contact breach of contract and its remedies in case of breach of contract

2. Presented To: Sir Zulqurnain Naqvi
Presented by : Faisal Hayat(03)
Mohammed Arif(09)
Asad Saleem(04)
Javad Ahmed(24)
Atif Rathore(20)
Junaid Saleem(21)

3. ContractContract
Ways of ContractWays of Contract
And remedies inAnd remedies in
case of breachcase of breach
of Contractof Contract

4. Contract
Any agreement or
promise enforceable
at law is a contract

5. What is Discharge of Contract ?What is Discharge of Contract ?
 ““Discharge of contract means theDischarge of contract means the
terminationtermination of a contractual relationshipof a contractual relationship
between parties”.between parties”.
 A contract is said to be discharged when itA contract is said to be discharged when it
ceases to operate , i.e. when theceases to operate , i.e. when the rightsrights &&
obligationobligation created by it come to an end.created by it come to an end.

6. For ExampleFor Example
 e.g. Two parties A & B Make a contract toe.g. Two parties A & B Make a contract to
build a fly-over in a City. A is the municipalbuild a fly-over in a City. A is the municipal
authority of the city & B is a constructionauthority of the city & B is a construction
company. Due to some reasons thecompany. Due to some reasons the
contract get discharged. Then the bothcontract get discharged. Then the both
parties are free from the obligations ofparties are free from the obligations of
contract, i.e. the rights & obligations of thecontract, i.e. the rights & obligations of the
parties come to an end.parties come to an end.

7. How a Contract can getHow a Contract can get
DischargedDischarged ??
1.1. By PerformanceBy Performance
2.2. By Agreement or by Consent.By Agreement or by Consent.
3.3. By Impossibility of performance.By Impossibility of performance.
4.4. By Promisee failing to offer facilities forBy Promisee failing to offer facilities for
performance.performance.
5.5. By DeathBy Death
A Contract may be discharged in any ofA Contract may be discharged in any of
the following way.the following way.

8. How a Contract can getHow a Contract can get
DischargedDischarged ??
6. By Refusing tender of performance.6. By Refusing tender of performance.
7. By Unauthorised material alteration of7. By Unauthorised material alteration of
contract.contract.
8. Discharge by lapse of time.8. Discharge by lapse of time.
9. By Operation of Law.9. By Operation of Law.
10. By Breach of Contract.10. By Breach of Contract.

9. 1.Discharge of Contract1.Discharge of Contract
By PerformanceBy Performance
 ““ If both parties to the contract haveIf both parties to the contract have
performed what they have agreed to do,performed what they have agreed to do,
the contract is discharged.”the contract is discharged.”
 Performance of obligation by parties to thePerformance of obligation by parties to the
contract puts an end to the contract.contract puts an end to the contract.

10.  e.g. in our previous example A & B had ae.g. in our previous example A & B had a
contract to build a fly-over. B build the fly-over incontract to build a fly-over. B build the fly-over in
the prescribed manner and A provides thethe prescribed manner and A provides the
consideration to B.consideration to B.
Here both parties performed their obligations &Here both parties performed their obligations &
rights , what they promised to do in the contract.rights , what they promised to do in the contract.
Thus the contract is come to an end by theThus the contract is come to an end by the
performance.performance.

11. 2. By Agreement or by Consent.2. By Agreement or by Consent.
 A Contract can be terminated orA Contract can be terminated or
discharged by mutual express ordischarged by mutual express or
implied agreement between theimplied agreement between the
parties in any of the following ways -parties in any of the following ways -

12.  A) By NovationA) By Novation
 B) By Accord and SatisfactionB) By Accord and Satisfaction
 C) By Remission and WaiverC) By Remission and Waiver
 D). By Rescission.D). By Rescission.

13. A) By NovationA) By Novation
 ““ If the parties to a contract agree to substituteIf the parties to a contract agree to substitute
a new contract for it , or to rescind or alter it, thea new contract for it , or to rescind or alter it, the
original contract need not to be performed”.original contract need not to be performed”.
 That means When a new contract is substitutedThat means When a new contract is substituted
for an existing contract, either between the samefor an existing contract, either between the same
parties or b/w the different parties ‘novation’parties or b/w the different parties ‘novation’
occurs.occurs.

14.  Novation means “the wiping out of theNovation means “the wiping out of the
original contract as well as the creating oforiginal contract as well as the creating of
a new valid contract”.a new valid contract”.
If the new agreement is invalid itIf the new agreement is invalid it
cannot serve as novation, and the originalcannot serve as novation, and the original
contract continues unless the rights therecontract continues unless the rights there
under are expressly abandoned.under are expressly abandoned.

15. Novation may occur in two ways -Novation may occur in two ways -
 I. New party is substituted for the oldI. New party is substituted for the old
one.one.
 e.g. A owes money to B under a contract. It ise.g. A owes money to B under a contract. It is
agreed b/w A, B and C that B shall henceforthagreed b/w A, B and C that B shall henceforth
accept C as his debater instead of A. The oldaccept C as his debater instead of A. The old
debt of A to B is at end and a new debt from C todebt of A to B is at end and a new debt from C to
B has been contracted.B has been contracted.

16. II. Parties may substituted newII. Parties may substituted new
contract for the old one.contract for the old one.
 e.g. A owes B Rs. 10,000. A enters intoe.g. A owes B Rs. 10,000. A enters into
an agreement with B, and gives B aan agreement with B, and gives B a
mortgage of his (A’s) estate for Rs. 5,000mortgage of his (A’s) estate for Rs. 5,000
in the place of the debt of Rs. 10,000. Thisin the place of the debt of Rs. 10,000. This
is a new contract which extinguishes theis a new contract which extinguishes the
old one.old one.

17. B) By Accord and SatisfactionB) By Accord and Satisfaction
 ““Every promise may dispense with or remit theEvery promise may dispense with or remit the
performance of promise made to him andperformance of promise made to him and
accept, instead of it, any satisfaction which heaccept, instead of it, any satisfaction which he
thinks fit.”thinks fit.”
 In other words “When a lesser sum is actuallyIn other words “When a lesser sum is actually
paid than what is due under an existing contract,paid than what is due under an existing contract,
the new contract is called ‘accord’ & the actualthe new contract is called ‘accord’ & the actual
payment is called ‘ Satisfaction’.payment is called ‘ Satisfaction’.

18.  e.g. Ali has an postpaid mobile connectione.g. Ali has an postpaid mobile connection
of AIRTEL. A bill of his mobile is of Rs.of AIRTEL. A bill of his mobile is of Rs.
1245.00, which he seems more than the1245.00, which he seems more than the
actual bill.actual bill.
thus he register a complain with AIRTEL.thus he register a complain with AIRTEL.
The AIRTEL officials offers him to pay Rs.The AIRTEL officials offers him to pay Rs.
1200 as a settlement. Here Rs. 1245.00 is1200 as a settlement. Here Rs. 1245.00 is
accord & Rs. 1200.00 is satisfaction.accord & Rs. 1200.00 is satisfaction.

19. C) By Remission and WaiverC) By Remission and Waiver
 ““When a party to the contract abandons orWhen a party to the contract abandons or
waiver his rights, the contract iswaiver his rights, the contract is
discharged”.discharged”.
e.g. A promise to paint picture for B. Be.g. A promise to paint picture for B. B
afterwards forbid him to do so. A is noafterwards forbid him to do so. A is no
longer bound to perform the promise.longer bound to perform the promise.

20. D). By Rescission.D). By Rescission.
 ““When a person at whose option a contract isWhen a person at whose option a contract is
voidable rescinds it, the other party theretovoidable rescinds it, the other party thereto
need not perform his promise”. He is dischargedneed not perform his promise”. He is discharged
from his liability under the contract.from his liability under the contract.
 Rescission may occur by mutual consent of theRescission may occur by mutual consent of the
parties or when one party fails to perform hisparties or when one party fails to perform his
obligation the other party may rescind theobligation the other party may rescind the
contract. Rescission of a contract cannot be incontract. Rescission of a contract cannot be in
part only. The entire contract must rescinded.part only. The entire contract must rescinded.

21. e.g.e.g.
 1. A induces B to enter into a contract by1. A induces B to enter into a contract by
fraud. The contract is voidable at thefraud. The contract is voidable at the
option of B. He may, therefore, rescind theoption of B. He may, therefore, rescind the
contract.contract.

22. 3. By Impossibility of performance.3. By Impossibility of performance.
 ““When the performance of a contractWhen the performance of a contract
becomes subsequently impossible, thebecomes subsequently impossible, the
contract becomes void”.contract becomes void”.
 It means that an agreement to do an actIt means that an agreement to do an act
impossible in itself is void.impossible in itself is void.

23. e.g. A promises B to sell his horse on 1e.g. A promises B to sell his horse on 1stst
June, butJune, but
before the day, the horse dies. Now itsbefore the day, the horse dies. Now its
impossible to fulfill the promise due toimpossible to fulfill the promise due to
impossibility of performance.impossibility of performance.
Such type of impossibilities in which at a time ofSuch type of impossibilities in which at a time of
contract, contract was capable of beingcontract, contract was capable of being
performed, but subsequently its performanceperformed, but subsequently its performance
becomes impossible is called “becomes impossible is called “ SUPERVENINGSUPERVENING
IMPOSSIBILITY” .IMPOSSIBILITY” .

24. 4. By Promisee failing to offer4. By Promisee failing to offer
facilities for performance.facilities for performance.
 ““If the promisee neglect or refuses toIf the promisee neglect or refuses to
afford the promisor reasonable facilities forafford the promisor reasonable facilities for
the performance of his promise, thethe performance of his promise, the
promisor is excused by such neglect orpromisor is excused by such neglect or
refusal to any non-performance causedrefusal to any non-performance caused
thereby”.thereby”.

25.  e.g. A contracts with B to repairs B’se.g. A contracts with B to repairs B’s
house. B neglect or refuse to point out tohouse. B neglect or refuse to point out to
A the places in which his house requiresA the places in which his house requires
repair. A is excused for the non-repair. A is excused for the non-
performance of the contract, if it is causedperformance of the contract, if it is caused
by such neglect or refusal.by such neglect or refusal.

26. 5. By Death5. By Death
 ““ Where a contract is personal inWhere a contract is personal in
character, or where personal skill or abilitycharacter, or where personal skill or ability
is involved, death of the promisoris involved, death of the promisor
discharge the contract”.discharge the contract”.

27.  e.g. A promises to paint a picture for B bye.g. A promises to paint a picture for B by
a certain day. A dies before the day. Thea certain day. A dies before the day. The
contract cannot be enforced either by A’scontract cannot be enforced either by A’s
representative or by B.representative or by B.

28. 6. By Refusing tender of6. By Refusing tender of
performanceperformance..
 – “– “If a party offers to perform his promise and theIf a party offers to perform his promise and the
offer has not been accepted by the other party,offer has not been accepted by the other party,
the promisor is not responsible for non-the promisor is not responsible for non-
performance.”performance.”
 In other words refusal to accept “offer ofIn other words refusal to accept “offer of
performance”, discharge the party making theperformance”, discharge the party making the
offer.offer.

29. 7. By Unauthorized material7. By Unauthorized material
alteration of contract.alteration of contract.
 In cases of material alteration by one party to theIn cases of material alteration by one party to the
contract without the consent of the other party, thecontract without the consent of the other party, the
contract is discharged.contract is discharged.
 e.g. A and B have a contract of partnership, accordinge.g. A and B have a contract of partnership, according
to contract the profit share would be distributed in theto contract the profit share would be distributed in the
ratio of 50:50. Without the consent of B, A made anratio of 50:50. Without the consent of B, A made an
alteration in the contract and change the shares in ratioalteration in the contract and change the shares in ratio
60:40 or introduce a new partner C.60:40 or introduce a new partner C.
In this case the contract get discharged & B is free fromIn this case the contract get discharged & B is free from
any type of obligations & has right to sue A.any type of obligations & has right to sue A.

30. 88. Discharge by lapse of time. Discharge by lapse of time..
 Contract is discharged also by lapse of time.Contract is discharged also by lapse of time.
 If the creditor does not file a suit to recover hisIf the creditor does not file a suit to recover his
debt amount from a debtor within a period ofdebt amount from a debtor within a period of
limitation as laid down under the Limitation Act,limitation as laid down under the Limitation Act,
his remedy is debarred.his remedy is debarred.
 The contract is terminated by virtue of theThe contract is terminated by virtue of the
Limitation Act and the creditor cannot recoverLimitation Act and the creditor cannot recover
his debt.his debt.

31. exampleexample
 For example – the period of limitation toFor example – the period of limitation to
file a money suit is 3 years. If within 3file a money suit is 3 years. If within 3
years the creditor fails to file a suit toyears the creditor fails to file a suit to
recover his amount, the debtor isrecover his amount, the debtor is
discharged.discharged.

32. 9. By Operation of Law9. By Operation of Law
 ““A contract is discharged orA contract is discharged or
terminated by the operation of law,terminated by the operation of law,
in the following cases –in the following cases –
 (i) By insolvency or bankruptcy(i) By insolvency or bankruptcy
 (ii) By merger.(ii) By merger.

33. (i) By insolvency or bankruptcy(i) By insolvency or bankruptcy
 On a person adjudicated insolvent, he isOn a person adjudicated insolvent, he is
released from all his debts & liabilitiesreleased from all his debts & liabilities
probable in the insolvency.probable in the insolvency.
 The rights and liabilities are transferred toThe rights and liabilities are transferred to
an Official Receiver under the Provincialan Official Receiver under the Provincial
Insolvency Act.Insolvency Act.
 The insolvent is discharged from allThe insolvent is discharged from all
obligations arising from all his earlierobligations arising from all his earlier
contract.contract.

34. (ii) By merger.(ii) By merger.
 Merger of superior right into an inferior right.Merger of superior right into an inferior right.
 For example,For example,
 (1)when a higher security is accepted in the(1)when a higher security is accepted in the
place of the lower security. Inferior or lowerplace of the lower security. Inferior or lower
security vanishes or merge into a highersecurity vanishes or merge into a higher
security.security.
an ordinary debt is merged into a mortgage,an ordinary debt is merged into a mortgage,
higher security. The right of lessee is changedhigher security. The right of lessee is changed
into a right of ownership.into a right of ownership.

35. 10. By Breach of Contract10. By Breach of Contract
 ““When a party to a contract has refused toWhen a party to a contract has refused to
perform, or disable himself fromperform, or disable himself from
performing his promise in its entirety, theperforming his promise in its entirety, the
promise may put an end to the contract.”promise may put an end to the contract.”
 In other words – “Breach of contractIn other words – “Breach of contract
occurs where a party refuses to performoccurs where a party refuses to perform
his part of the promise.his part of the promise.

36. Breach of Contract may be -Breach of Contract may be -
 (i) Actual breach of contract.(i) Actual breach of contract.
 (ii) Anticipatory breach of contract.(ii) Anticipatory breach of contract.

37. (i) Actual breach of contract(i) Actual breach of contract..
 The actual breach occurs when during the performanceThe actual breach occurs when during the performance
of the contract or at the time when the performance ofof the contract or at the time when the performance of
contract is due, one party either fails or refuse to performcontract is due, one party either fails or refuse to perform
his obligation under the contract.his obligation under the contract.
 e.g. A agrees to deliver to B 5 bags of sugar on 1e.g. A agrees to deliver to B 5 bags of sugar on 1stst
Jan.,Jan.,
He fails to do so on 1He fails to do so on 1stst
Jan, There is a breach of contractJan, There is a breach of contract
by A.by A.
 In the above example, if A tenders the sugar to B on theIn the above example, if A tenders the sugar to B on the
particular day, But B for no valid reason refuses toparticular day, But B for no valid reason refuses to
accept delivery, this is a breach of contract by Baccept delivery, this is a breach of contract by B

38. (ii) Anticipatory breach of(ii) Anticipatory breach of
contractcontract..
 When a party to contract refuse to performWhen a party to contract refuse to perform
his part of the contract before the actualhis part of the contract before the actual
time of the performance of the contract istime of the performance of the contract is
due, it is called an ‘anticipatory breach ofdue, it is called an ‘anticipatory breach of
contract’.contract’.

39. Anticipatory breach of contract mayAnticipatory breach of contract may
be -be -
 (a)(a) By repudiation of contractBy repudiation of contract
(express renunciation).(express renunciation). oror
 (b)(b) By impossibility of performanceBy impossibility of performance
(implied renunciation).(implied renunciation).

40. (a)(a) By repudiation of contractBy repudiation of contract
(express renunciation).(express renunciation).
 ““when a party communicates his inabilitywhen a party communicates his inability
to perform his part of the contract beforeto perform his part of the contract before
the time fixed for the actual performance isthe time fixed for the actual performance is
due, he is said to have expresslydue, he is said to have expressly
renunciation.”renunciation.”

41. (b)(b) By impossibility of performanceBy impossibility of performance
(implied renunciation).(implied renunciation).
 When the breach take place by eitherWhen the breach take place by either
party to contract by his own voluntary act,party to contract by his own voluntary act,
which makes performance of contract,which makes performance of contract,
Anticipatory breach of contract isAnticipatory breach of contract is
committed by impossibility of performance.committed by impossibility of performance.
It is a case of implied renunciation of aIt is a case of implied renunciation of a
contract.contract.

42. Example of anticipatory breach ofExample of anticipatory breach of
contract -contract -
 A promises to sell his car to be on beforeA promises to sell his car to be on before
11stst
May, but before 1May, but before 1stst
May, A sells his carMay, A sells his car
to C. Here A had performed such ato C. Here A had performed such a
voluntary act that the performance of hisvoluntary act that the performance of his
obligation towards B is impossible andobligation towards B is impossible and
therefore, “Anticipatory breach bytherefore, “Anticipatory breach by
impossibility” is committed.impossibility” is committed.

43. Remedies for Breach ofRemedies for Breach of
ContractContract
 1. Suit for specific performance1. Suit for specific performance
 2. Suit for injunction2. Suit for injunction
 3. Suit for damages for the loss sustained3. Suit for damages for the loss sustained
 4. Quantum Merit4. Quantum Merit

44. Suit for Specific PerformanceSuit for Specific Performance
 In this case , the Court directs the partyIn this case , the Court directs the party
committing the breach of Contract tocommitting the breach of Contract to
perform the promise according to theperform the promise according to the
terms of Contract. Specific Performance ofterms of Contract. Specific Performance of
the Contract can be granted underthe Contract can be granted under
Specific Relief Act 1877Specific Relief Act 1877

45.  Specific Performance can be granted onlySpecific Performance can be granted only
when damages are an inadequate remedywhen damages are an inadequate remedy
or when the Court can supervise theor when the Court can supervise the
execution of Contract, or when theexecution of Contract, or when the
Contract is Certain , Fair and Just.Contract is Certain , Fair and Just.
 Specific Performance cannot be enforcedSpecific Performance cannot be enforced
of the Contracts of Personal Serviceof the Contracts of Personal Service

46. ExampleExample
 A agrees to buy and B agrees to Sell aA agrees to buy and B agrees to Sell a
picture and two China Vasespicture and two China Vases
 A may Compel B specifically to performA may Compel B specifically to perform
the Contract for there is no Standard forthe Contract for there is no Standard for
ascertaining the actual damage whichascertaining the actual damage which
would be caused by its non performancewould be caused by its non performance

47. Suit for InjunctionSuit for Injunction
 An injunction is an order of the CourtAn injunction is an order of the Court
directing a person to do or to refrain fromdirecting a person to do or to refrain from
doing some act, which is subject matter ,doing some act, which is subject matter ,
Court can on a suit restrain a party by anCourt can on a suit restrain a party by an
order of injunction from Committing theorder of injunction from Committing the
breach. The power of Court isbreach. The power of Court is
discretionary and can be granted for adiscretionary and can be granted for a
temporary or an indefinite period.temporary or an indefinite period.

48.  A singer contracts with B the Manager ofA singer contracts with B the Manager of
a theatre to Sing at his theatre for onea theatre to Sing at his theatre for one
year and to abstain from Singing at otheryear and to abstain from Singing at other
theatres during the theatre.theatres during the theatre.
 She absents herself , B cannot compel AShe absents herself , B cannot compel A
to sing at his theatre, but he may sue herto sing at his theatre, but he may sue her
for an injunction restraining her fromfor an injunction restraining her from
Singing at other theatres .Singing at other theatres .

49. Suit for damages for the lossSuit for damages for the loss
sustainedsustained
 In case of a breach of Contract , injuredIn case of a breach of Contract , injured
party can claim damages for the lossparty can claim damages for the loss
caused by the breach of Contractcaused by the breach of Contract
 Damages are given by the way ofDamages are given by the way of
restitution and as a monetaryrestitution and as a monetary
compensation to the injured party.compensation to the injured party.

50.  The aggrieved party can recover theThe aggrieved party can recover the
actual loss caused to him by the breach ofactual loss caused to him by the breach of
Contract. And not any unusual damages.Contract. And not any unusual damages.
For Example :For Example :
1. A contracts to repair B’s house in a1. A contracts to repair B’s house in a
certain manner and receives payments incertain manner and receives payments in
advance. A repairs the house but notadvance. A repairs the house but not
according to the Contract. B is entitled toaccording to the Contract. B is entitled to
recover from A , the Cost of making therecover from A , the Cost of making the
repairs conforming to the Contractrepairs conforming to the Contract

51. Quantum MeruitQuantum Meruit
Quantum Meruit means as much as he hasQuantum Meruit means as much as he has
earned Where one person has expresslyearned Where one person has expressly
or impliedly requested another to renderor impliedly requested another to render
him a service without specifying anyhim a service without specifying any
remuneration but the circumstances of theremuneration but the circumstances of the
request imply that the Service is to be paidrequest imply that the Service is to be paid
for there is implied promise to payfor there is implied promise to pay
quantum Meruit that is so much as thequantum Meruit that is so much as the
party doing the service deservesparty doing the service deserves

52. Types of DamagesTypes of Damages
1.1. Compensatory Damages :Compensatory Damages :
 These damages are calculated to actuallyThese damages are calculated to actually
Compensate or make up the loss sufferedCompensate or make up the loss suffered
by the partyby the party

53. ExampleExample
 A who owes money to B a money lenderA who owes money to B a money lender
undertakes to repay him by delivering himundertakes to repay him by delivering him
10 mounds of grain on a certain date and10 mounds of grain on a certain date and
stipulates that in the event of his notstipulates that in the event of his not
delivering the stipulated amount by thedelivering the stipulated amount by the
stipulated date, he shall be liable to deliverstipulated date, he shall be liable to deliver
20 pounds. This is a stipulation by way of20 pounds. This is a stipulation by way of
penalty , and B is only entitled topenalty , and B is only entitled to
reasonable Compensation in case ofreasonable Compensation in case of
BreachBreach

54. 2.Nominal Damages2.Nominal Damages
 Damages which naturally arise in theDamages which naturally arise in the
usual course of things from the breach areusual course of things from the breach are
called nominal damages.called nominal damages.
 It is in the discretion of the Court whetherIt is in the discretion of the Court whether
to allow or refuse damages. Damagesto allow or refuse damages. Damages
should however be actually suffered .should however be actually suffered .

55. 3.Exemplary Damages3.Exemplary Damages
 Losses which arise due to remoteorLosses which arise due to remoteor
indirect consequences are not allowed.indirect consequences are not allowed.
Exemplary damages are granted forExemplary damages are granted for
Injured feelings, mental pain , sufferingInjured feelings, mental pain , suffering
etc.etc.
 For e.g. Breach of Contract of Marriage,For e.g. Breach of Contract of Marriage,
Banker fusing to honor the Cheque of hisBanker fusing to honor the Cheque of his
Client having sufficient funds etcClient having sufficient funds etc

56. 4.Special Damages4.Special Damages
 These arise on account of unusualThese arise on account of unusual
circumstances. Special damages can becircumstances. Special damages can be
recovered only if Stipulated in therecovered only if Stipulated in the
Contract. Parties to the Contract mustContract. Parties to the Contract must
know of the damages likely to result fromknow of the damages likely to result from
the Breach. Special damages are grantedthe Breach. Special damages are granted
when the parties know at the time ofwhen the parties know at the time of
making the Contract that the Special lossmaking the Contract that the Special loss
or damage would result or is likely to resultor damage would result or is likely to result
from the Breach of Contractfrom the Breach of Contract