The Different Types of Remedies for Breach Of Contract

Payment Default Cases Are Very Frequent And Can Generally Happen In The Course Of Daily Life Activities As Well As In The Cases Of Loan Agreements. Since, Every Product Or Service That We Purchase Binds Every Individual In A Legal Contract If All The Essentials Of A Valid Contract Are Met. Contracts Can Be Oral Or Written As Well, Since We Buy And Purchase Products And Services Usually On A Daily Basis Some Contracts Are Not Required To Be Written While The Loan Agreements, Or Supply Agreements Between Companies Are In The Written Form.

“Payment default in legal terms will be called a breach of contract. It means an agreement or a promise is broken by the one party in case of payment default by the customer”

Remedies for breach of contract

The Remedies Available In General Breach Of Contract Are Recession Of A Contract, Compensatory Remedies, Injunctions, Specific Performance, And Quantum Meriut. The Remedies Which Can Be Invoked Can Vary From A Case-To-Case Basis, For Instance, In The Case Of Payment Default Compensatory Remedies, And Recession Of Contract Can Be Invoked.

1. Recession of Contract

Section 65 Of The Indian Contract Act, 1872 Deals With The Recession Of A Contract, When A Party To The Contract Does Not Fulfill His/Her Obligations, Then The Other Party Is Entitled To Rescind Or To Break The Contract. The Party Which Rightfully Rescinds The Contract Is Entitled To The Damages For Any Loss Incurred Upon That Party Due To The Non-Fulfillment Of The Contract Under Section 75 Of The Indian Contract Act, 1872.

2. Suit for Damages or Compensation

The Very Basic And Most Sought-After Remedy Is The Compensatory Remedy In Case Of Breach Of A Contract. Section 73 Of The Indian Contract Act, 1872 Deals With The Compensatory Remedy In Case Of Breach Of A Contract And The Party At Loss Is Entitled To Get The Damages, And The Party Which Breaches The Contract Is Liable To Provide Compensation To The Aggrieved Party.

The Compensation Will Be Provided For The Naturally Arising Consequences Due To The Breach Of Contract And The Parties Were Well Aware Of Such Consequences And Not For Any Remote Or Indirect Loss Incurred Due To The Breach Of Contract As Per Section 73 Of The Indian Contract Act, 1872.

The Damages Can Broadly Be Divided Into Liquidated And Unliquidated Damages, Liquidated Damages Are The Decided Damages For Breach Of A Contract Which Can Be Decided By The Parties In Their Written Agreement. Unliquidated Damages On The Other Hand Are Not Decided, Rather These Are Calculated By The Courts Or Appropriate Authority As Per The Provisions Of The Indian Contract Act, 1872 Based On The Extent Of The Loss Incurred And Inconvenience Caused.

The Suit For Damages Can Be Filed In A Civil Court Having Jurisdiction As Per The Provisions Of The Code Of Civil Procedure, 1908.

3. Money Recovery Suit in case of loan payment default

The Banks Are Entitled To Take Strict Legal Action Against The Loan Defaulters, Although The Action Can Only Be Taken In A Civil Nature And The Bank Can Approach A Civil Court With A Suit For Recovery Of The Loan Amount. There Is An Exception To This Rule Wherein The Borrower Had The Intention To Defraud The Bank From The Very Beginning, Then In Such A Scenario, A Criminal Case Can Also Be Filed Against The Loan Defaulter.

If The Borrower Is Not Initiating Repayment Of The Loan And A Period Of 180 Days Has Passed The Bank Is Entitled To File A Suit Against The Borrower Under Section 138 Of The Negotiable Instruments Act, 1881. There Are Instances When Unavoidable Circumstances Arise And The Borrower Is Not Able To Repay The Loan Owing To Those Conditions, In Such A Scenario, The Lender May Work Out A Modified Plan For Repayment Of The Loan Amount.

The Bank Can Also Recover The Loan Amount By Selling The Pledged And The Mortgaged Property After Obtaining Legal Orders From The Civil Court Having Jurisdiction.

The Reserve Bank Of India Mandates That The Rights Of Borrowers Shall Not Be Compromised In A Case Of Default As Well, The Rights Of The Borrowers Are Specified Further In This Article.

Rights of the Borrowers

Even When The Borrowers Are Unable To Repay The Loan Amount, He/She Is Entitled To Some Basic Rights Which Shall Not Be Infringed.

Right To Notice: The Borrower Has All The Rights To Get Timely Notice Of The Initiation Of Legal Proceedings Against Him/Her So That The Borrower Gets Enough Time To Prepare To Represent Himself/Herself In The Court Of Law And That Natural Justice Is Maintained.

Right to fair value : The borrower is entitled to get the fair value of the assets provided as security for the loan and the lender cannot arbitrarily decide the value of those assets. A fair value notice shall be sent to the borrower informing them about the evaluation of the sale price.

Right to the remaining balance: The borrower has the right to claim the remaining balance of the assets sold by the lender to recover the loan amount.

Right to be heard: The principle of natural justice “ audi alteram partem” which means every party has the right to be heard should be properly followed

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The Disputes Of Payment Defaults And Loan Payment Defaults Are Very Common At Present Times, The Number Of Wilful Loan Defaulters Increased From 2,208 To 2,494 In The Year 2021 As Informed By The Finance Ministry.

It Is Essential To Consult A Lawyer To Get Insights Into The Legal Remedies Available, The Rights And Liabilities Of Both Parties And The Procedure To Approach The Court For Compensation Or Recovery. Finding The Right Lawyer To Initiate Your Case In The Court Of Law, To Defend Your Case Is Essential As If You Go For An Inexperienced Lawyer, You May Lose Your Case, Be It The Lender Or The Borrower.

WeVaad Is An Online Platform Delivering Online Dispute Resolution Services Along With Services Like “Find Your Lawyer” And “Online Legal Consultation”, These Services Can Easily Be Accessed Online. WeVaad Has Legal Experts With Over Seven Years Of Experience Who Can Assist You Well In These Disputes And Defend You In A Court Of Law.