A breach of contract happens when one side does not do what it promised: goods are not delivered, services are not performed, payment is not made, exclusivity is broken, or the contract is ended without the right to do so. The law gives the other side remedies. The most common is damages, meaning money to put you in the position you would have been in if the contract had been performed. Sometimes, especially for unique property or shares, you can ask the court to order the contract to be carried out.
This page is for businesses and individuals who have suffered a breach, and for those accused of one. In short: you need to show the contract, the breach and the loss it caused. Claims usually have to be started within three years of the breach. If the contract has an arbitration clause, the dispute goes to arbitration; otherwise to a commercial court (₹3 lakh and above) or civil court.
Before deciding what to claim, decide what you actually want: money, performance, or a clean exit. The strategy follows from that.
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Is this your situation?
- A supplier failed to deliver, or delivered late or defective goods
- A customer cancelled an order after you had bought materials or started work
- A distributor, franchisor or partner ended the agreement without proper notice
- A service provider did not perform as agreed, causing you losses
- Someone broke an exclusivity, non-solicitation or confidentiality clause
- A seller refused to complete a sale of property or shares after taking an advance
- You have been accused of breach and want to know your defences
Remedies for breach
Damages (Section 73)
Compensation for loss that naturally arises from the breach, or that both sides knew was likely when they made the contract.
Liquidated damages (Section 74)
Where the contract names a sum for breach, reasonable compensation up to that sum.
Specific performance
A court order requiring the contract to be performed, now the normal remedy under the Specific Relief Act after the 2018 amendment, subject to exceptions.
Injunction
An order stopping a party from doing something it promised not to do, such as breaching exclusivity or using confidential information.
Refund and restitution
Return of money paid for something never received, under Sections 64, 65 and 70 of the Contract Act.
Termination
The right to end the contract for a serious breach and claim damages, without being liable for your own future performance.
Proving damages: what courts and arbitrators look for
Damages are not automatic. The party claiming must prove the loss with evidence. Under Section 73, the loss must arise naturally in the usual course of things from the breach, or be loss the parties knew, when they made the contract, would be likely to result. Remote or indirect losses that neither side contemplated are not recoverable.
Common heads of loss include: the extra cost of buying substitute goods or services elsewhere; lost profit on a resale or project that failed because of the breach; wasted expenditure on materials, staff or preparation; and payments made for something not received. Each needs proof: invoices for substitute purchases, the lost contract with your own customer, accounts showing wasted costs.
Courts also expect you to take reasonable steps to reduce your loss. If a supplier fails to deliver, you are expected to buy elsewhere at the market price, not wait for prices to rise. The Explanation to Section 73 says that the means of remedying the inconvenience caused by non-performance must be taken into account.
Where the contract names an amount for breach, Section 74 allows reasonable compensation up to that amount. In Kailash Nath Associates v DDA (2015), the Supreme Court held that actual loss must still be proved where it can be proved; the named sum is a ceiling, not an automatic entitlement. Where loss is hard to prove, as in many public contracts, the named sum may be treated as a genuine pre-estimate.
Specific performance after the 2018 amendment
Before 2018, specific performance was discretionary, and courts often preferred to award damages. The Specific Relief (Amendment) Act, 2018 changed this. Under the substituted Section 10, specific performance "shall" be enforced by the court, subject only to the exceptions in Sections 11(2), 14 and 16.
The exceptions remain important. Section 14 lists contracts that cannot be specifically enforced: where a party has obtained substituted performance under Section 20; contracts involving continuous duties the court cannot supervise; contracts so dependent on personal qualities that the court cannot enforce them; and contracts that are by nature determinable. Section 16 bars relief to a party who has not performed, or been ready and willing to perform, its own essential obligations.
Specific performance is most often sought in sales of immovable property and shares, where the subject is unique and money is not an adequate substitute. In ordinary commercial supply or service contracts, damages are usually the practical remedy. See specific performance.
How we handle a breach claim
Read the contract closely
Obligations, time for performance, termination rights, notice requirements, limitation of liability, liquidated damages, and the dispute clause.
Fix the breach and its date
What exactly was promised, what happened, and when. The date of breach usually starts limitation.
Decide the remedy
Damages, performance, injunction or refund, or a combination. This decides the forum and the urgency.
Preserve and quantify loss
Collect evidence of loss and mitigation. For large claims, consider an accountant's report.
Notice and response
A notice of breach, often required by the contract before termination or a claim. Follow any cure period.
Start proceedings
Arbitration if the contract has a clause; otherwise pre-institution mediation and a commercial suit. Urgent injunctions where needed.
Prove and recover
Evidence, arguments, award or decree, and enforcement.
Time and typical cost range
Our fees are agreed in writing at the start, stage by stage, and are not linked to the outcome.
| Stage | Usual time | Cost |
|---|---|---|
| Contract review and strategy | 3 to 7 days | Our fee |
| Notice of breach and response | 15 to 45 days | Our drafting fee |
| Mediation or arbitration notice | 1 to 3 months | Small authority fee or arbitration costs |
| Arbitration or suit to award or judgment | 12 to 36 months | Arbitrators' fees or court fee; our fee |
| Enforcement | Weeks to over a year | Our fee |
Documents needed
The contract
- Signed agreement, purchase order or terms accepted
- Emails or letters forming or varying the contract
- Any related agreements
The breach
- Notices of breach, termination letters
- Correspondence showing what went wrong
- Evidence of your own readiness to perform
The loss
- Invoices for substitute purchases or work
- Lost orders or contracts with your customers
- Accounts showing wasted costs and lost profit
Where breach claims go
| Situation | Forum |
|---|---|
| Contract has an arbitration clause | Arbitration under the clause |
| No arbitration clause, commercial claim ₹3 lakh or more | Pre-institution mediation, then commercial court |
| No arbitration clause, below ₹3 lakh or non-commercial | Civil court |
| Urgent injunction needed | Court (Section 9 if arbitration clause; Order 39 CPC otherwise) |
| Sale of immovable property not completed | Civil or commercial court for specific performance |
| Registered micro or small supplier's unpaid dues | MSME Facilitation Council may be available |
Termination: when you can end the contract
A serious breach may let you terminate the contract and claim damages. But wrongful termination is itself a breach, and a common reason businesses end up as defendants. Before terminating, check what the contract says: is there a right to terminate for breach, a notice period, a cure period, or a requirement to give reasons? If the contract has a termination-for-convenience clause, you may be able to end it on notice without proving breach.
Under Section 39 of the Contract Act, if one party refuses to perform or disables itself from performing, the other can end the contract unless it has accepted the continuation by words or conduct. Section 55 deals with failure to perform on time: where time is of the essence, the contract becomes voidable; where it is not, the other party can claim damages for the delay. Courts usually presume that time is not of the essence in contracts for sale of immovable property, but it can be in commercial supply contracts.
Terminate in writing, citing the clause and the breach, after any required notice. Keep performing your own obligations until the termination takes effect. If in doubt, send a notice calling on the other side to remedy the breach within a fixed time first.
If you are accused of breach
Common defences to breach claims include: the contract was not concluded or its terms are different; the other side breached first, so you were excused; performance became impossible or unlawful, so the contract was frustrated under Section 56; the delay or failure was caused by the claimant; the contract excludes or caps liability for this kind of loss; the claimed loss is too remote; the claimant did not mitigate; or the claim is time-barred.
Force majeure clauses, which excuse performance for events beyond a party's control, are interpreted strictly. The event must fall within the clause, and must actually have prevented performance. After the pandemic, courts saw many such claims; the Supreme Court in Energy Watchdog v CERC (2017) and later decisions made clear that a mere rise in cost does not usually frustrate a contract or trigger force majeure.
Counter-claims are often the best defence. If the claimant owes you money or caused you loss, raise it in the same proceedings.
Laws that apply
Damages for breach, and compensation where the contract names a sum.
Refusal to perform, time for performance, and frustration.
Specific performance as the normal remedy, exceptions and substituted performance.
Restraints of trade are void, which limits post-termination non-competes.
Generally three years from the date of breach.
A cancelled export order
Here's a made-up example. A Noida garment manufacturer received a written order from a Delhi buying house for 40,000 shirts for a European client, with a 30% advance. After the manufacturer bought fabric worth ₹38 lakh and began cutting, the buying house cancelled the order because its client had found a cheaper supplier. It offered to adjust the advance against "future orders".
The purchase order had an arbitration clause seated in Delhi. We sent a notice treating the cancellation as a repudiation, accepting it, and claiming the cost of fabric and work done, less the advance and the salvage value of the fabric, plus lost profit. The manufacturer sold part of the fabric to another buyer at a discount to reduce the loss, and kept records.
In the arbitration, the buying house argued that the order was conditional on its client's confirmation. The order said nothing of the kind. The tribunal awarded the wasted costs and a reduced lost-profit figure based on the manufacturer's previous margins, with interest.
How we work
We are a litigation and advisory practice led by Advocate BK Singh, with offices in Dwarka (New Delhi) and Vaishali (Ghaziabad). This is what you can expect:
- Remedy-first thinking: money, performance or exit, decided at the start.
- Evidence of loss built early: so the claim is not just a number.
- Careful termination advice: to avoid turning your claim into a defence.
- Right forum: arbitration or court, with urgent relief where needed.
- Written fee terms: agreed stage by stage, never linked to the outcome.
Mistakes in breach claims
- Terminating without following the contract's notice or cure period
- Claiming lost profit without any evidence of margins or lost orders
- Not mitigating the loss
- Ignoring the limitation of liability clause
- Continuing to accept performance after a breach without reserving rights
- Letting three years pass from the breach
Limitation of liability and exclusion clauses
Many business contracts limit what one side can claim. Typical clauses cap total liability at the contract price or the fees paid in the last twelve months, exclude "indirect or consequential loss" and "loss of profit", or require claims to be notified within a short period. These clauses are generally enforced between businesses, because the parties are presumed to have bargained for them.
They are not always as wide as they look. Courts read exclusion clauses strictly against the party relying on them. A clause excluding "consequential loss" may not exclude loss of profit that arises directly from the breach. A cap may not apply to deliberate or fraudulent breaches, depending on the wording. A clause requiring claims within a short time may be void to the extent it shortens the statutory limitation period, under Section 28 of the Contract Act, though clauses that extinguish rights after a period have been treated differently.
So, before calculating a claim, read the limitation and exclusion clauses closely, and frame each head of loss with them in mind. If you are drafting a contract, think about these clauses as carefully as the price.
Breach in long-term and relationship contracts
In long-term contracts, such as distribution, supply, outsourcing and franchise agreements, breaches are often gradual: slow payments, missed targets, short supplies, poor service levels. The parties may continue working together for months while complaining about each other. When the relationship finally ends, each side has a list of grievances.
In these cases, the timeline matters. A party that continued to accept performance without protest may be treated as having waived earlier breaches. A party that did protest in writing, at the time, has a much stronger case. Service level agreements with credits or penalties may be the agreed remedy for some failures, limiting further claims.
Where one side wants to exit, the termination clause and notice period usually decide the value of the claim. A distributor terminated without the contractual notice period can usually claim the profit it would have made during the notice period, not for the whole remaining term. See franchise and distributor disputes and supply contract disputes.
Settling a breach dispute
Breach disputes settle more often than debt claims, because both sides usually have some fault and the damages are uncertain. A settlement might involve a payment, completion of the outstanding work at an agreed price, return of goods, release of a bank guarantee, mutual releases and an agreed public statement.
Mediation is particularly useful here. The mediator can help each side see the weaknesses in its own case, and creative solutions, such as a new contract on revised terms, are possible in mediation but not in a judgment. If a settlement is reached after arbitration begins, it can be recorded as a consent award. See mediation and settlement agreements.
Frequently Asked Questions
What do I need to prove in a breach of contract claim?
That a contract existed, that the other side breached it, and that you suffered loss as a result.
Can I claim lost profit?
Yes, if it arises naturally from the breach or was within the parties' contemplation, and you can prove it.
What if the contract says a fixed amount for breach?
You can claim reasonable compensation up to that amount. You may still need to prove actual loss where it can be proved.
Can I force the other side to complete the deal?
Specific performance is now the normal remedy under the Specific Relief Act, except for contracts listed in Section 14 and where you were not ready to perform.
Is a non-compete enforceable after the contract ends?
Section 27 makes restraints of trade void, so post-termination non-competes are generally unenforceable, though restrictions during the contract usually are.
What is the time limit for a breach claim?
Generally three years from the date of the breach.
Can I terminate immediately for breach?
Only if the contract or law allows it. Check notice and cure provisions first.
What if I signed the contract only by email?
A contract can be formed by email. The key is whether the terms and acceptance are clear.
Does a breach claim go to arbitration or court?
Arbitration if the contract has a valid arbitration clause; otherwise court.
Can I claim for mental distress in a business contract?
Generally not in commercial contracts. Damages are for financial loss.
What if the other side says force majeure?
Check whether the event falls within the clause and actually prevented performance. A cost increase is usually not enough.
Can I get interest on damages?
Yes. Courts and arbitrators can award interest on damages from the date of loss or the claim.
Other side broke the deal?
Send us the contract and the key correspondence. We will tell you what you can realistically claim and where.
This page gives general information about arbitration and dispute law in India as it stood when it was last reviewed. It is not legal advice on your case and does not promise any result. Time limits, fees and court rules change, and the right step depends on your own contract, dates and documents, so take advice before acting.
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