Remedies for the breach of contract by Johnson Yesaya

 PRELIMINARY

A breach of contract is a violation of any of the agreed-upon terms and conditions of a binding contract. The breach could be anything from a late payment to a more serious violation such as the failure to deliver a promised asset. A contract is binding and will hold weight if taken to court. To successfully claim a breach of contract, it is imperative to be able to prove that the breach occurred.  A breach of contract is when one party breaks the terms of an agreement between two or more parties. This includes when an obligation that is stated in the contract is not completed on time or an obligation completed in a different manner not stated in a contract which destroys the whole concept of a contract.

A concept of breach of contract is divided into two, one is “minor breach” and two is “material or fundamental breach”. Minor breach involves violation of warranties which are minor terms in the contract, breach of warranty do not affect the core purpose of a contract. Material or fundamental breach of a contract is a breach of basic conditions which destroys the entire purpose of a contract.  In every contract there is or are certain terms which form the core of the contract.  Such terms(s) create core or fundamental obligations which must be performed by the parties.  If one of the parties fails to perform such fundamental obligation(s), the breach amounts to complete non-performance of the contract.  

For example, if A agreed to deliver cars to B as stated in a contract, but later, A delivers motorcycles to B this is totally breach of contract. The major term in a contract was to deliver cars and not motorcycles, this is a fundamental breach of terms of a contract.

The effects of breach of conditions varies from those of breach of warranties. The breach of warranty only entitles an affected party a right to claim damages but not to repudiate the entire contract. The breach of basic terms or conditions of a contract entitles an affected party a right to repudiate an entire contract or to claim damages for loss suffered. An affected party in breach of conditions may decide to sue for damages while he is in contract, or he may decide to reject the entire contract and to claim damages for the loss suffered. 

The facts and holding in the case of Kampala General Agency Ltd vs Mody's  is a good example of a case law which help to examine differences between conditions and warranties. In this case, A sold certain goods to B to be delivered to Soroti Station.  Because A discovered that Aloi station was nearer to B's ginnery he sent them there.  B refused to accept the goods alleging that by changing stations, A was in breach of a contractual condition.

The court rejected B's argument and described the breach as one of warranty.  Newbold J.A. referring to the then Sale of Goods Ordinance, said:

"the position is, therefore, that the sellers have made delivery of the goods in accordance with the contract but, as agents for the buyers, have consigned the goods to a station which, though possibly more convenient to the buyers, was other than the one to which they had been instructed to consign the goods.  Is this breach of instructions a breach of a condition of the contract of sale, or is it a breach of a warranty in respect of which the buyers are, under section 53 of the Sale of Goods Ordinance, only entitled to damages equivalent to the loss resulting from the breach?  A condition of a contract is an obligation, the performance of which is so essential to the contract that if it is not performed the other party may fairly consider that there has been a substantial failure to perform the contract.  A warranty, on the other hand, is defined in Section 2 of the Sale of Goods Ordinance as, "an agreement with reference to goods which are the subject of a contract of sale, but collateral to the main purposes of such contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated".  

I have no doubt that the breach by the sellers of the instructions to consign the goods to Soroti station was a breach of a warranty. This is the last word of a judge in this case, he rejected claims of B and held the breach as a breach of warranty hence affected party is not entitled a right to repudiate a contract, but he can sue for damages.

REMEDIES FOR THE BREACH OF CONTRACT

Section 73-75 of The Law of Contracts Act  provides several remedies for the breach of contract, some of remedies are as follows;

Rescission of a contract. When a breach of Contract is committed by one party, the other party may sue to treat the contract as rescinded. The remedy of rescission is available to a party whose consent, in entering into a contract, has been invalidated from the beginning, rescinding a contract is to extinguish it and restore the parties to their pre-contractual positions where by parties will be entitled a right to recover loss suffered from the breach of terms of a contract. 

Rescission is a remedy made available when the underlying basis for making a contract is fundamentally tainted.  Some conduct on behalf of a contracting party undermines the very reason that the other party made the contract in the first place. The contract can be rescinded, at the option of the affected party.

The remedy of rescission means that an entire contract is set aside. For legal purposes, it’s treated as though it was never made. It never took place.  The outcome of rescission is: whatever was done by the parties by making the contract is reversed, the parties are put back in the position they would have been in, as if the contract never even been made, it's treated as "non-existing". The transaction established by the contract is brought to an end with retrospective effect. When the right to rescind is available and properly exercised, it is said that the contract has been "rescinded". 

Example: A, a singer, contracts with  B, the manager of a theatre, to sing at his theatre for two nights in every week during the next two months, and  B  engages to pay her Ts. 10M for each night’s performance. On the sixth night,  A  wilfully absents herself from the theatre, and  B  in consequence, rescinds the contract.  B  is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract.

Damages for the loss sustained or suffered. Breach of contract by a party entitles an affected party a right to claim compensation relevant to the loss suffered. When a breach of basic terms of a contract resulted to a serious damage or loss, an affected party may sue to recover loss suffered. Damages may be ordinary or special damages.

Ordinary Damages  (Section 73) are those which naturally arose in the usual course of things from such breach. The measure of ordinary damages is the difference between the contract price and the market price at the date of the breach. If the seller retains the goods after the breach, he cannot recover from the buyer any further loss if the market falls, nor be liable to have the damages reduced if the market rises. 

Examples: A  contracts to buy  B’s ship for Tsh. 60B but breaks his promise.  A  must pay to B, by way of compensation, the excess, if any, of the contract price over the price which  B  can obtain for the ship at the time of the breach of promise.

Special performance. This is another remedy for the breach of contract, in some cases, where terms breached can be cured, a court of law may order a party breached a contract to perform its agreed duties. This is called  ‘specific performance’  of the contract. Some of the instances where Court may direct specific performance are: a contract for the sale of a particular house or some rate article or any other thing for which monetary compensation is not enough because the injured party will not be able to get an exact substitute in the market. 

Prohibition/injunction. A court of law may issue injunction to prohibit a party from continuing performing a particular activity with negative impacts to another party. This order intends to maintain status quo of the terms of the contract and to safeguard interests of a party who has suffered loss or is still suffering loss.

Example : N, a film star, agreed to act exclusively for a particular producer, for  one year. During the year she contracted to act for some other producer. Held  : She could be restrained by an injunction.

CONCLUSION

Generally, breach of warranty (minor terms of the contract) which do not affect the core purpose of the contract entitles right to an affected party to only claim the damages and not to repudiate a contract because damage is of less impacts. Breach of conditions by a party entitles rights to an affected party to either repudiate an entire contract and claim damages at the same time or to claim only damages while she still in the contract. He who breach conditions must pay damages at the exactly loss rate or otherwise depending upon situation.

REFERENCE

STATUTES

1. THE LAW OF CONTRACTS ACT, CAP 345 R:E 2002

2. THE INDIAN LAW OF CONTRACT 1872

CASE LAWS

1. Kampala General Agency Ltd vs Mody's  (E.A.) Ltd [1963] E.A. 549

2. Credit Finance Corporation Ltd. vs Alli Mwakasanga [19591 E.A. 79

BOOKS

3. Luoga, F.D.A. Makinyika , Law of contracts, (form, contents and vitiating factor),University of Dar es salaam.

4. N.N.N Nditi, Law of contracts, The Open University of Tanzania, Learning material for Ll.b programme. 

ONLINE SOURCES

1. https://www.investopedia.com/terms/b/breach-of-contract.asp (Accessed: 14 JAN 2021 at 06:02)

2. https://www.upcounsel.com/difference-between-warranty-and-condition-in-contract-law  (Accessed: 14 JAN 2021 at 06:29).

3. https://www.lexisnexis.co.uk/legal/guidance/rescission-of-a-contract (Accessed : 14 JAN 2021 at 19:42)

4. https://hallellis.co.uk/rescission-contract-law-meaning/ (Accessed : 14 JAN 2021 at 19:50)