What is a breach of contract?

Movie Case Study

The above scene shows how Rahul Malhotra (Played by Aamir khan) is about to breach the contract with Mr. Bijlani (played by Dilip Tahil). He needs to deliver the assignment within 15 days but he is in no position to complete the order. He is asking for more money from Mr. Bijlani. However, Mr. Bijlani wants Rahul to comply with the contract and deliver the assignment on time. This blog, Learning Perspectives will explore the meaning of breach of contract.

What is a breach of contract?

Mr. Bijlani has given a contract to Rahul Malohtra’s factory to provide a batch of shirts. For this order, he has already paid Rs. 12,00,000 and given Rs. 5,00,000 of cloth material. The order isn’t completed and more money and material are required.

Rahul Malhotra finds himself in a difficult situation because the contract was signed between Mr. Bijlani and Rahul Malhotra’s brother-in-law. Unfortunately, Rahul’s sister and brother-in-law passed away in a car accident. Now, Rahul has replaced his brother-in-law in his factory.

A breach of contract is the breaking of a promise or violation of terms and conditions that are mentioned in the contract. This breach can include late payment, agreed assignment not being delivered, not delivering on time, etc. Since a contract is legally binding. The defaulting party can be sued in a court of law if parties don’t mutually decide to reach a compromise.

Breach of contract can be minor or material.

When one party doesn’t receive the delivery by the due date, it generally falls under a minor breach. A material breach is receiving different articles than what was mentioned in the contract.

For example, A contract has been given for 100 school uniforms but when the order was received they were for 100 navy uniforms. This is a material breach of contract as the items received are not what the client requested.

When is a contract valid?

A contract is an act of promise between two or more parties to offer something of value in exchange for a price. For a contract to be valid, there are certain conditions that need to be fulfilled.

Offer and acceptance

An offer is when one party presents something of value to another party. The other party accepts in exchange for a payment. When an offer is presented, another party has the option to either accept it or decline it. Once accepted, it becomes a binding contract. Offer and acceptance are crucial elements for a contract to be valid.

Consideration

Another important element of a contract is a consideration. It can also be referred to as a benefit that parties receive in a contract. The majority of times, this can be money, but it could also be service, rights, or interest. For example, A neighbor decides to share his/her wifi connection with another neighbor in exchange for half the rental of wifi. In this contract, one neighbor receives the service while the other receives money.

Intention

This can be referred to as ‘having the same mind” regarding the contract. Each party would have to live up to their end of the bargain for a contract to be valid.

Legality

Another crucial element of a valid contract is legality. One cannot enter a contract with a person of unsound mind or a minor. These contracts are illegal and will become void. Gambling is unlawful, hence any gambling contract would also be considered void.

 What happens when one party of the contract dies?

Generally, when one part of the contract dies, in most cases contract becomes void. A void contract means those contracts that are not legally enforceable.

• Committing a Crime
• Gambling
• A minor or a person of an unsound mind

In all the above cases, the contract can be declared void too.

Not in all death cases, contracts can become void, it depends on the situation. In the scene above, the contract is still valid i.e. enforceable.

Understand the Breach of Contract with a Video