When is an Agreement or Contract considered as breached?
Our basic understanding intimates that – when one party fails to fulfill the conditions of the contract then the agreement is considered breached. Well, there is more to that, it depends upon the nature of the contract itself. The breach can occur during complex and simple transactions as well.Breach of contract is easy to prove during the specific contract but it may be difficult to prove it is not a specific contract or it is vague. Section 73, 74 and 75 of the Indian Contract Act deals with the Breach of Contract. Breach of contract leads to frustration for the parties involved and also the wastage of time and money.
A breach occurs when:
- When one party does not perform his part of duty.
- When something prohibited is done by the party.
- When customer prevents the contractor to do his part of the job or finishing the project at hand.
- When time is the essence of the contract and the contractor does not do his work completed on time.
- It is at the option of the other party to breach the contract or not when the time is not the essence of the contract and the performance has not happened on time.
- The contract is voidable or can be breached if the performance is not done according to the requirements of the contract. For example: when the product is not according to the size, shape, color, design, quantity or quality etc.
- When it is impossible to perform the contract.
- Contract with minor is void.
- When other party does not do the work and refuses it to do before the completion of time period or fails to do.
- Delay in the delivery of the product and harassment can cause a breach of contract.
Types of Breach:
- MATERIAL BREACH- this breach occurs when one party fails to perform his part of the contract and causes loss or damages to the other party.
- FUNDAMENTAL BREACH- this allows the aggrieved party to stop performance of the contract and sue for damages.
- MINOR BREACH- in this, you cannot sue the person for actual performance but for partial breach. There is an option for the party either to sue for damages or ask the other party to correct their mistakes or perform his duty as per the requirements.
- ANTICIPATORY BREACH- when one party breaks the contract by not executing his/ her part of the contract within the allocated time.
Remedies that businesses or individuals can take in response to such a situation:
- Liquidated damages– these are specified in the contract.
- Compensatory damages– compensate for losses and reimburse the cost.
- Attorney’s fees– it is recoverable when expressly included in the contract.
- Punitive damages– it is given for the offensive behavior or action for the defendant.
There is a strong reason why we decided to write a blog on this topic. We at Wazzeer have recently encountered with entrepreneurs seeking a third view on their existing Agreements to react or send notice on breaching of agreements. Being caught up in core business activities is definitely a priority, but when things like Agreement breaching goes un-noticed, would land your company as such in problems. We at Wazzeer will be happy to ensure that nothing ever goes wrong in your legal and accounting matters, ‘Get a Wazzeer’ 🙂