What Is A Breach Of Contract In India?
A breach of contract occurs when one party fails to fulfill its contractual obligations as agreed. In India, all contracts are governed by the Indian Contract Act, 1872, which defines what constitutes a valid agreement and the remedies for a breach. Simply put, a breach happens when the promised performance is not delivered on time or as promised. This can mean non-performance, delay or inadequate performance of the contract terms and so on.
Key Elements of a Breach Claim
For any breach claim, two basic elements must exist: (1) a valid, enforceable contract and (2) a failure of one party to perform its promised duty under that contract.
A valid contract requires offer, acceptance, lawful consideration and intent to create legal relations. Under Section 37 of the Indian Contract Act, 1872, each party is obligated to perform or at least offer to perform their contractual promises. If one party “refuses or fails to fulfill the promise” without lawful excuse, that non-performance constitutes a breach of contract. In short, without a legally binding contract and a wrongful failure to perform, there can be no breach claim.
Each party’s duties must therefore be clearly defined in the agreement. If one side unequivocally indicates it will not perform, or simply does not perform when due, the contract is considered broken. In India, this foundational principle (that contracts must be honoured) is codified in Section 37, which makes failure to perform a promise a breach.
Legal Obligations Under Section 37 and Section 39 of the Indian Contract Act
To understand breach of contract in India in detail, it’s important to examine two pivotal provisions of the Indian Contract Act, 1872 – Section 37 and Section 39. These sections lay the groundwork for the rights and responsibilities of contracting parties and offer clarity on what happens when those duties are not fulfilled.
Section 37 – Obligation of Parties to Perform
Section 37 states:
“The parties to a contract must either perform, or offer to perform, their respective promises, unless such performance is dispensed with or excused under the provisions of this Act, or of any other law.”
This means that all contracting parties are legally bound to fulfill their contractual obligations unless:
- The contract itself allows for a waiver or exemption,
- Or legal circumstances excuse the non-performance.
Failure to perform or even to tender performance (i.e., the act of offering to perform) gives the other party grounds to claim breach of contract.
Section 37 confirms that a breach arises the moment a party fails to act as promised—unless legally excused.
Section 39 – Refusal to Perform and Its Consequences
Section 39 explains the implications of anticipatory breach:
“When a party to a contract has refused to perform, or disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has signified… willingness to continue with it.”
This clause deals directly with anticipatory breaches (covered in the next section), where a party refuses performance before it is due. The aggrieved party can treat the contract as terminated immediately and seek remedies.
These sections establish that in Indian law, a breach does not need to wait for the deadline to lapse—a clear refusal to perform, or partial/inadequate performance, can be enough to constitute a breach.
In the case of Satyabrata Ghose v. Mugneeram Bangur & Co.,[1] the Supreme Court emphasized that contracts are meant to be honoured unless performance is rendered impossible by supervening events, aligning with the principles of Sections 37 and 39.
Types of Breach of Contract: Anticipatory vs. Actual, Minor vs. Material
Understanding the types of breach of contract helps in determining legal strategy, remedies, and the urgency with which a party must act. Under Indian contract law, breaches fall into several categories, each carrying different consequences. For business owners and the general public, knowing these distinctions helps in assessing risk and deciding when to involve a breach of contract lawyer in Delhi NCR or elsewhere.
1. Anticipatory Breach of Contract
An anticipatory breach of contract occurs when one party clearly communicates—through words or conduct—its intention not to perform the contract before the performance is actually due.
Under Section 39, such refusal allows the aggrieved party to:
- Terminate the contract immediately, or
- Continue to remain bound and wait for the performance date.
Example:
If a supplier informs a business that they will not deliver goods one week before the due date, this is an anticipatory breach.
Anticipatory vs. Actual Breach Explanation:
Anticipatory breach happens before performance is due, based on refusal or impossibility.
Actual breach occurs on or after the due date, when the promised act is not performed.
Anticipatory breaches provide earlier access to remedies, preventing further losses.
2. Actual Breach of Contract
An actual breach occurs when a party:
- Fails to perform on the due date, or
- Performs incompletely or defectively.
This is the most common form of breach of contract India deals with in commercial transactions—such as delayed services, defective deliveries, or failed payments.
3. Minor Breach of Contract (Non-Material Breach)
A minor breach occurs when a party performs its primary obligations but fails to meet a small part of the agreement. This doesn’t defeat the overall purpose of the contract.
Minor breach of contract meaning:
A minor breach does not undermine the contract’s core purpose, but the injured party may still claim compensation for the specific loss caused.
Example:
A contractor finishes a project but uses a different paint brand than specified—without affecting quality.
Remedies are limited to damages and do not permit termination of the entire contract.
4. Material Breach of Contract
A material breach of contract is a serious violation that goes to the root of the agreement and substantially deprives the aggrieved party of the benefit of the contract.
Examples include:
- Failure to deliver essential goods,
- Significant deviation from contractual specifications,
- Non-payment of the major part of consideration.
A material breach allows the injured party to:
- Terminate the contract,
- Claim damages,
- Seek specific performance (in some cases).
Indian courts assess whether the breach affected the core intention of the parties.
Remedies & Why Legal Counsel In Breach Of Contract Matters
When a breach of contract India dispute arises, the law provides several remedies designed to place the aggrieved party in the position they would have been had the contract been performed. The remedy you pursue often depends on whether the breach was minor, material, anticipatory, or actual.
1. Damages (Monetary Compensation)
The most common remedy damages compensate the injured party for losses suffered due to the breach. Depending on the nature of the breach, courts may award:
- Ordinary damages (direct losses),
- Special damages (indirect losses known to both parties),
- Nominal damages (when a breach occurred but no substantial loss is proven).
In commercial cases, damages are often preferred because they provide swift financial redress.
2. Specific Performance
Under the Specific Relief Act, a court may order the breaching party to fulfill their contractual obligations. This remedy is often sought when:
- The subject matter is unique (e.g., real estate),
- Monetary compensation is inadequate.
Material breaches, especially involving real estate or high-value contracts, frequently see specific performance litigation.
3. Injunctions
Courts may grant preventive or mandatory injunctions to:
- Stop a party from acting contrary to the contract, or
- Compel a party to comply with specific terms.
This is common in non-compete disputes, IP agreements, and franchise contracts.
4. Contract Termination
Material and anticipatory breaches allow the innocent party to terminate the contract and seek damages. Termination must be exercised carefully, as wrongful termination can itself result in liability.
Why You Should Consult a Breach of Contract Lawyer in Delhi NCR
Contract disputes are rarely straightforward. Whether a breach is actionable, what remedies are available, and how damages should be quantified depend on the contract’s wording, the intent of the parties, the nature of the breach, the timeline of events and the applicable statutory provisions.
A breach of contract lawyer in Delhi NCR can help interpret your contract, assess whether the breach is minor or material, advise whether to terminate or continue the contract, gather evidence for damages and negotiate settlements or represent you in court.
Conclusion
Understanding what is breach of contract under Indian law requires clarity on legal obligations under Sections 37 and 39 of the Indian Contract Act, as well as how different types of breaches.
For businesses and individuals alike, recognizing these differences allows you to respond promptly and protect your contractual rights. Given the complexities involved, seeking professional guidance from an experienced breach of contract lawyer is not just advisable—it is often essential to safeguarding your interests.
