What is Breach of Contract? Distinguish between Actual Breach and Anticipatory Breach.
Breach of Contract.
Every contract imposes obligations on both the parties to it. When one of them fails or refuses to perform the obligations imposed upon him by the contract, this is known as breach of contract. The party causing breach of contract is called the ‘guilty party’ and the other party is called the ‘injured’ or ‘aggrieved party’. This breach confers upon the aggrieved party a right of action against the defaulter party. In some cases breach also discharges the injured party from performing his obligations under the contract.
Breach of contract may be of two kinds:
- Anticipatory Breach,
- Actual Breach.
When before the contract becomes due for performance, one of the parties to it shows his intention not to perform the contract, this is called anticipatory breach of contract. It is an announcement by one of the contracting parties of his intention not to fulfill the contract. It may take place by two ways:
By express repudiation: Under this one party to the contract communicates to the other party, before the performance is due, his intention not to perform it.
By creating some impossibility: A promisor may, before the time of performance arrives, by doing some act, make the performance of
his promise impossible.
Effect of an anticipatory breach: Anticipatory breach would give to the aggrieved party either of the following two options:
- He can treat the contract as rescinded and can bring an action for damages for breach of contract immediately without waiting till the due date for performance; or
- He may treat the contract operative till the date of performance arrives and to sue only after that date for damages for breach.
The option to sue at once or wait for performance lies with the aggrieved party.
When at the time of performance of contract one of the parties to the contract fails, neglects or refuses to perform or does not perform his obligations, such breach is said to be actual breach of contract. Actual breach can be of the following types:
On the due date of performance: Actual breach occurs when at the time of performance of contract, one party fails or refuses to perform his obligation. In such a case the other party is discharged from his obligation and can hold the defaulter party liable for damages for breach.
During the performance of the contract: This occurs when during the performance of the contract, one party refuses or fails to perform his obligations under the contract. This breach can be by express words (or act) or implied. In such cases the other party is discharged from further performance of the contract.