This paper focuses on the consequences of the breach of contract and remedies available in Bangladeshi contract law. Contract law in Bangladesh is primarily governed by the Contract Act of 1872. Requirements of contract, rights and obligations of contractual parties and consequences of termination or breach of contract can all be found in the Contract Act of 1872. Upon breach of contract, the innocent party can bring a claim for:
- Specific Performance of Contracts
- Rescission of contracts
A. Cases in which specific performance enforceable
The specific performance of any contract may in the discretion of the Court be enforced-
- When the act agreed to be done is in the performance of a trust;
- When there exists no standard for ascertaining the actual damage caused by non-performance of the act agreed to be done;
- When the nature of the act agreed to be done is such that monetary compensation for its non-performance would not afford adequate relief; or
- When it is probable that monetary compensation cannot be obtained for the non-performance of the act agreed to be done.
As the order of specific performance is discretionary, the Court is not bound to grant such relief merely because it is lawful to do so.
The following contracts cannot be specifically enforceable-
Contracts which is not enforceable:
- A contract for the non-performance of which compensation in money is an adequate relief;
- A contract which runs into such minute or numerous details, or which is so dependent on the personal qualifications of the parties, or otherwise from its nature is such, that the Court cannot endorse specific performance of its material terms;
- A contact the term of which the Court cannot find with reasonable certainty;
- A contract which is in its nature revocable;
- A contract made by trustees either in excess of their powers of in breach of their trust;
- A contract made by or on behalf of a corporation or public company created for special purposes, or by the promoters of such company, which is in excess of its powers;
- A contract the performance of which involves the performance of a continuous duty extending over a longer period than 3 years from its date; and
- A contract of which a material part of the subject matter, supposed by both parties to exist, has before it has been made, ceased to exist.
B. Monetary compensation
1. Monetary compensation for loss or damage caused by breach
When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach.
Such compensation is not to be given for any remote and indirect loss or damage sustained because of the breach.
2. Compensation for breach of contract for where penalty stipulated for
When a contract has been breached, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contact reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. In addition above, the innocent party may claim the section interest on the claimed amount.
C. Rescission of contracts
Any person interested in a contract in writing may sue to have it rescinded, and such rescission may be allowed by the Court in the following cases –
- Where the contract is voidable or terminable by the plaintiff;
- Where the contract is unlawful for causes not apparent on its face, and the defendant is more to blame than the plaintiff;
- Where a decree for specific of a contract of sale, or of a contract to take a lease, has been made, and the purchaser or lessee makes default in payment of the purchase money or other sums which the Court has ordered him to pay.
Much like the prayer for specific performance, a claim for rescission also depends upon the discretion of the judge.
Contract law practice at CLP
Team CLP Law Chamber at Gulshan in Dhaka, Bangladesh is a forward looking and outcome driven law firm that has an immense amount of experience at dealing with cases in relation to contractual breach, consequences and money claim thereof. For queries or legal assistance, please reach us at:
Phone: +8801700920980 | +8801947470606
Address: House 39, Road 126 (3rd Floor) Islam Mansion, Gulshan 1, Dhaka.