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Unit 6: Discharge of Contract

Anticipatory breach of contracts. The anticipatory breach of contract occurs when a party Notes
repudiates it before the time fi xed for performance has arrived or when a party by his own act
disables himself from performing the contract.

Example: A contracts to supply B with certain articles on 1st August. On 20th July,
he informs B that he will not be able to supply the goods. B is entitled to sue A for breach of
promise.
The anticipatory breach is also known as ‘breach by repudiation’. Repudiation is a clear statement
by one party before performance is due that it cannot or will not perform a material part of the

contract obligation. Suppose that the day before your friend was to pick up the fiat that your
promised to sell him, you sent your friend a message that you decided to sell the car to someone
else. That would be repudiation or anticipatory breach. It also would be repudiation if your
friend heard from another reliable source that you sold the car to someone else (There would be
no reason to believe that you would get it back to sell the car to your friend tomorrow). However,
it is not repudiation if one party will not perform because of an honest disagreement over the
contract’s terms.

Consequence of anticipatory breach. Where a party to a contract refuses to perform his part of the
contract before the actual time arrives, the promisee may either (i) rescind the contract and treat
the contract as at an end, and at once sue for damages, or (ii) he may elect not to rescind but to
treat the contract operative and wait for the time of performance and then hold the other party
liable for the consequences of non-performance. In the latter case, the party who has repudiated
may still perform if he can.
The anticipatory breach of contract does not by itself discharges the contract. The contract is
discharged only when the aggrieved party accepts the repudiation of the contract, i.e., elects to
rescind the contract. Thus, if the repudiation is not accepted and subsequently an event happens
discharging the contract legally, the aggrieved party shall lose his right to sue for damages.
A agreed to load a cargo of wheat on B’s ship by a particular date but when the ship arrived,
A refused to load the cargo. B did not accept the refusal and continued to demand the cargo.
Before the last date of loading had expired war broke out rendering the performance of the
contract illegal. Held, the contract was discharged and B could not sue for damages [Avery v.
Bowen (1856) 6 E & B 965].
Actual breach of contracts. The actual breach can occur by (i) failure to perform as promised,
(ii) making it impossible for the other party to perform. The failure to perform means that one
party must not have performed a material part of the contract by a stated deadline. The actual
breach by failure to perform may take place (a) at the time when performance is due, or (b)
during the performance of the contract. Thus, if a person does not perform his part of the contract
at the stipulated time, he will be liable for its breach.

Example: A, the seller, offers to execute a deed of sale only on payment by the buyer of a
sum higher than is payable under the contract for sale, he shall be liable for the breach.

But, if the promisor offers to perform his promise subsequently, the question arises whether it
should be accepted, or whether the promisee can refuse such acceptance and hold the promisor
liable for the breach. The answer depends upon whether time was considered by the parties to
be of the essence of the contract. Section 55 provides the meaning of ‘time to be the essence of a
contract’ and is discussed below.
Breach during the performance of the contract. The actual breach of contract also occurs when
during the performance of the contract, one party fails or refuses to perform his obligation under
the contract.

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