We often enter into various agreements, contracts and memorandum of understanding before pursuing any business or service arrangement. An agreement defines and confines the role of the either party to avoid any future legal course of action due to breach of the agreement. The party to such an agreement incorporates the entire extent of the work to be performed by each party along with the rights and liabilities arising out of the subject matter of arrangement. Most of the Agreements also inculcate the mode of dispute resolution arose between the parties via mediation, arbitration or any other mode as agreed upon between the parties.Yet there are instances where one or the party violates or breaches the agreement.
Breach of contract is a legal cause of action and a type of civil wrong, in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party’s performance. Breach occurs when a party to a contract fails to fulfill its obligation(s) as described in the contract, or communicates an intent to fail the obligation or otherwise appears not to be able to perform its obligation under the contract.
In India, all the contracts and agreements are governed by the Indian Contract Act, 1872. So, when a contract or a clause of it is breached, a party can send a legal notice for it under the Civil Procedure Code.
Agreements/Contracts can be breached by way of-
- When parties fails to perform their obligations under the contract either in full or in part,
- When parties to the contract behaves in a manner which shows an intention not to perform their obligations under contract in the future or
- the contract becomes impossible to perform as a result of the defaulting party’s own act.
Types of Breach of Contract
- Minor Breach
- Material Breach
- Anticipatory Breach and
- Actual Breach
Minor Breach- It also referred to as partial breach, it is a breach of contract that is less severe than a material breach and it gives the harmed party the right to sue for damages but does not usually excuse him from further performance. For example- A and B entered into an agreement with C to manufacture a car as per the design and interior suggested by A and B. One of the terms of the agreements says that C will use bullet proof glass in making the car. C exactly made the car as per the specifications and design suggested by A and B, but did not use the bullet proof glass while making the Car. C has basically performed the contract with a minor accidental breach of contract and therefore C is only liable towards the cost of damages which would be the cost of replacement of bullet proof glasses with the normal one.
Material Breach-Any substantial breach in the terms of the contract can be said as a material breach. The consequences of such breach are quite major and significant and the term of the contract which has been breached is a condition to that contract. Essentially, a material breach does two things. First, it gives rise to an immediate cause of action against the breaching party and, second, it excuses the innocent party from performing.For example- A gives contract to B for supply of a particular type of cloth with a condition that the cloth must be supplied to A by 01/06/2019, as on 04/06/2019 there is a fashion show in which the model will wear the dress made up from that material and it will take 3 days to stitch that dress by A. B supplied the same quality of cloth to A but on 02/06/2019 instead of 01/06/2019 as promised. In this case A can sue b for the breach and furthermore A can deny making the payment for the delayed delivery of the cloth.
Anticipatory Breach- when one party stops fulfilling his or her part of the deal, which makes the other party believe the agreed upon details will remain incomplete. An anticipatory breach gives the innocent party the option to immediately terminate the contract and sue for damages, or wait for the time of performance: if the party required to perform does not perform when required by the contract, the innocent party can terminate the contract. For example- A agrees to B to supply certain goods on 01/04/2019, on 15/03/2019, A denies to supply the said goods to B on 01/04/2019. B may immediately consider the breach to have occurred and file a suit for damages for the scheduled performance, even though A has until May 1 to perform. However, a unique feature of anticipatory breach is that if an aggrieved party chooses not to accept a repudiation occurring before the time set for performance, not only will the contract continue on foot, but also there will be no right to damages unless and until an actual breach occurs.
Actual Breach- When either party fails to meet the obligations stated in the contract when the performance is due is called as Actual breach of contract.This kind of breach occurs when the guilty party breaches the contract’s essential conditions. For example- A agrees to B to supply goods against the agreed sum of Rs. 10,000. A supplied the goods as and when demand raised by B, but B refused to pay the amount as agreed in between.
Remedies for a Breach of Contract
- Claim for Damages- The payment of monetary or other types of damages is the most common remedy for a contract breach. These can come in the form of compensatory, punitive, nominal, or liquidated damages.
- Specific performance- If damages do not fully compensate for the loss or injury that has occurred, the innocent party can request the court to award specific performance, which requires the breaching party to perform his or her contractual duties
Contents of Legal Notice for Breach of Contract/Agreement
- Mention the name of all the parties to the contract
- Refer the agreement indicating the effective date on which the agreement was entered
- Explain in detail how the counter party breached the agreement indicating and quoting the specific clause and condition which are breached
- Mention the consequences and remedies available as per the terms of contract
- The language of the Notice must clearly communicate the desired cause of action along with the time by which the other party takes remedial action.
Format of Legal Notice for Breach of Contract–
LEGAL NOTICE
Date- __/__/____
To,
_________
__________
Subject- Breach of Contract
Dear Sir,
Under instruction and on behalf of my client Ms. A, Resident House No. 3/96, Gomti Nagar, I do hereby serve you with the following notice:-
- That
my Client Ms. A entered into an agreement with you dated ____ (hereinafter the
Agreement)
- That in terms of the said agreement you are required to _______________, as per clause ___ of the contract.
- That
it has come in Notice to my client that you
have breached the contract in the following manner-
- _______________________
- ___________________________
- That the specific clause which are violated or breached significantly are “________________________________________”
- That you are further requested to refer the attached documents proving the breach of the contract on your part.
- That
on behalf of my Client I demand that you rectify the breach immediately and take
the following steps on your part to make good the breach done by you-
- _______________________________
- _______________________________
Within 15 days of time period you are required to take above specific actions.
- That on failing to take the above stated steps, I will take appropriate legal action against you seeking all remedial and punitive remedies that are available under the applicable laws.
Name and Signature
Advocate
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