Performance of Contract
Performance of a contract refers to the fulfillment of the obligations agreed upon by the parties involved in the contract. The Indian Contract Act, 1872, provides that a contract must be performed according to its terms and conditions. Failure to perform the contract can lead to a breach of contract and result in legal action being taken against the party that failed to perform.
There are two types of performance of a contract:
- Actual performance: This refers to the complete performance of all the obligations agreed upon by the parties involved in the contract. When the parties perform their obligations as per the terms of the contract, it is considered actual performance. For example, if A agrees to sell goods to B and delivers the goods to B as per the agreed terms, it is considered actual performance.
- Attempted performance: This refers to the partial or incomplete performance of the obligations agreed upon by the parties involved in the contract. When one party has attempted to perform their obligations but has not fully completed them, it is considered attempted performance. For example, if A agrees to construct a building for B and has completed only half the work as per the agreed terms, it is considered attempted performance.
If a party fails to perform their obligations as per the terms of the contract, it is considered a breach of contract. The non-breaching party can then take legal action against the party that failed to perform. The following are the remedies available to the non-breaching party in case of breach of contract:
- Specific performance: This remedy is available when monetary damages are not sufficient to compensate for the loss suffered by the non-breaching party. In such cases, the court orders the party that failed to perform to fulfill their obligations as per the terms of the contract.
- Damages: This is the most common remedy available to the non-breaching party. The party that failed to perform is required to pay monetary damages to the non-breaching party to compensate for the loss suffered as a result of the breach of contract.
- Rescission: This remedy is available when the non-breaching party chooses to terminate the contract as a result of the breach. In such cases, the parties are returned to their original position before the contract was made, and any consideration given is returned.
Breach of Contract
Breach of contract refers to a situation where one party to a contract fails to perform their obligations as per the terms of the agreement. It can occur when a party fails to perform their obligations in the time, manner, or quality agreed upon in the contract. A breach of contract can be a serious issue and can result in legal action being taken against the party that failed to perform.
The following are the types of breaches of contract:
- Material breach: A material breach occurs when the failure to perform is so significant that it goes to the very heart of the contract. In such cases, the non-breaching party is discharged from their obligations under the contract, and they can seek legal action against the party that failed to perform.
- Minor breach: A minor breach occurs when the failure to perform is not significant enough to discharge the non-breaching party’s obligations under the contract. In such cases, the non-breaching party can still seek legal action against the party that failed to perform, but they must still fulfill their own obligations under the contract.
- Anticipatory breach: An anticipatory breach occurs when one party to a contract indicates that they will not perform their obligations under the contract before the performance is due. This can occur through a statement or action that indicates an unwillingness to perform. In such cases, the non-breaching party can seek legal action immediately without waiting for the actual breach to occur.
Consequences of Breach of Contract
- Damages: The non-breaching party may claim damages as compensation for any loss suffered as a result of the breach of contract. The damages may be compensatory, consequential or punitive in nature.
- Specific performance: The non-breaching party may seek specific performance of the contract if monetary damages are not adequate to compensate for the loss suffered. Specific performance means that the party that breached the contract is required to fulfill their obligations as per the terms of the contract.
- Injunction: The non-breaching party may seek an injunction to prevent the party that breached the contract from doing anything that may cause further damage.
- Rescission: The non-breaching party may seek rescission of the contract, which means that the contract is cancelled and the parties are returned to their original position before the contract was made. In such cases, any consideration given is returned.
- Quantum Meruit: In cases where the contract is not completed due to a breach, the non-breaching party may be entitled to payment for the work done on the basis of quantum meruit, which means payment for the work done.
- Legal action: The most common consequence of a breach of contract is legal action being taken by the non-breaching party. The non-breaching party may seek damages or specific performance from the party that failed to perform.
- Financial loss: The party that suffered as a result of the breach may have incurred financial losses, such as lost profits or expenses incurred due to the breach.
- Loss of reputation: Breaching a contract can damage the reputation of the party that failed to perform, which can have long-lasting effects on their business.
The following are the Remedies available to the non-breaching party in case of breach of contract:
- Specific performance: This remedy is available when monetary damages are not sufficient to compensate for the loss suffered by the non-breaching party. In such cases, the court orders the party that failed to perform to fulfill their obligations as per the terms of the contract.
- Damages: This is the most common remedy available to the non-breaching party. The party that failed to perform is required to pay monetary damages to the non-breaching party to compensate for the loss suffered as a result of the breach of contract.
- Rescission: This remedy is available when the non-breaching party chooses to terminate the contract as a result of the breach. In such cases, the parties are returned to their original position before the contract was made, and any consideration given is returned.