Breach of Contract- Actual and Anticipatory
A breach of contract occurs when one party violates the conditions of a contract between two or more parties. Continue Reading to learn more!
Izhar Ahmad15 Nov, 2023
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Breach of Contract: A breach may cover anything from a delayed payment to a big violation, like the inability to provide a promised asset.
A contract holds legal importance and takes weight in a court of law. If proof proves a breach of contract, the normal solution includes meeting the original claims made to the offended party. It's important to note that a breach of contract is not classified as a criminal crime or a tort, and severe damages are seldom given for the non-fulfilment of agreed-upon duties.Breach of Contract Meaning
A contract constitutes a promise or a number of joint agreements that are legally valid. According to Section 37 of the Indian Contract Act of 1872, it is obligatory for parties to meet the claims made in a contract or, at the very least, agree to do so. Consequently, when any party refuses or falls short of meeting their promise, it is considered a breach of contract. Typically, the contract states a period for the completion of claims. In situations where no specific date is stated, the promise is supposed to be completed within an acceptable period. However, if, upon the end of the defined time, the agreed-upon action or refraining remains unmet, the contract is deemed broken.Types of Breach of Contract
A breach of contract can be classified as either minor or material. Minor breach: A minor breach happens when you do not obtain a product or service by the agreed-upon time. For instance, picture a case where you engage a photographer for a family function, and despite the promise to provide the images the following day, they are given over two days later. Material breach: A material breach takes place when you receive something substantially different from what was outlined in the agreement. For example, suppose your business contracts a software development company to create a customized project management tool. However, upon completion, the delivered software lacks essential features agreed upon in the contract.Categories of Breach of Contract
In addition, a breach of contract typically falls under one of two categories:- Anticipatory Breach of Contract
- Actual Breach of Contract
Anticipatory Breach of Contract
An anticipatory breach refers to a breaking of a contract happening before the agreed-upon time for performance. If a party making a promise shows unwillingness or refuses to meet their commitment before the performance date, it counts as an anticipatory breach of contract. The party making the promise can communicate this unwillingness through either:- Verbal or written statement
- Conduct implying the refusal
Actual Breach of Contract
- In contrast to an anticipatory breach, an actual breach of contract occurs when a party neglects, declines, or fails to meet its duties at the set time, happening within the planned period of performance rather than beforehand.
- In cases of contract rejection, the offended or hurt party is freed from their related tasks. Subsequently, this party has the option to take legal action against the breaching party to seek compensation for the caused losses.
- Both real and anticipatory breach of contract can result in either small or significant hurt. The compensatory damages resulting from a contract breach may take the form of hope damages or consequential damages, based on the claims made by the offended party.
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How to Prevent a Breach of Contract
To stay clear of possible breach of contract problems, it's crucial to fully review any contract you enter into, focused on three key aspects. Clarity: Make sure that the language used in the contract is concise and precise. To avoid any confusion, it might be necessary to include a translator if the other party is not a native speaker of the contract language. Expectations: Both parties signing the contract must be certain that their expectations are fully understood, and they are able to comply with the conditions. It is not advisable to depend on future changes for completion as some of these changes might not occur. Legality: In order for a contract to be legally enforceable, it must comply with the rules of the state in which it is executed. When there is confusion, it is advisable to consult a lawyer in contract law before agreeing to the contract.Liquidated Damages and Penalty in Breach of Contract
Liquidated Damages: This refers to a fair estimation of the probable loss in the event of a contract breach, as specified in the contract before the breach occurs. Penalty: This involves an arbitrarily determined sum of money, unrelated to estimating potential losses in the event of a breach.| Aspect | Liquidated Damages | Penalty |
| Basis | Grounded on genuine pre-estimated loss | High amount (not reasonable) |
| Amount | Reasonable amount | High amount (not reasonable) |
| Intention | To compensate for loss due to breach of contract | To enforce the other party for performance |
| Basis of Amount Fixation | Based on genuine pre-estimated loss | Not connected to actual loss; arbitrary fixation |
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| Perfect Competition | Measures of Dispersion | The Shutdown Point | Economic Systems |
| Planning Process | Organization of Economic Activities | Rural Development | Partnership Deed |
Breach of Contract FAQs
What does actual breach mean in law?
An Actual breach in law refers to a party's failure to fulfill contractual obligations within the specified period.
What are the remedies of actual breach of contract?
Remedies for actual breach of contract include compensatory damages, specific performance, and cancellation of the contract.
What is Section 39 of the Contract Act?
Section 39 of the Indian Contract Act deals with the consequences of refusal to perform a promise.
What is Section 37 of the Contract Act?
Section 37 of the Indian Contract Act makes it mandatory for parties to perform or offer to perform their promises in a contract.
What is Section 69 of Contract?
Section 69 of the Indian Contract Act allows for reimbursement for a person who has rightfully performed another's contract.
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