Breach of Contract

A contract is broken when one of the parties fails to fulfill its obligations, refuses to perform, or makes it plain that it will not perform. It is when one or both parties fail to carry out their contractual responsibilities. An exposure could be impacted by:

• Refusal to perform before the contract has even started.
• Refusal to fulfill responsibilities before it is finished.
• A behavior that makes it illegal to properly carry out the terms of the contract (such as interfering with the performance of the other party).

A "fundamental breach" of a key condition (term) of the agreement empowers the party who was wronged to

• Take the party's dismissal from the contract as final.
• Consider oneself released from its own contractual duties and hold the offending party liable for any resulting damages.

Unless the contract expressly provides otherwise, a breach of a minor term known as a guarantee gives rise to a claim for damages resulting from the breach but prevents any party from treating the contract as discharged. A breach of contract does not function reflectively, in contrast to rescission of a contract.

The Nepalese Contract Act states that a party is in breach of a contract if they fail to fulfill their contractual obligations, inform a third party that they won't carry out their obligations under the terms of the agreement, or demonstrate their inability to do so through their actions or conduct.

A breach of contract is when one party does not fulfill his contractual obligations or refuses to fulfill his obligations under the agreement. When a contract is made, the parties are required to follow through on their individual commitments. But a breach of contract occurs when one party refuses or fails to carry out their obligations.

A contract can be broken in one of two ways: either by conduct or by giving notification before the date of performance. This is known as an anticipatory breach. For instance, on April 30, 2004, Bidhya and Reshma agreed that Bidhya would sell her car to Reshma for Rs. 1,600,000. On 15 April 2004 if Bidhya informs Reshma that she will not sell her car it is an anticipatory breach.

Actual breach of a contract occurs when one party violates it or fails to fulfill their obligations under the agreement at the appointed time. For instance, on April 30, 2004, Bidhya and Reshma agreed that Bidhya would sell her car to Reshma for Rs. 1,600,000. If Bidhya tells Reshma on May 1st, 2004, she won't be selling her car. It really is a breach.

The basic goal of contract law is to safeguard contractual expectations. These expectations are satisfied when the parties keep their commitments, but the law offers specific remedies if one party breaks the contract and doesn't fulfill their obligations.

Remedies for breach of contract:

A court ruling that seeks to uphold a person's rights or correct a legal violation is the remedy. The opposite party may ask a court to impose a remedy when one party violates a contract. The breaching party may be ordered by the court to pay the non-breaching party money. The following remedies are available to the party who has been wronged when one party breaches a contract:

• Right to withdraw from the contract:
  • In the event of a breach of the agreement, the offended party may withdraw from or cancel the deal. If one party breaks the agreement, the other party (the aggrieved party) is likewise released from all contractual obligations and has the right to rescind or terminate the agreement.
• Right to claim compensation:
  • A party who has been wronged by a breach of contract is entitled to compensation for his losses. The following methods are available for requesting compensation:
  • If there was an actual loss, the same amount was lost.
  • The same amount as is specified in the contract, if it is mentioned.
  • Unless otherwise specified in the contract, the reasonable damages he sustained
• Right to get usual performance:
  • An harmed party has the right to demand standard performance of a contract if he is not satisfied with compensation or if the compensation obtained by another party is insufficient. He may file a lawsuit for ordinary performance in court. He or she cannot demand standard performance in the following situations:
  • If the breach's financial reparation was sufficient.
  • If the court is unable to verify whether the work described in the contract has actually been performed or not.
  • If a person's signature was obtained from the court based on their unique knowledge and abilities.
  • If circumstances prevent the contract from being carried out
  • Injunction litigation entails requesting a court stay order. An injunction is a court-issued directive that forbids someone from performing a specific act. For instance, Krishna only commits to work at Hari's school for the time specified in the contract. Krishna made a contract with shyam to teach at another school for the term of the agreement but refused to fulfill the commitment with hari. Krishna has now imposed restraint.
• Right to claim for quantum meruit:
  • Quantum meruit is the legal term for a person's right to receive from the other party, in the event of a breach of contract, a reasonable compensation or consideration. The harmed party may demand the appropriate amount of compensation for the work or supplies that were already provided by the other party throughout the course of the contract. This is the quantum meruit claim made by the wronged party.
  • Rules regarding quantum meruit:
  • Where the act has been performed in accordance with the contract and the agreement is dissolved due to the dependent party's default.
  • When the items obtained are not gratuitous in nature.
  • Where the required action is not possible for technical or legal reasons.
  • When one unintentionally purchases the goods and services of another
  • A appropriate payment should be made in cases when the contract does not specify compensation.

Damages

There are two types of damage, they are:

1. Compensatory Damages: Actual damages, also known as compensatory damages, are meant to make up for the loss the non-breaching party suffered as a result of the contract's violation. The amount granted is meant to compensate for or replace the harm the breach caused. The non-breaching party may be entitled to two different forms of compensatory damages:

• General Damages:
  • The most frequent kind of harm is general damage. It addresses the loss experienced as a direct and necessary result of the contract violation. The most typical forms of compensation for contract violations are those.
  • Example: Furniture of the incorrect type was delivered to Company Y by Company X. Later in the day, after realizing their error, Company Y demanded that Company X pick up the incorrect furniture and provide the correct furniture.
  • In addition to declining to pick up the furniture, Company X informed Company Y that it was unable to provide the appropriate furniture because it was not in stock. Company Y was victorious in its lawsuit for contract breach.
• Special Damages:
  • Special damages, also known as consequential damages, protect against any harm brought on by unpredictable events or contract violations brought on by unique situations. The breach did in fact result in these losses, though they weren't felt right away. The non-breaching party must demonstrate that the breaching party was aware of the unique requirements or conditions at the time the contract was executed in order to recover damages for this kind of loss.
  • Example: In the above scenario , if Company X knew that Company Y needed the new furniture on a particular day because its old furniture was going to be carted away the night before, the damages for breach of contract could include all of the damages awarded in the scenario above, Payment for Company Y’s expense in renting furniture until the right furniture arrived.

2. Punitive Damages: Punitive damages, often referred to as exemplary damages, are given to punish or serve as a lesson to wrongdoers who have engaged in deliberate, malicious, or deceptive behavior. Punitive damages are founded on the goals to punish the perpetrator for outrageous behavior and to dissuade others from acting in the same manner, in contrast to compensatory damages, which are meant to recompense actual loss. In addition to compensatory damages, punitive damages are granted.

Reference:

• Jones, S. (2012). http://freebcomnotes.blogspot.com. Retrieved from free BCom notes:http://freebcomnotes.blogspot.com/2016/04/performance-of-contract.html
• legal-dictionary.thefreedictionary.com/, 2011
• Shrestha, R. P. (2007).Business Law.Kathmandu: M.K.Books.
• W. (2016).businessdictionary. Retrieved from businessdictionary.com:http://www.businessdictionary.com/definition/performance-of-contract.html