Anticipatory and actual BOC for CLAT - Practice Questions & MCQ

Passage 8

Read the passage and answer the questions that follow.

The parties to a contract may determine beforehand the amount of compensation payable in the event of a breach. According to English law, a sum so fixed may fall in any of the following two categories, namely, (1) Liquidated damages, or (2) Penalty. A sum less than the amount of probable damage are regarded as liquidated damages. The whole of such a sum is recoverable. A well-known illustration is Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd. A manufacturer of tires supplied a quantity of tires to a dealer on the condition that they would not be sold below the list prices and that liquidated damages, not penalty, of £5 would be payable for every tire sold in breach of the agreement. The dealer committed a breach. The question was whether the above sum was intended as a genuine compensation for the loss suffered. In the case of Lamdon Trust Ltd v Hurrel, a car was purchased on hire-purchase terms, the total price payable by instalments being £558. The agreement provided that if the purchaser returned the car or if, on account of his default the seller retook it, the total sum, including the instalments already paid, of £ 425 must be paid. The purchaser paid up to £ 302 and then defaulted. The seller retook and resold it for £270, thus receiving a total sum of £572, which was more than the contract price. Even so, he brought an action to recover £ 122, being the difference between £425 and the installments paid. But his claim failed. The court rejected the sum as being a penalty and not a genuine pre-estimate of the probable damage. In arriving at this conclusion Denning LJ took into account these circumstances: "The £425 is three-quarters of the total price. It is inserted by the hire-purchase companies by rule of thumb without regard to the make of car, its age, the market conditions or anything of the kind. It is the same for all."

There is no difference between a penalty for non-payment of money due under a contract and a penalty for the non-performance of some other obligation and, furthermore, there is no distinction between a penalty that requires the payment of money and a penalty which requires the transfer of property.

Question:

Identify the correct option for the following two statements of Assertion (A) and Reasoning (R).

Assertion (A): If the sum fixed by the parties for compensation in case of breach of contract is found to be a penalty, then the whole of it is recoverable.

Reasoning (R): Such a stipulation reflects good business sense and is advantageous to both parties.

Passage 8

Read the passage and answer the questions that follow.

The parties to a contract may determine beforehand the amount of compensation payable in the event of a breach. According to English law, a sum so fixed may fall in any of the following two categories, namely, (1) Liquidated damages, or (2) Penalty. A sum less than the amount of probable damage are regarded as liquidated damages. The whole of such a sum is recoverable. A well-known illustration is Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd. A manufacturer of tires supplied a quantity of tires to a dealer on the condition that they would not be sold below the list prices and that liquidated damages, not penalty, of £5 would be payable for every tire sold in breach of the agreement. The dealer committed a breach. The question was whether the above sum was intended as a genuine compensation for the loss suffered. In the case of Lamdon Trust Ltd v Hurrel, a car was purchased on hire-purchase terms, the total price payable by instalments being £558. The agreement provided that if the purchaser returned the car or if, on account of his default the seller retook it, the total sum, including the instalments already paid, of £ 425 must be paid. The purchaser paid up to £ 302 and then defaulted. The seller retook and resold it for £270, thus receiving a total sum of £572, which was more than the contract price. Even so, he brought an action to recover £ 122, being the difference between £425 and the installments paid. But his claim failed. The court rejected the sum as being a penalty and not a genuine pre-estimate of the probable damage. In arriving at this conclusion Denning LJ took into account these circumstances: "The £425 is three-quarters of the total price. It is inserted by the hire-purchase companies by rule of thumb without regard to the make of car, its age, the market conditions or anything of the kind. It is the same for all."

There is no difference between a penalty for non-payment of money due under a contract and a penalty for the non-performance of some other obligation and, furthermore, there is no distinction between a penalty that requires the payment of money and a penalty which requires the transfer of property.

Question:

A contract for the delivery and erection of certain machinery provided that the contractor would have to pay Rs. 20 as a penalty for each day of default. The contractor delayed the completion of the work by thirty weeks. According to the contract, his liability was Rs. 600, but the purchasers claimed Rs. 5850 as the actual loss suffered by them by reason of the delay.

As a court of competent jurisdiction, what among the following would be the observation in the above-mentioned case?

Passage 5

Read the passage and answer the question that follow. 

Section 37 of the Indian Contract Act, 1872 explicitly defines that the parties to the contract are obliged to carry out or offer to perform their respective commitments or promises under the contract unless they are exempted or excused under the terms of the Indian Contract Act or any other statute. Section 39 of the Indian Contract Act draws out further clarification of this concept by stating that if one party has failed to carry out or deterred itself from executing its commitment in its entirety, the other party may terminate the contract unless that other party has explicitly or impliedly consented to the continuation of the contract. The ramification of breach or repudiation of the contract is elucidated under sections 73- 75 of the Indian Contract Act. Generally, the breach of contract is broadly classified under 4 categories: Minor breach, Material breach, Actual breach and Anticipatory breach of contract. This article will scrutinise and uncoil the concepts and consequences of actual and anticipatory breach of contract. Anticipatory breach of contract is the failure of either of the parties to conduct their part of the contract prior to the actual due date of the performance of the contract. In simple essence, an anticipatory breach of the contract refers to the lack or absence of intention of either of the parties to fulfill his obligations under the terms of the contract.

In the case of Food Corporation vs J.P Kesharwani, it was held by the Supreme Court that if one party made unilateral changes without intimation of the other side and then terminated the contract, this amounted to a breach (repudiation). It may also be clearly argued that any type of contract can be deemed to be breached if the party is reluctant or refuses to comply with their respective promises of the contract regardless of when the performance is scheduled to occur. Such unconditional denial or refusal is known as a repudiation to enter into a contract. Furthermore, the court observed, with regard to Jhawaharlal Wadhwa and Anr. v. HaripadaChakraborty, that “it is settled law that where a party to a contract commits anticipated violation of the contract, the other party of the contract can treat the violation as an end and claim for damages but, in that case, cannot demand specific performance.”

Question:

Which of the following elements constitute an anticipatory breach of contract under the provisions of the ICA, 1872?

Passage 5

Read the passage and answer the question that follow. 

Section 37 of the Indian Contract Act, 1872 explicitly defines that the parties to the contract are obliged to carry out or offer to perform their respective commitments or promises under the contract unless they are exempted or excused under the terms of the Indian Contract Act or any other statute. Section 39 of the Indian Contract Act draws out further clarification of this concept by stating that if one party has failed to carry out or deterred itself from executing its commitment in its entirety, the other party may terminate the contract unless that other party has explicitly or impliedly consented to the continuation of the contract. The ramification of breach or repudiation of the contract is elucidated under sections 73- 75 of the Indian Contract Act. Generally, the breach of contract is broadly classified under 4 categories: Minor breach, Material breach, Actual breach and Anticipatory breach of contract. This article will scrutinise and uncoil the concepts and consequences of actual and anticipatory breach of contract. Anticipatory breach of contract is the failure of either of the parties to conduct their part of the contract prior to the actual due date of the performance of the contract. In simple essence, an anticipatory breach of the contract refers to the lack or absence of intention of either of the parties to fulfill his obligations under the terms of the contract.

In the case of Food Corporation vs J.P Kesharwani, it was held by the Supreme Court that if one party made unilateral changes without intimation of the other side and then terminated the contract, this amounted to a breach (repudiation). It may also be clearly argued that any type of contract can be deemed to be breached if the party is reluctant or refuses to comply with their respective promises of the contract regardless of when the performance is scheduled to occur. Such unconditional denial or refusal is known as a repudiation to enter into a contract. Furthermore, the court observed, with regard to Jhawaharlal Wadhwa and Anr. v. HaripadaChakraborty, that “it is settled law that where a party to a contract commits anticipated violation of the contract, the other party of the contract can treat the violation as an end and claim for damages but, in that case, cannot demand specific performance.”

Question:

Identify the correct option for the following two statements of Assertion (A) and Reasoning (R).

Assertion (A): In the event of a breach of contract, the defaulting party may express their willingness to proceed in the performance of the contract.

Reasoning (R): The decision of permitting the defaulting party to execute the contract would depend on the fact, whether time was the crux of the contract.

Passage 7

Read the passage and answer the question that follow. 

 Breach of contract is nothing but a failure to live up to the terms of a contract. In essence, a breach may be actual or anticipatory. An actual breach is one in which there is actual non-performance of the contractual obligations. Section 39 of the Indian Contract Act, 1872 has laid out anticipatory as one where a party has refused to perform or disabled himself from performing the contractual obligations, i.e., repudiation.

Straight off the bat, there lie three challenges in front of the parties. First is the challenge for the aggrieved party to prove that there has been a legal breach of contract and for the other party to prove otherwise. Section 39 of the Act states that anticipatory breach does not stand if the aggrieved party has signified acquiescence, i.e., acceptance, of the continuance of such contract even with the repudiation. Hence the second challenge becomes one for the other party, to prove that there had been such acquiescence. The third challenge is one for the aggrieved party. They need to prove that there has been a repudiation. Every deviation or departure from the terms of the contract would not be a repudiation. A repudiation would need an intentional denial to fulfill contractual obligations.

Essentially there are three kinds of remedies for breach of contract, namely, Damages, Specific Performance and Injunction. The availability of all of these remedies is subjective; however. In the case of anticipatory breach, such remedies are only available once the repudiation has been accepted and treated as an immediate breach of contract. Herein lies quite a challenge for the parties as to the incidence of breach of contract. In cases of a continuous breach where there are repeated breaches or acts of repudiation, it becomes quite a challenge to point out the incident from which damages shall be computed.

Section 73 of the Act provides for compensation in terms of damages arising due to a breach of contract. As per this section, compensation would be awarded only for the loss in the regular course of business or such loss which the parties knew would likely occur because of such breach. Here the challenge lies in proving actual loss or damage suffered as only such loss can be recovered and remote or indirect loss or damages are specifically excluded from the purview of this section. Further, Section 74 of the Act provides for liquidated damages. Where the contract specifically states the sum to be paid in case of a breach, or provides for a stipulation by the way of a penalty then the aggrieved party is entitled to reasonable compensation not exceeding the amount or, the penalty, stipulated for in the contract. Further proof of actual loss or damage is not a condition precedent for awarding such compensation.

Question:

Which of the following statements is correct as per the provisions of the Indian Contract Act, 1872?

Passage 7

Read the passage and answer the question that follow. 

 Breach of contract is nothing but a failure to live up to the terms of a contract. In essence, a breach may be actual or anticipatory. An actual breach is one in which there is actual non-performance of the contractual obligations. Section 39 of the Indian Contract Act, 1872 has laid out anticipatory as one where a party has refused to perform or disabled himself from performing the contractual obligations, i.e., repudiation.

Straight off the bat, there lie three challenges in front of the parties. First is the challenge for the aggrieved party to prove that there has been a legal breach of contract and for the other party to prove otherwise. Section 39 of the Act states that anticipatory breach does not stand if the aggrieved party has signified acquiescence, i.e., acceptance, of the continuance of such contract even with the repudiation. Hence the second challenge becomes one for the other party, to prove that there had been such acquiescence. The third challenge is one for the aggrieved party. They need to prove that there has been a repudiation. Every deviation or departure from the terms of the contract would not be a repudiation. A repudiation would need an intentional denial to fulfill contractual obligations.

Essentially there are three kinds of remedies for breach of contract, namely, Damages, Specific Performance and Injunction. The availability of all of these remedies is subjective; however. In the case of anticipatory breach, such remedies are only available once the repudiation has been accepted and treated as an immediate breach of contract. Herein lies quite a challenge for the parties as to the incidence of breach of contract. In cases of a continuous breach where there are repeated breaches or acts of repudiation, it becomes quite a challenge to point out the incident from which damages shall be computed.

Section 73 of the Act provides for compensation in terms of damages arising due to a breach of contract. As per this section, compensation would be awarded only for the loss in the regular course of business or such loss which the parties knew would likely occur because of such breach. Here the challenge lies in proving actual loss or damage suffered as only such loss can be recovered and remote or indirect loss or damages are specifically excluded from the purview of this section. Further, Section 74 of the Act provides for liquidated damages. Where the contract specifically states the sum to be paid in case of a breach, or provides for a stipulation by the way of a penalty then the aggrieved party is entitled to reasonable compensation not exceeding the amount or, the penalty, stipulated for in the contract. Further proof of actual loss or damage is not a condition precedent for awarding such compensation.

Question:

A books a car from a car dealership, and makes the advance payment for it also, however later on the car dealership refuses to deliver the car to him, and A files a suit for specific performance of the Contract. Decide the liability of the car dealership.

Passage 7

Read the passage and answer the question that follow. 

 Breach of contract is nothing but a failure to live up to the terms of a contract. In essence, a breach may be actual or anticipatory. An actual breach is one in which there is actual non-performance of the contractual obligations. Section 39 of the Indian Contract Act, 1872 has laid out anticipatory as one where a party has refused to perform or disabled himself from performing the contractual obligations, i.e., repudiation.

Straight off the bat, there lie three challenges in front of the parties. First is the challenge for the aggrieved party to prove that there has been a legal breach of contract and for the other party to prove otherwise. Section 39 of the Act states that anticipatory breach does not stand if the aggrieved party has signified acquiescence, i.e., acceptance, of the continuance of such contract even with the repudiation. Hence the second challenge becomes one for the other party, to prove that there had been such acquiescence. The third challenge is one for the aggrieved party. They need to prove that there has been a repudiation. Every deviation or departure from the terms of the contract would not be a repudiation. A repudiation would need an intentional denial to fulfill contractual obligations.

Essentially there are three kinds of remedies for breach of contract, namely, Damages, Specific Performance and Injunction. The availability of all of these remedies is subjective; however. In the case of anticipatory breach, such remedies are only available once the repudiation has been accepted and treated as an immediate breach of contract. Herein lies quite a challenge for the parties as to the incidence of breach of contract. In cases of a continuous breach where there are repeated breaches or acts of repudiation, it becomes quite a challenge to point out the incident from which damages shall be computed.

Section 73 of the Act provides for compensation in terms of damages arising due to a breach of contract. As per this section, compensation would be awarded only for the loss in the regular course of business or such loss which the parties knew would likely occur because of such breach. Here the challenge lies in proving actual loss or damage suffered as only such loss can be recovered and remote or indirect loss or damages are specifically excluded from the purview of this section. Further, Section 74 of the Act provides for liquidated damages. Where the contract specifically states the sum to be paid in case of a breach, or provides for a stipulation by the way of a penalty then the aggrieved party is entitled to reasonable compensation not exceeding the amount or, the penalty, stipulated for in the contract. Further proof of actual loss or damage is not a condition precedent for awarding such compensation.

Question:

Raju asks a cab company to take him to Delhi on 12.01.2022, however, the company refuses to take him to Delhi on that particular day, and Raju rents a private plane to Delhi and books a 5-star hotel for his stay in Delhi, and subsequently sues the company to claim the expenses. Decide the liability of the cab company.

Passage 7

Read the passage and answer the question that follow. 

 Breach of contract is nothing but a failure to live up to the terms of a contract. In essence, a breach may be actual or anticipatory. An actual breach is one in which there is actual non-performance of the contractual obligations. Section 39 of the Indian Contract Act, 1872 has laid out anticipatory as one where a party has refused to perform or disabled himself from performing the contractual obligations, i.e., repudiation.

Straight off the bat, there lie three challenges in front of the parties. First is the challenge for the aggrieved party to prove that there has been a legal breach of contract and for the other party to prove otherwise. Section 39 of the Act states that anticipatory breach does not stand if the aggrieved party has signified acquiescence, i.e., acceptance, of the continuance of such contract even with the repudiation. Hence the second challenge becomes one for the other party, to prove that there had been such acquiescence. The third challenge is one for the aggrieved party. They need to prove that there has been a repudiation. Every deviation or departure from the terms of the contract would not be a repudiation. A repudiation would need an intentional denial to fulfill contractual obligations.

Essentially there are three kinds of remedies for breach of contract, namely, Damages, Specific Performance and Injunction. The availability of all of these remedies is subjective; however. In the case of anticipatory breach, such remedies are only available once the repudiation has been accepted and treated as an immediate breach of contract. Herein lies quite a challenge for the parties as to the incidence of breach of contract. In cases of a continuous breach where there are repeated breaches or acts of repudiation, it becomes quite a challenge to point out the incident from which damages shall be computed.

Section 73 of the Act provides for compensation in terms of damages arising due to a breach of contract. As per this section, compensation would be awarded only for the loss in the regular course of business or such loss which the parties knew would likely occur because of such breach. Here the challenge lies in proving actual loss or damage suffered as only such loss can be recovered and remote or indirect loss or damages are specifically excluded from the purview of this section. Further, Section 74 of the Act provides for liquidated damages. Where the contract specifically states the sum to be paid in case of a breach, or provides for a stipulation by the way of a penalty then the aggrieved party is entitled to reasonable compensation not exceeding the amount or, the penalty, stipulated for in the contract. Further proof of actual loss or damage is not a condition precedent for awarding such compensation.

Question:

Rajat gives his antique watch for repair which was passed over from generation to generation as a family heirloom to Mohit, however later on Mohit refuses to give it back to Rajat and offers him to collect double the value of the watch. Decide the liability in this scenario.

Read the given passage and answer the following question

 Breach of contract is nothing but a failure to live up to the terms of a contract. In essence, a breach may be actual or anticipatory. An actual breach is one in which there is actual non-performance of the contractual obligations. Section 39 of the Indian Contract Act, 1872 has laid out anticipatory as one where a party has refused to perform or disabled himself from performing the contractual obligations, i.e., repudiation.

Straight off the bat, there lie three challenges in front of the parties. First is the challenge for the aggrieved party to prove that there has been a legal breach of contract and for the other party to prove otherwise. Section 39 of the Act states that anticipatory breach does not stand if the aggrieved party has signified acquiescence, i.e., acceptance, of the continuance of such contract even with the repudiation. Hence the second challenge becomes one for the other party, to prove that there had been such acquiescence. The third challenge is one for the aggrieved party. They need to prove that there has been a repudiation. Every deviation or departure from the terms of the contract would not be a repudiation. A repudiation would need an intentional denial to fulfill contractual obligations.

Essentially there are three kinds of remedies for breach of contract, namely, Damages, Specific Performance and Injunction. The availability of all of these remedies is subjective; however. In the case of anticipatory breach, such remedies are only available once the repudiation has been accepted and treated as an immediate breach of contract. Herein lies quite a challenge for the parties as to the incidence of breach of contract. In cases of a continuous breach where there are repeated breaches or acts of repudiation, it becomes quite a challenge to point out the incident from which damages shall be computed.

Section 73 of the Act provides for compensation in terms of damages arising due to a breach of contract. As per this section, compensation would be awarded only for the loss in the regular course of business or such loss which the parties knew would likely occur because of such breach. Here the challenge lies in proving actual loss or damage suffered as only such loss can be recovered and remote or indirect loss or damages are specifically excluded from the purview of this section. Further, Section 74 of the Act provides for liquidated damages. Where the contract specifically states the sum to be paid in case of a breach, or provides for a stipulation by the way of a penalty then the aggrieved party is entitled to reasonable compensation not exceeding the amount or, the penalty, stipulated for in the contract. Further proof of actual loss or damage is not a condition precedent for awarding such compensation.

Question:

A and B enter into a contract that A would sell his land to B only if he does not construct a building on the land, however, after buying the land B starts constructing the house on the land. Decide the remedies available to A.

Section….. and Section….. of the Indian Contract Act, 1872 deal with the remedies available to parties in case of a breach of contract and the compensation that may be awarded.