Breach of contract (Definition)

Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance.

Types of breach
Minor breaches A minor breach, a partial breach or an immaterial breach, occurs when the non-breaching party is un entitled to an order for performance of its obligations, but only to collect the actual amount of their damages. For example, suppose a homeowner hires a contractor to install new plumbing and insists that the pipes, which will ultimately be sealed behind the walls, be red. The contractor instead uses blue pipes that function just as well. Although the contractor breached the literal terms of the contract, the homeowner can only recover the amount of his damages. Generally, this means the difference in value between the red pipe and the blue pipe. Since the pipes are identical value, the difference is zero; therefore, there are no

Material breach
A material breach is any failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach. If the contractor in the above example had been instructed to use copper pipes, and instead used iron pipes which would not last as long as the copper pipes would have, the homeowner can recover the cost of actually correcting the breach - taking out the iron pipes and replacing them with copper pipes.

Fundamental breach
Fundamental breach A fundamental breach is a breach so fundamental that it permits the aggrieved party to terminate performance of the contract, in addition to entitling that party to sue for damages.

Anticipatory breach
A breach by anticipatory repudiation (or simply anticipatory breach) is an unequivocal indication that the party will not perform when performance is due, or a situation in which future non-performance is inevitable

Breach of Contract and Remedies

Recession of contract When e breach of contract is committed other party may treat the contract as rescinded. The aggrieved party is free from all obligation.

Compensatory damages
Compensation is awarded only for the losses that directly and naturally result from the breach of the contract. The aggrieved party is required to keep the loss to the minimum.

Nominal damage
is awarded where the court concludes that the defendant is in breach but the plaintiff has suffered no quantifiable pecuniary loss. It consists of a small cash amount of nominal value. It is often sought to obtain a legal record of who was at fault

Punitive damages
This damages awarded with the view to punish the defendant and not with the idea of awarding compensation to the plaintiff. For breach of promise to marriage. For wrongful dishonor of cheque because of in adequate funds.

Liquidated damages
Liquidated damages are pre-estimate of losses agreed upon in the contracts. The stipulated sum payable in the case of breach of contract.

penalty
A penalty clause is one which is intended to deter breach and is typically excessive in amount compared with the greatest loss which the parties could have anticipated as resulting from breach at the time the contract was made.

Special damages
These damages are claimed in the case of loss and profit when there are certain or extraordinary circumstances present and their existence is communicated to the promisor, the non performance of the promise entitles the promisor to not only damages but also special damages.

Specific Performances
Whenever a monetary damage at law is insufficient to fully compensate the plaintiff, the equity principle of specific performance or injunction might be available.

A Specific Performance requires that the acts specified in the contract be performed by the defaulting party. Related to orders for specific performance, an injunction may be requested when the contract prohibits a certain action. Action for injunction would prohibit the person from performing the act specified in the contract.

Illustrations (Specific Performances)

A agrees to sell B his painting but commits breach, cannot sue for damages he cannot sue for damages, he shall be given order to purchase and to make specific performance of selling that to A.

When specific performance cannot be given

1. Monetary compensation is adequate relief 2. The contract is of personal nature e.g a contract to paint a picture 3. Where it is not possible for the court to supervise the performance of contract i.e building of house 4. Contract beyond the object in memorandum of association

Injunction
An injunction may be requested when the contract prohibits a certain action. Action for injunction would prohibit the person from performing the act specified in the contract.

Illustration
N, a film star agreed to act exclusively for a particular producer for one year but she contracted to act for some other producer , she could be restrained by an injunction to do so.

quantum meruit
A party who performs a valuable service for another party usually enters into a written contract or agreement before performing the service, particularly when the party is in the business of performing that service. For instance, most professional roofers hired to repair a roof insist on having a formal agreement with the owner of the house before beginning the repairs. In the absence of an agreement or formal contract, the roofer may be unable to recover losses in court if the transaction goes awry. Quantum meruit is a judicial doctrine that allows a party to recover losses in the absence of an agreement or binding contract.

quantum meruit
By allowing the recovery of the value of labor and materials, quantum meruit prevents the Unjust Enrichment of the other party. A person would be unjustly enriched if she received a benefit and did not pay for it when fairness required that payment be made. Quantum meruit can be used to address situations where no contract exists or where a contract exists but for some reason is unenforceable. In such cases courts imply a contract to avoid an unjust result. Such contracts are called quasi contracts.

quantum meruit
Quantum meruit also describes a method used to determine the exact amount owed to a person. A court may measure this amount either by determining how much the defendant has benefited from the transaction or by determining how much the plaintiff has expended in materials and services.