Define breach of contract and anticipatory breach of contract.

by • 05/06/2013 • GeneralComments (0)255

Q. 9 Define breach of contract and anticipatory breach of contract.

Ans: BREACH OF CONTRACT

 

A breach of contract occurs if any refuses or fails to perform his part of the contract or by is act makes it impossible to perform his obligation under the contract. In case of breach, the aggrieved party (i.e. the party not at fault) is relived from performing his obligation and gets a right to proceed against the party at fault. A breach of contract may arise in two ways, (a) anticipatory breach and (b) actual breach.

 

Anticipatory Breach Of Contract [Section 39]

Anticipatory breach occurs when the party declares his intention of not performing the contract before the performance is due. Thus, when a party refuses to perform a contract even before it is due for performance, it is called anticipatory breach.

 

MODES OF DECLARING AN INTENTION NOT PERFORMING THE CONTRACT [section 39]

A party may declared his intention of not performing the contract in the following two ways:

 

(a)        When a party to a contract has refused to perform his promise.

 

EXAMPLE

“X”, a farmer agrees to sell to Y his refused crop of 10 tons of wheat @ Rs 8,000/- per ton to be delivered on 20ch October. On October, X informs Y that he is not going to supply the goods. X has committed anticipatory breach of contract by express repudiation.

 

(b)        When a party to a contract has disabled himself from performing his promise units entirely.

 

EXAMPLE

a farmer agrees to sell to “Y” his entire crop of 10 tons of wheat @ Rs 8,000/= per ton to be delivered on 20th October. On 1st October “X” sold his entire crop to 4tZ” @ Rs. 10,000/= per ton. “X” has committed anticipatory breach of contract by implied repudiation.

 

OPTIONS AVAILABLE TO AGGRIEVES PARTY [SECTION-39)

In case of anticipatory breach, the aggrieved party has the following two options.

(a)        He can rescind the contract and claim damages for breach of contract with out waiting until the due date for performance, or

(b)        He may treat the contract as operative and wait till the due date for performance and claim damages if the promise still remains performed

 

Consequences Of Treating As Operative

 

In case of anticipatory breach, if the aggrieved party treats the contract as operative and waits till the date for performance the consequences will be as follows

(a)        The promisor may perform his promise on or before the due date of performance and the promisee will be bond to accept the performance.

(b)        The promisor may take advantages of the discharge by supervening impossibility arising between the date breach and the due date of the performance and in such a case, the promisee shall lose his right to sue for damages.

 

EXAMPLE

“X9″ a farmer agreed to sell to “Y” his crop entire crop of wheat @ Rs 8,000/= per ton to be delivered on 20ch October. On 1st October, “X” informed “Y” that he was not going to supply the goods. “Y” decided not to rescind the contract on lft October and to wait till 20th October the contract had becomes void become void on the group of impossibility of performance, “Y” had lost his right to sue “X” for damages.

amount of damages

The amount of damages in each of the options exercised by an aggrieved party will be calculated as under:

 

  Option exercised Amount of damages
I When the aggrieved party rescinds the contract at the date of breach. The amount of damages will be equal to the difference between the price prevailing on the date of breach and the contract price
II When the aggrieved party does not rescind contract at the date of breach The amount of damages will be equal to the different between the price prevailing on the due date of performance and the contract price.

 

EXAMPLE

“X” fanner, agreed to sell to sell to “Y” entire crop of 10 toms of wheat @ Rs 8,000/= per ton to be delivered on 20th October. On 1st October, “X” informed “Y” that he was not going to supply the goods. Calculate the amount of damages, which could be recovered by “Y” from “X” (a) if Y rescinded the contract on 1st October when the market price of wheat was Rs, 10,000/= per ton, (b) If did not rescind the contract on 1st October and waited till 20th October when the market price of wheat was Rs 12,Q00/= per ton.

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