Table of Contents
Every contract is done for the performance of the contract. It is the obligation of the parties for the performance of the contract. If the pare do not perform accordingly, then there are the possibilities for the breach of the contract and there is the possible ground for the non-performance of the contract. In that case, the parties can ask for the remedies of breach of contract. The parties in the contract, if they have promised to seek the remedies from the alternative dispute resolution (negotiation, mediation, conciliation, and arbitration), can seek the remedies from the mentioned informal process of settlement of disputes. The award from the arbitration is final and binding. Otherwise, if the parties have agreed to settle the case through the National Civil Code, 2017, then they can get the remedies from the formal settlement of the dispute, that is through the court proceeding.
According to the National Civil Code, 2017, section 535, the breach of contract by the parties occurs in the following situations:
- If any party to a contract fails to fulfill the obligation under the contract.
- If any party to a contract gives a notice to the other party that he/she will not perform the act to be performed by him/her.
- If any party to a contract by his/her action and conduct demonstrates that he/she is incapable of performing the act under the contract.
Types of breach of contract
There are two types of breach of contract. They are the actual breach and anticipatory breach which are discussed below:
Actual breach
According to the National Civil Code, 2017, section 535, the breach of contract by the parties occurs in the following situations:
- If any party to a contract fails to fulfill the obligation under the contract.
- If any party to a contract gives a notice to the other party that he/she will not perform the act to be performed by him/her.
Anticipatory breach
Anticipatory breach occurs in the following situations:
- If any party to a contract by his/her action and conduct demonstrates that he/she is incapable of performing the act under the contract.
- If one party commits a breach of the contract or the action or conduct of that party demonstrates non-performance of contract in a material respect or a material breach of the contract is demonstrated by the conduct or action of a party, the other party may rescind the contract by giving a notice to such a party.
In the case of the rescission of the contract, the party rescinding the contract shall not be bound to perform the contract.
Types of Remedies
Generally, the contracting parties can demand the remedies in case of breach of contract. There are different types of remedies in case of breach of contract which are discussed below:
A) On the basis of Settlement:
1) Formal Settlement (court settlement): In case of breach of contract, parties can seek the remedies from the court for the settlement dispute. The following are the remedies available in the court settlement:
- To refuse further performance of the contract;
- To sue on quantum meruit,
- To bring an action for damages (compensation for breach contract);
- To sue for specific performance of the contract;
- To sue for an injunction;
- Restitution;
- Doctrine of Unjust Enrichment.
2) Informal Settlement: In case of breach of contract, parties can seek the remedies from the informal settlement. The following are the ways for the informal settlement of disputes:
- Negotiation: The disputing parties can sit and settle the dispute by themselves.
- Mediation: The disputing parties, with the help of a third party, can settle the dispute. The decision of the third party is not binding in mediation.
- Arbitration: The disputing parties, with the help of a third party, settle the dispute. The award given by the third party is binding in the contract. Generally, in recent days, parties in the contract have chosen to include arbitration to settle the dispute.
B) On the basis of Process
i. Self Help Remedy
Parties can seek the self-help remedy in case of breach of contract.
Bank and Financial Institution Act, 2073, section 57 states, the bank or financial institution can recover its principal and interests by selling by auction the assets taken or put as mortgage by the borrower in the name of the bank or financial institution, if the borrower fails to abide by the terms of the credit as mentioned in the deed or agreement or any terms and covenants made with a bank or financial institution or fails to repay credit to the bank or financial institution within the time-limit stipulated in the deed, or if the bank or financial institution is found, through the monitoring, that it has misused the credit by using it for the purpose other than the purpose for which it was disbursed.
In booking of tickets, booking of hotels, reservation of seats, the airlines do not return the full amount. In case of booking of rooms in hotels also, the hotels do not return the full amount.
A breach of contract occurs when one party fails to fulfill its contractual obligations, leading to legal consequences and remedies. The National Civil Code, 2017, categorizes breaches into actual and anticipatory, both of which allow the aggrieved party to seek legal or alternative dispute resolution remedies. Formal settlements through court proceedings provide various reliefs such as damages, specific performance, and injunctions, while informal methods like negotiation, mediation, and arbitration offer quicker resolutions. Additionally, self-help remedies allow financial institutions to recover debts without court intervention. The choice of remedy depends on the agreement between the parties and the nature of the breach. Understanding these provisions is crucial for individuals and businesses to protect their rights and obligations in contractual relationships. By ensuring proper contractual compliance and awareness of legal remedies, parties can mitigate risks and uphold fair trade and business practices.