Contract Law - Term Paper
Contract Law - Term Paper
Contract Law - Term Paper
BREACH OF CONTRACT
A Term Paper
Submitted to:
Prof. Gyandarshan Bhattarai Sir
Course code:
Contract Law
Suveksha Panta
BALLB, 4th Semester, Section: C
Roll no: 101
Feburary 22, 2024
ACKNOWLEDGMENT
First of all, I would like to express my gratitude to Prof. Gyandarshan Bhattarai Sir, for providing me with this
opportunity to prepare a term paper on this topic of Remedies for
Breach of Contract. I enjoyed preparing this term paper, it pushes me to enhance my knowledge on this topic
and helped in improving my research skills.
TABLE OF CONTENTS
S.No. Contents Page No.
1. Introduction to Breach of Contract
2. Remedies of Breach of Contract
3. Types of Remedies of Breach of Contract
4. Conclusion
5. References
1. INTRODUCTION TO BREACH OF CONTRACT
Breach in simple words means the breaking of a duty or failure to honor a promise. Breach of contract means
the failure of a party to perform his obligations. The party committing a breach of contract is called the ‘guilty’
or ‘defaulting’ party and the other party is called the ‘injured’ or ‘aggrieved’ party. There are many ways to
breach a contract, common failures include failure to deliver goods or services, failure to fully complete the job,
failure to pay on time, or providing inferior goods or services.
Examples: a. ABC Company fails to deliver goods for XYZ Shop.
b. Tenant M violates lease with landlord N.
1.1. Breach of Contract in Nepalese Act : Section 535(1) of the Civil (Code) Act, 2074 contain that, the
contract is deemed to have been breached when:
a. Any party does not fulfill liability according to the contract,
b. Any party thereto renounces his liability under the contract,
c. Any party’s conduct / action shows his incapacity of performing the contract.
b. Anticipatory Breach of Contract: This occurs before the time of Performance. If X agrees to sell her car to Y
in Seven days, but on third day she sells her car to Z. this is an anticipatory breach of contract.
Cases: Hochster v De La Tour (1853): In this case, the claimant, Hochster, had been hired by the defendant,
De La Tour, as a tour guide for a three-month period starting in June. However, in May, before the
commencement of the contract, De La Tour informed Hochster that his services would no longer be required.
Hochster immediately sued De La Tour for breach of contract, even though the performance was not yet due.
The court ruled in favor of Hochster, recognizing that De La Tour's clear repudiation of the contract before the
commencement date amounted to an anticipatory breach. Hochster was entitled to treat the contract as
terminated immediately and to seek damages for the loss of income he would have earned during the contracted
period.
b. Forfeiture of bank guarantee: The aggrieved party may also forfeiture of bank guarantee as self-help
remedies to breach of contract by guilty party.
c. Recovery from advance or deposit: The victimized party can also recover his/her loss from advance or
deposit of defaulting party.
d. Exoneration: Exoneration, in the context of breach of contract, refers to a legal remedy that relieves a party
from its contractual obligations or liabilities when certain conditions are met. It typically arises when one party
has fulfilled its obligations under the contract, but the other party fails to perform, thereby freeing the
performing party from further obligations.
Cases: Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd (1962): In this case, Hong Kong Fir
Shipping Co. chartered a ship from Kawasaki Kisen Kaisha for a specified period. However, the ship turned out
to be unseaworthy and required extensive repairs, causing significant delays and financial losses to Hong Kong
Fir. Hong Kong Fir sued Kawasaki for breach of contract. The court held that Kawasaki had breached the
contract by providing an unseaworthy ship, which substantially deprived Hong Kong Fir of the benefit they
expected under the contract. Hong Kong Fir was entitled to damages for the losses suffered due to Kawasaki's
breach, and Kawasaki was not exonerated from liability.
2. Judicial Damages
Judicial remedies refer to the legal actions that a court may take to resolve disputes arising from breaches of
contract or other legal wrongs. These remedies are intended to provide relief to the aggrieved party and to
enforce the rights established under the law or the terms of the contract. Several judicial remedies are available
in cases of breach of contract:
a. Rescission of the contract (Sec.536):
Rescission is the process in which the party cancel the contract and are returned to their original state as though
the contract had never been formed. For example, A contracts B to supply 100 quintals of rice on a certain date.
B agrees to pay on delivery. A fails to deliver on the date fixed. B does not need to pay as the contract is
rescinded. In the same way the rescinding party can get compensation also if there is the loss or damage to him
by the breach of contract.
The basic reasons for rescission can be stated as follows:-
1) Innocent or Fraudulent representation; or
2) Mutual mistake; or
3) Lack of capacity to contract; or
4) An impossibility to perform a contract not contemplated by the parties; or
5) Duress; or
6) Undue influence.
Cases: Smith v. Hughes (1871): In this case, the plaintiff, Smith, agreed to purchase a quantity of oats
described as old oats. However, the oats delivered were new oats, which were of inferior quality and cheaper.
Smith argued that the contract should be rescinded because he believed he was buying old oats, and the
difference in quality was significant. The court held that there was no misrepresentation on the part of the seller
because the oats were accurately described as "old oats," which referred to the type of oats, not their age. As
there was no misrepresentation, rescission was not granted.
McRae v. Commonwealth Disposals Commission (1950): In this case, McRae agreed to purchase a ship from
the Commonwealth Disposals Commission based on the belief that it was seaworthy. However, it was later
discovered that the ship was not seaworthy as represented. McRae sought to rescind the contract due to the
misrepresentation. The court granted rescission, holding that there was a material misrepresentation regarding
the ship's condition, and McRae was entitled to rescind the contract.
b. Suit for Damages :
In Anglo American common law (smith and Robertson pg. 331) specific performance is not granted if -
1. There is an adequate remedy at law
2. It is impossible to enforce them
3. The seller has already sold the subject matter of the contract to an innocent third person
4. The contract is without consideration
5. Consideration is grossly inadequate
6. Contract is tainted with fraud, co-ercion, undue influence or other defect
7. The plaintiff is ready and able to perform
8. If the money damages are enough.
Unlike in continental legal system where an innocent party generally has a right to have the contract specifically
performed (Anson 633) but in English law it is a remedy in equity i.e. it is supplementary to the remedy of
money damages. Only in cases when grant of money damage is grossly inadequate as a remedy and the injured
party is without any adequate remedy at law. Only then suit for specific performance of the contract as an equity
remedy is entertained.
Cases: Beswick v. Beswick (1968): In this case, a nephew, Peter Beswick, agreed to purchase a coal business
from his uncle, William Beswick, in exchange for periodic payments to William's widow after his death. After
William's death, Peter refused to make the payments to the widow as agreed. The widow sought specific
performance of the agreement. The court granted specific performance, ordering Peter to make the payments to
the widow as stipulated in the agreement. Specific performance was deemed appropriate because monetary
damages would not adequately compensate the widow for the loss of her expected income.
Warner Bros. Pictures Inc. v. Nelson (1937): In this case, Bette Davis, an actress under contract with Warner
Bros. Pictures, refused to perform in a film as required by her contract. Warner Bros. sought specific
performance to compel Davis to fulfill her contractual obligations and perform in the film. The court granted
specific performance, ordering Davis to perform in the film as stipulated in her contract. Specific performance
was deemed appropriate because Davis's unique talents were integral to the film, and monetary damages would
not adequately compensate Warner Bros. for her non-performance.
f. Injunction (Sec. 541):
Injunction means an order of the court restraining (ordering) a person to refrain from doing something which he
promised not to do. The injunction is an order of the court to stop the contrary action to the contract of the
breaching party. It is also called preventive relief or stay order. An injunction is a Court order which orders a
company or person to stop doing (called a "prohibitory injunction") or to do (a "mandatory injunction") a
particular act or thing. This is also an equitable remedy to relieve the aggrieved party and the grant of an
injunction by the court is based on its discretion. This is only issued in the form of negative order (or not to do
the challenging thing or for restraining to do something).
For example: A lets certain land to B and B contracts not to dig sand. A may sue for an injunction to refrain B
from digging if B starts digging the land or violates the contract.
Injunctions are of three kinds -
1. Prohibitory injunction- (Lumley v Wagner)
2. Mandatory injunction-
3. Interlocutory or interim
Cases: American Broadcasting Companies, Inc. v. Aereo, Inc. (2014): In this case, American Broadcasting
Companies (ABC) sued Aereo, a company that streamed broadcast television content over the internet without
authorization, alleging copyright infringement. ABC sought a preliminary injunction to halt Aereo's
unauthorized streaming pending the outcome of the trial. The Supreme Court granted the injunction, holding
that Aereo's activities likely constituted copyright infringement and that ABC would suffer irreparable harm if
the injunction were not granted. The injunction effectively prevented Aereo from continuing its unauthorized
streaming operations until the trial concluded.
Apple Inc. v. Samsung Electronics Co. (2012): In this high-profile case, Apple sued Samsung for patent
infringement related to smartphone technology. Apple sought a permanent injunction to prohibit Samsung from
selling certain smartphone models found to infringe on Apple's patents. Although Apple initially succeeded in
obtaining a permanent injunction from the district court, the injunction was later overturned by the Federal
Circuit Court of Appeals. The appellate court held that the district court had abused its discretion in granting the
injunction, as Apple had not demonstrated that it would suffer irreparable harm without it.
Nepalese cases- NB hotel v Taj hotel, Lallan PD shah v DDC Parsa NKP 2067 verdict date 2066/2/10 etc
g. Arbitration
Arbitration in the context of breach of contract refers to a method of dispute resolution where the parties to a
contract agree to submit their dispute to an impartial third party, known as an arbitrator or arbitration panel,
instead of pursuing litigation in court. In cases of breach of contract, arbitration provides an alternative means
of resolving disputes without resorting to traditional court proceedings. When a breach of contract occurs, and
the parties have included an arbitration clause in their contract, they are bound by the terms of that clause.
Typically, the arbitration clause outlines the procedure for initiating arbitration, selecting arbitrators, conducting
the arbitration proceedings, and rendering a final decision or award.
AT&T Mobility LLC v. Concepcion (2011): In this case, customers sued AT&T Mobility over allegedly
fraudulent charges on their bills. AT&T invoked the arbitration clause in its contracts, which required disputes
to be resolved through individual arbitration rather than class action lawsuits. The customers argued that the
arbitration clause was unconscionable under California law. The Supreme Court ruled in favor of AT&T,
holding that the Federal Arbitration Act preempted state laws that invalidated arbitration agreements on the
grounds of unconscionability. The decision reaffirmed the enforceability of arbitration agreements, particularly
in the context of consumer contracts.
Stolt-Nielsen S.A. v. Animal Feeds International Corp. (2010): In this case, parties to a commercial contract
disagreed over whether their arbitration agreement permitted class arbitration. Animal Feeds International
sought to compel class arbitration, while Stolt-Nielsen argued that the agreement only allowed for individual
arbitration. The Supreme Court held that the arbitration panel had exceeded its authority by allowing class
arbitration when the agreement was silent on the issue. The Court emphasized the importance of party consent
in arbitration and held that class arbitration could not proceed absent explicit agreement by the parties.
4. CONCLUSION
Breach means violation of law. A breach of contract occurs when a party thereto renounces his liability under it,
or by his own act makes it impossible that he should perform his obligations under it or totally or partially fails
to perform such obligations. The person injured by a breach of contract can claim damages from the other party
for compensating the loss suffered. When a there is breach of contract, the injured party has one or more of
remedies including, suit for rescission, damages, injunction, specific performance, and quantum meruit. Mostly,
breach of contract is cause by the terms which are not clear in the contract. It is vital to make sure that the
parties are clear with the terms and regulations in the contract so that there will not have a breach of contract.
5. REFERENCES
1. Addis V. Gramophone Co. Notes. (n.d.). Retrieved from
https://www.oxbridgenotes.co.uk/revision_notes/bcl-law-oxford-commercial-remedies-bcl/sa mples/addis-v-
dot-gramophone-co
2. Quantum Meruit - Definition, Examples, Cases, Processes. (2015, October 05). Retrieved from
https://legaldictionary.net/quantum-meruit/
3. Remedies in contract law. (n.d.). Retrieved from http://e-lawresources.co.uk/Contract-remedies.php
4. CA. Sunil Joshi & CA. Mahesh Gyawali ‘Study Notes on Mercantile Laws for CAP-I’
5. REMEDIES_FOR_BREACH_OF_CONTRACT.pdf
6. Anson, ‘Contract Law’