Chapter 4 of the Indian Contract Act, 1872, from sections 37 to 67, deals with the performance of contracts.
Once a contract is made, it becomes obligatory for the parties to perform the contract or fulfil the conditions of the contract. The obligation or liability of the parties can be terminated (discharged) under certain circumstances.
The concept of discharge of contract under the Indian Contract Act provides for certain modes of discharge, which means the termination of liability of the parties under the contract.
According to the Indian Contract Act, the liability of the parties comes to an end when the object of the contract is fulfilled.
The modes of discharge provided under the Indian Contract Act are:
- Discharge by performance
- Discharge by breach
- Discharge by novation
- Discharge by the impossibility of the act
- Discharge by operation of law
Discharge by Breach
The failure to perform the contract or to breach any condition of the contract is known as discharge by breach of contract. The discharge by breach of contract is of two kinds:
- Anticipatory breach
- Actual breach
This law note covers anticipatory breach of contract.
Meaning of Anticipatory Breach
Anticipatory Breach of Contract means a breach done before the date of performance of the contract. When prior to the due date of the performance of the contract, there is absolute repudiation (to say that you refuse to accept something) of the contract.
Example: Sanjay has to supply 10kg of rice to Prakash on 1st July. But Sanjay informed Prakash on 15th June that he will not perform the contract on 1st July. Here, he has made an anticipatory breach of contract.
Anticipatory Breach of Contract Under the Indian Contract Act
Section 39 of the Indian Contract Act deals with Anticipatory Breach of Contract. According to this section, when a party to a contract refused to perform or has disabled himself from performing (fulfilling) his promise in its whole, the promisee may put an end to the contract unless he has signified, by words, or conduct his acceptance in its continuance.
Anticipatory breach of contract is made by the promisor and may be done in two ways:
- By the refusal of performance
- By disabling himself from performance
Effect of Anticipatory Breach of Contract
When there is an anticipatory breach of contract by one party, the other party has the following two options:
- He may cancel the contract immediately.
- He may appoint another day of performance, which means that the other party may not put an end to the contract, but he may signify by his words or conduct to wait for the performance of the contract on another day.
Case Laws Related to Anticipatory Breach of Contract:
Hochster vs De La Tour (1853): In this case, Lord Campbell held that as soon as the anticipatory breach occurs, the other party has an immediate right of action. It may either sue immediately or wait till the time the act was to be done.
Frost vs Knight (1872): In this case, it was held that even when the performance of a contract is conditional upon the happening of a contingency, an immediate action for damages will lie if, before the happening of the contingency, the promiser disables himself from the performance of the contract.
Avery vs Bowden (1855): In this case, it was held that while the contract is lying open, some event happens by which discharges a contract other than by repudiation, for example, by supervening impossibility or by frustration, the promiser would also be entitled to take advantage of the changed circumstances.
Note: The citations for the above three case laws are taken from the book Contract and Specific Relief by Avtar Singh.
Conclusion
The anticipatory breach is an announcement by the contracting party of his intention not to put in the contract and that he will no longer be bound by it, nor is the other party bound by the terms of the contract. Instead, the innocent party is excused from further performance of the contract.
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