What is the limitation period for breach of contract?

Under Article 55 of the Limitation Act 1963, the limitation for a suit for compensation for breach of contract is 3 years from the date of the breach. For specific performance, the limitation is 3 years from the date fixed for performance (Article 54).

What damages can be claimed for breach of contract?

Under Section 73 of the Indian Contract Act, the aggrieved party can claim compensation for loss or damage caused by the breach, which naturally arose in the usual course of things from the breach, or which the parties knew at the time of contracting would likely result from the breach. Remote or indirect damages are not recoverable.

When can specific performance be claimed?

Under the Specific Relief (Amendment) Act 2018, specific performance is now the general rule (not the exception). The court shall grant specific performance unless it falls under the exceptions in S.14 (personal service contracts, construction contracts requiring continuous supervision, etc.). Monetary compensation is granted only when specific performance is not appropriate.

Indian Contract Act 1872 Specific Relief Act 1963

How to Respond to a Breach of Contract Notice

A guide for parties and their advocates on responding to breach of contract notices. Understand remedies, damages calculation, specific performance, and defense strategies under Indian contract law.

Types of Breach

Actual Breach

A party fails to perform their obligation when it falls due, or performs defectively. The other party can sue for damages under S.73 or specific performance.

Anticipatory Breach

Before performance is due, a party communicates intention not to perform (S.39). The aggrieved party can treat the contract as rescinded and sue immediately, or wait until the due date.

Material Breach

A fundamental breach that goes to the root of the contract, entitling the other party to terminate. Distinguished from minor/immaterial breach which allows only damages claim.

Partial Performance

Where only part of the obligation is performed. The aggrieved party may accept partial performance (S.56) or reject and claim full damages.

How to Respond

1. Review the contract thoroughly — Check all terms, conditions, schedules, force majeure clause, dispute resolution clause (arbitration?), limitation of liability, and notice provisions.

2. Assess whether breach actually occurred — Was the obligation conditional? Was performance prevented by the other party? Were there any waivers or modifications?

3. Check the dispute resolution clause — If the contract has an arbitration clause, the matter may need to go to arbitration, not court. Initiate arbitration proceedings if required.

4. Draft reply addressing each allegation — Deny the breach if applicable, or explain why the breach was excusable (frustration, force majeure, prevention by other party). Propose cure if possible.

5. Quantify any counterclaim — If the other party also breached (mutual breach), quantify your damages and include a counterclaim in the reply.

6. Propose resolution — If appropriate, propose a cure period, modified performance, or negotiated settlement. Courts look favourably on parties who attempted to resolve disputes amicably.

Key Defenses

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No Valid Contract — Contract was void (S.24-30), voidable (S.19-19A), or unenforceable (not in writing where required, e.g., Arbitration Act).

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Frustration (S.56) — Performance became impossible due to events beyond control (Act of God, change in law, destruction of subject matter).

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Prevention by Other Party — The complaining party itself prevented performance (e.g., failed to provide inputs, delayed approvals).

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Waiver or Modification — The other party waived the requirement through conduct or express communication, or the contract was modified by mutual agreement.

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Limitation Expired — 3 years from date of breach (Art. 55/54, Limitation Act 1963).

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Mitigation Failure — The aggrieved party failed to mitigate their damages (S.73 — duty to take reasonable steps to minimize loss).

Damages Under Indian Contract Act

Section	Type	Scope
S.73	General Damages	Loss naturally arising in usual course + loss parties knew would result
S.74	Liquidated Damages	Pre-agreed amount in contract. Court may reduce to reasonable compensation.
S.75	Rescission Damages	Compensation for loss through non-fulfilment of a contract rightfully rescinded

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