Sugam Adhikari 12301

Breach of Contract (Section 82) A contract is said to be breached when any party to contract fails to perform his duty as per the contract or his action or words suggest it is impossible to perform the obligation as set under contract. Under section 75(1) of Nepalese contract act 2056, upon the breach of contract by one party the other aggrieved party is relieved from his duty and gets right to proceed against the faulty party for damaged caused. Usually, the breach of contract occurs in two ways; a) Actual Breach b) Anticipatory Breach

Actual Breach of Contract Actual breach of contract happens if any party of contract refuses or fails to perform his part of contract within the due date of contract or during the time of contract, i.e. on due date or during course of performance. Then if a person started doing as per terms of contract and leave it in middle then it is also the breach of contract. Example: If X agreed to supply provision for college canteen for a year and stop providing the provision during June, then it is actual breach of contract during course of performance whereas if the payment is scheduled to be made at the end of month and if payment is failed to meet at the end of month then it is actual breach on due date.

Anticipatory Breach of Contract Anticipatory breach occurs when the either party of contract declares their intention of not performing the contract before the performance is due either directly or through implied action. Example: If A contracts to B to sell his company on August 20, 2012 but declares on June 20 that he wont be selling his company then it is case of anticipatory breach by declaration whereas if he sold the company to C on July 20 then it is case of anticipatory breach by implied action.

What are the remedies for breach of contract to aggrieved party? Under section 82 (2), the aggrieved party of contract is relieved of his duty and may cancel his contract by furnishing a notice thereof to the other party in case of both actual and anticipatory breach of contract as under 82 (1). Secondly, the aggrieved party is also provided with compensation for any losses suffered due to breach of contract by the other party as per section 83(1) of contract act 2056. The amount of

Sugam Adhikari 12301

loss to be compensated shall be up to the specified amount if specified explicitly otherwise the amount of compensation shall be the reason amount of direct and actual damage or loss suffered from the breach. NO imaginary or indirect losses shall be calculated under this process. Incase provision has been created for compensation for contract to be completed within a specified period, the party paying compensation may request for extension of period for completion in proportion to compensation paid. As per section 86 (1) of contract act, if the cash received in compensation of loss suffered is not reasonable or in adequate, the aggrieved party may demand the execution of the as stimulated instead of making a claim for compensation but no claim of execution shall be heard in circumstances ( section 86(2) ) like; a) b) c) d) e) Adequate cash compensation Inability of court to supervise execution Contract of services relating personal expertise, skills or knowledge If contract cannot be executed as stipulated If violating party himself demands the contract be executed as stipulated.

Thus in usual case the remedies to contract are as follow: a) b) c) d) e) Rescission of Contract Suiting for Damages Suit for Specific Performance Suit for Injunction Suit for Quantum Meruit

Case (Hadley v. Baxendale) : Hadleys mill was stopped due to the breakdown of shaft. He delivered the shaft to Baxendale, a common carrier, to be taken it to manufacturer to copy it and make a new one. H hasnt made it known to B that delay would result in a loss of profits. By neglect on part of B, the delivery was delayed beyond reasonable time in transit. Though the court didnt held B liable as he was communicated that the delay would result to the loss of profit to mill. Case (Hobbs. v. London & S.W. Rail Co): Hobbs with his wife and children booked a ticket for a midnight train, to be transported to a particular place where he lived. They were however transported to a wrong place and they had to walk several miles on a drizzling night and as a result his wife caught cold and he had to incur some medical expenses. It was held that he could recover compensation for inconvenience and not for sickness of his wife as it was a very remote consequence.

Sugam Adhikari 12301

Case (Planche v. Calburn): Calburn the owner of a magazine company engaged Planche to write a book to be published in installments. After few installments were published, the publication of magazine stopped. It was held that P could claim payment for part already published.

Amount of Damages The amount of damages is usually equal to the difference between the prevailing price on the date of breach and the contract price in case aggrieved party rescind the contract on date of breach whereas if the aggrieved party rescind the contract on due date it will be the difference between the price prevailing on due date and contract price. In short the amount of compensation shall be the amount of direct loss suffered by aggrieved party. Example: If A co. contract with B ltd. for supply of raw material @ Rs. 30/kg for the year 2069. If A co. becomes unable to supply for the last 3 months and B ltd. has to buy the raw material from elsewhere at Rs. 40/kg and also suffered loss of 10000 in the first month due to short supply. A co. should pay to B ltd Rs. 10000 plus difference (40-30) Rs. 10/kg.