So if any of the parties fails to perform the contract, the court may order them to
do so. This is a decree of specific performance and is granted instead of damages.

4] Injunction

An injunction is basically like a decree for specific performance but for a

negative contract. An injunction is a court order restraining a person from doing a
particular act.