Agreements

Breach of Contract – Consequences that Startups should avoid

Let’s take a situation here, say there are two organizations- A and B. A enters a contract with B to outsource tech team. The Contract is a well vetted and very much valid contract drafted by an experienced Lawyer. Now, say the contract was breached by Organization B for some reason. In this article, we will look into the solutions that Organization A has, which basically answers our first question ‘What could be the consequence of breaching an Agreement or Contract in India?’

Compensation for loss or damage caused by breach of contract

Organization A who suffers by such breach is entitled to receive from Organization B a compensation for any loss or damage caused.

Compensation for breach of contract where penalty stipulated for

When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, the Organization A complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the Organization B.

Party rightfully rescinding contract, entitled to compensation

A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfillment of the contract.

Compensation for failure to discharge obligation resembling those created by contract 


When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.


Examples of scenarios where the breach of contract takes place:

  • Firm P contracts to buy of Firm Q, at a stated price, 50 mounds of rice, no time being fixed for delivery. P afterward informs Q that he will not accept the rice if tendered to him. Q is entitled to receive from A, by way of compensation, the amount, if any, by which the contract price exceeds that which Q can obtain for the rice at the time when P informs Q that he will not accept it.
  • Firm P contracts to buy Q’s ship for 60,000 rupees, but breaks his promise. P must pay to Q, by way of compensation, the excess, if any, of the contract price over the price which Q can obtain for the ship at the time of the breach of promise.
  • Firm P contracts to repair Q’s Office in a certain manner and receives payment in advance. P repairs the house, but not according to contract. Q is entitled to recover from P the cost of making the repairs conform to the contract.


In conclusion, if a contract is valid it is enforceable to protect parties that are affected by the breach in some way or the other. We at Wazzeer provide the flexibility to clients by including specific clauses to protect the client from any disputes and as well ensure to provide a guarantee of service.

 

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