A breach of contract may be expressed or implied. It may be caused by the act of either party of contract. The nature of breach of contract may be Anticipatory or Actual. Basically the breach of contract can be categories into two types:-
a. Actual breach (Present breach): It is known as a fundamental breach of contract. When the party to a contract does not perform his obligations under the contract at the time when it is due, it is an actual breach of contract. Sometimes, a party performs the liability of his part, but the other party alleges that it is not a proper performance, in accordance with the terms of the contract. It is known as a breach during the performance of It is a failure to performance the contract. (Section 83.1 of Nepal Contract Act, 2056) Actual breach of contract may happen on the following two categories:
- Breach on due date of performance: If one party fails or refuses to perform or seems to be incapable of performing his obligations at the time fixed for performance, is called an actual breach of contact on due date of performance. Example, 'A' agrees to deliver to 'B' 10 bags of rice on 5th He does not deliver the rice on that day there is a actual breach of contract.
- Breach on during the performance: In case where one party has performed a part of his obligation under the contract, but fails or refuses to perform the remaining part of obligation under the contract, is called an actual breach of contract during the performance.
b. Anticipatory breach of contract:
If the time for performance of contract is fixed in the contract and one party repudiates his obligation or gives pre- information to the other party that he will not perform his obligation before the time for performance arrives, is said to be an anticipatory breach of contract. It is also known as a constructive or an anticipatory breach of contract. Example, 'A' undertakes to supply certain goods to 'B' on 11th March before this date (or 10th March) he informs 'B' that he is not going to supply the goods this is an anticipatory breach of contract.
An anticipatory breach of contract may happen on the following condition:
- By Renunciation: It occurs when a party to an executory contract renounces his liability under the contract expressly, before the performance is due.
- By Creating some impossibility: It occurs when a promisor to an executory contract, before the time when for performance arrives, by doing some acts makes performance of his promises impossible.
Remedies for Breach of Contract
The contract is itself a law made and applicable to its parties. It must be made in accordance with law and enforced by court. When a party breaches a contract the injured party becomes entitled to legal remedies. A remedy means a right which is given by law for enforcement of a prescribed right under an agreement of contract. Such remedy is known as legal treatment, provided by the court of law or other formal agency formed under law, to the aggrieved party.
There are different kinds of remedy may be available to the aggrieved party in the breaching of contract. The remedy for breach of contract depends on the basis of nature of breaching. The aggrieved party may claim one or more remedies as per the law. When a contract is broken, the injured party can use one or more of the following remedies: (Section 82-87 of Nepal Contract Act, 2056)
- Right to rescind (Cancel) the contract
- Rights to claim damages
- Suit for specific performance of contract
- Suit for injunction
- Suit upon quantum merit
a. Right to rescind the contract: When a contract is broken by one party the other party will also be relieved from his contractual liability and he may rescind (conceal) the contract by sending a notice to the former party. The injured party is freed from all of his obligations under such Contract. (Section 82.2 of Nepal Contract Act, 2056) The injured party is to be restored any benefit received by the breaching party. The injured has the right to demand compensation for the loss. But the court can refuse a rescission of the contract in the following circumstances. (Section 87 of Nepal Contract Act, 2056)
- Where the parties cannot restore the contract due to the change of circumstances.
- Where a third party has, during the substance to the contract, acquired right in good faith and for value.
- Where only a part is sought to be rescinded that is not separate.
b. Rights to claim damages: Claim for damages refers the right to claim compensation to the aggrieved party against the former party. The Nepal Contract Act, 2056 has made provisions in this respect. According to the Act the injured party can claim the following compensation.
- Compensation for actual loss: Where a contract has been broken under section 82 of Nepal Contract Act, 2056 the injured party may recover the actual loss from the breaching party of contract. (Section 1)
- Compensation for anticipated loss: Where loss or damage is anticipated at the time of entering in to the contract (due to the breach) such a loss or damage can be compensated by the breaching party
- Amount if mentioned, claim certain amount as contract: Where the amount for damage mentioned in the contract, the injured party is compensated not exceeding the amount in the basis of quantum meruit.
c. Suit for special performance of contract: The injured party is entitled to sue for specific performance of the The specific performance means an order by the court to the breaching party to perform his contractual obligation. Such an order is made by the court when other types of compensation do not seem to be adequate. However, in the following circumstances, the claim for a specific performance is not applicable. (Section 86.2 of Nepal Contract Act, 2056)
- Where compensation for the breach of contract is adequate.
- Where the liability of contract lies upon personal nature. (Personal skill or knowledge)
- Where a specific performance is not applicable due to the change of circumstances.
- Where the breaching party itself has claimed for a specific performance against the injured party.
d. Suit for injunction: Where a party is in breach of a negative term of contract (Where he is doing something which he promised not to do) the court may by issuing an order, restrain him from doing what he promised not to do. Such an order of the court is known as an injunction. Such a remedy is appropriate where there is an anticipatory breach of contract. That is why; it is a kind of preventive relief to the aggrieved party.
e. Suit upon quantum merit: The remedy for a breach of contract available to an injured party against the guilty party is to file a suit upon quantum merit. The Latin phrase 'quantum meriut" means 'Payment in proportion to the amount of work ' Right to quantum merit means a right to claim the compensation for work already has done. Such a type of remedy is based on the implied agreement to payment for what has been done or completed. The rules are flied in the following situations.
- The contract must be terminated.
- Contracting party who claim quantum merit must be innocent.
- The party claim must have provided service benefit and goods to the next party.
- Performed is impossible by technical problems.