BREACH OF CONTRACT
Where one party to a contract neither performs nor
offers to perform his promise; or where the
performance is defective, there is a breach of
Types of Breach
• Actual Breach of contract occurs in two ways:
i. On due date of performance, when any party to a contract
refuses or fails to perform his part of the contract at the time
fixed for performance.
ii. During the course of performance, when any party has
performed a part of the contract and then refuses or fails to
perform the remaining part of the contract.
• Anticipatory Breach occurs when the party declares his
intention of not performing the contract before the performance
If one of the parties to a contract breaks the promise, the party
injured thereby has not only a right of action for damages but he
is also discharged from performing his part of the contract.
REMEDIES FOR BREACH OF CONTRACT
A remedy is the course of action available to an aggrieved
party (i. e) the party not at default for the enforcement of a
right under a contract.
In case of breach of contract, the injured or the aggrieved
party has the following remedies:
i. Rescind the contract
ii. Sue for damages
iii. Sue for specific performance
iv. Suit for injunction
v. Suit for Quantum Meruit
• Rescind the Contract: When a party to a contract has
broken the contract, the other party may treat the contract as
rescind/void and he is absolved from all his obligation under the
contract. When a contract is rescind, any person, who received
any advantage or benefit under such contract, is bound to
restore it to the person from whom he received it.
• Sue for damages: When a party to a contract breaks the
contract, the aggrieved party is entitled to receive compensation
to any loss or damages caused to him, from the party who has
broken the contract. The object of awarding damages to the
aggrieved party is to make good any financial loss or damages
suffered due to breach of contract.
• Sue for Specific Performance: Where damages are not
an adequate remedy in the case of breach of a contract, the
Court may, in its discretion, on suit of specific performance,
direct the party in breach for the specific performance of the
contract i.e., to carry out his promise according to the terms
of the contract.
• Suit for Injunction: The aggrieved party may bring a suit
for injunction i.e., an order of the Court restraining a person
from doing a particular act. Where a party to the contract
does something he promised not to do, the Court may issue
an order prohibiting him from doing so. Injunction, is a mode
of securing the specific performance of negative terms of a
• Suit for Quantum Meruit: Quantum Meruit means as
much as is earned. It is a right to claim the compensation for
the work already done.
LAW OF AGENCY
An agent is a person employed to do any act for another or to
represent another in dealings with third persons. The person
for whom such act is done, or who is so represented, is called
the principal. (Section 182 of the Indian Contract Act, 1872)
• The agent can render the principal liable to a third person.
• Any person who has the capacity to contract may employ an
• No consideration is necessary to create an agency.
MODES OF CREATION OF AGENCY
1. Agency by Express Agreement: A contract may be made by either oral or
written agreement. The usual form of written contract of agency is the
Power of Attorney.
2. Agency by Implied Agreement: When from the conduct of the parties, it
appears that a person is acting as an agent, then an agency arises impliedly:
• Agency by Estoppel – Where a person, by his words or conduct, has
willfully led another person to believe that certain set of
circumstances/facts exists, and that other person has acted on that belief,
then he is estopped from denying the truth of such statements
• Agency by Holding Out – If a person, by his conduct or statement, leads
another person to believe that a certain person is his agent, then he is
estopped from saying that such a person is not his agent.
• Agency by Necessity – A person who has been entrusted with another’s
property, may have to incur unauthorized expenses to protect/preserve it.
3. Agency by Ratification: It is a case, where a person having no authority
purports to act as agent and the principal is not bound by it. However, if
the principal ratifies the same, the contract is valid and the principal
becomes liable for the same.
AUTHORITY OF AN AGENT
An agent can exercise his authority in the following cases:
Necessary for the purpose of conducting the business.
Usually done in the course of conducting the business
To do all such acts, for the purpose of protecting his
principal from loss, as would be done by a person of ordinary
DUTIES OR OBLIGATIONS OF AN AGENT
He is bound to conduct the business of his principal:
- according to the directions given by his principal.
- with reasonable diligence and care
He is bound to render proper accounts to his principal.
In case of difficulty, he must contact his principal to obtain
He is bound to pay, to the principals, all the sums received
on his account.
RIGHTS OF AN AGENT
He is entitled to retain goods, papers and other property,
whether movable or immovable, until the amount due to him
on account of commission is received.
He is to be indemnified against consequences of all lawful
acts done by him.
He cannot claim to be indemnified against the consequences
of an act, which he does, but which is prohibited under the
penal law of the country.
He is entitled to be compensated in respect of any injury
caused to him by the principal’s neglect.
He can retain any amount to be rendered to the principal for
any reimbursements due to him in respect of advances,
expenses incurred by him on account of the business.
LIABILITY TO THIRD PARTY
AGENT: An agent is personally liable to third party in the
Where an agent represent that he has authority to act on be half of a
principal, but who does not actually possess such authority or who
has exceeded t he authority and the principal does not ratify his
Where the contract expressly provides for the personal liability of
Where the agent signs a negotiable instrument in His own name,
without making it clear that he is signing as agent.
Where the agent works for a foreign principal.
Where, according to usage of trade in certain kinds of business,
agents are personally liable.
Liabilities of the principal to third-parties may be discussed
under the following categories.
1. When agent acts within the scope of his authority
2. When agent exceeds his authority
3. Principal is bound by notice given to agent
4. Liability of principal by estoppel
5. Liability for misrepresentation or fraud by an agent
TERMINATION OF AGENCY
An agency comes to an end or terminates
a) By the performance of the contract of agency
b) By an agreement between the principal and the agent
c) By expiration of the period fixed for the contract of agency
d) By the death of the principal or the agent
e) By the insanity of the principal or the agent
f) By the destruction of the subject-matter
g) By the renunciation of his authority by the agent
h) By revocation of authority of the agent by the principal
Where agency cannot be terminated or put to an end by the principal, it is
The term ‘sub-agent’ has been defined under Section 191 of the Indian
Contract Act, 1872. According to this, a ‘sub-agent’ is a person employed by,
and acting under the control of the original agent in the business of the agency.
So, a sub-agent is the agent of the original agent. As between themselves, the
relation of sub-agent and original agent is that of the agent and the principal.
A sub-agent is bound by all the duties of the original agent. The sub-agent is
not directly responsible to the principal, except for fraud and wilful wrong. The
sub-agent is responsible to the original agent. The original agent is responsible
to the principal for the acts of the sub-agent.
Where an agent, holding an express or implied authority to name
another person to act for the principal in the business of agency, has
named another person accordingly, such person is an agent of the
principal for such part of the business of the agency is entrusted to