A breach is a failure by a party to fulfil the obligations under a contract. It is of two types, namely, anticipatory breach and actual breach. In this article, we will focus on understanding both types of breaches with the help of some examples.
Anticipatory Breach of Contract
As the name suggests, an anticipatory breach is a breach of contract before the time of performance. So, if a promisor denies to perform his promise and signifies his unwillingness before the time for performance, then it is an anticipatory breach of contract.
The promisor can convey his unwillingness either by:
- Expressing it in words (spoken or written)
- Implying it by his conduct
Let us look at an example. Peter enters into a contract with John on May 30, 2018. In the contract, Peter agrees to sell his house to John provided he receives a token amount of Rs 5,00,000 from John on or before June 30, 2018. However, on June 15, 2018, John informs Peter that he will not be able to provide the token amount on the said date, thereby expressing rejection of the contract.
Here is another example. Peter enters into a contract with John on June 01, 2018. As per the contract, Peter agrees to sell his guitar to John on June 10, 2018, for an amount of Rs 5,000. However, he sells this guitar to Oliver on June 07, 2018. Hence, it is an anticipatory breach of contract due to Peter’s conduct.
The anticipatory breach of contract is specified under Section 39 of the Indian Contract Act, 1872. It states: “When a party to a contract has refused to perform or disable himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified, but words or conduct, his acquiescence in its continuance.”
When a promisor refuses to perform his promise leading to an anticipatory breach of contract, the promisee is excused from performance or from further performance of his obligations. Also, he can either:
- Treat the contract as cancelled and file a suit against the other party for damages arising from the breach. This suit can be filed immediately without waiting until the date of performance specified in the contract.
- Choose not to cancel the contract but treat it as an operative and wait until the time of performance has passed before holding the other party responsible for the damages caused due to non-performance. However, he will need to keep the contract alive for the benefit of all parties involved.
Actual Breach of Contract
While an anticipatory breach is before the time of performance, an actual breach of contract is on the scheduled time of performance of the contract. An actual breach of contract can be committed either:
1] At the time when the Performance of the Contract is Due
Peter enters into a contract with John promising to deliver 50 bags of cotton to him on June 30, 2018. However, on the scheduled day, he fails to deliver the same. This is an actual breach of contract. Also, this breach is at the time the performance of the contract is due.
2] During the Performance of the Contract
An actual breach of contract can also occur when one party fails to perform his obligation, during the performance of the contract. This refusal can be expressed in words or by action.
Solved Example on Anticipatory Breach
Q1. Peter is a singer. He enters into a contract with John who is the manager of a music club. As per the terms of the contract, Peter promises to sing every Friday and Saturday night for two hours during the next six months, in exchange for a payment of Rs 2,000 per hour. On the fifth night, Peter wilfully absents himself. Can John end the contract?
Answer: Yes. John can end the contract and file a suit for damages since Peter has sown his unwillingness to perform the contract through his conduct.
Q2. In the same case above, John allows Peter to sing on the sixth night despite his unplanned absence on the fifth night. Can John end the contract and sue Peter for damages?
Answer: In this case, since John expresses his consent for the continuance of the contract through his actions, he cannot end the same. However, he is entitled to compensation for the damages sustained by him arising due to Peter’s unavailability on the fifth night.