English Law:-

You can’t both rescind and claim for damages. Where a contract contains an inherent cause of invalidity rendering it voidable at the option of one of the parties, that party has a choice. He may rescind the contract ab initio, in which case not only is there then no contract but there is deemed never to have been a contract. So he is entitled to restitution in integrum but not to damages for breach of contract. Alternatively, he may affirm the contract despite the defect and proceed. In that case, if and when a breach of contract occurs, he is obviously entitled to recover damages for breach of contract. Thus he must choose either rescission and restitution in integrum or affirmation damages for breach of contract.

Most of the controversy has surrounded the availability of damages for breach of contract to a party who chooses to regard the breach of the other party as a repudiation and accept that repudiation as bringing the contract to an end. In principle, that innocent party should clearly be entitled to recover damages for breach of contract. The other party has necessarily breached an entirely valid contract- an act which should obviously entitle the innocent party to seek damages for breach.  However, some of the decided cases exhibit some confusion on this point. This confusion has stemmed mostly from the fact that many judges and commentators use the expression “rescission” to signify not only the rescission ab initio of a contract that is inherently voidable but also the acceptance by a guiltless party of a repudiation of a perfectly valid contract. This usage is admittedly confusing but it is not fatal provided that those adopting it keep in mind the two meanings of “rescission.”  However, one or two of the judges and commentators using this terminology have failed to distinguish the two meanings. This has led them to say that an innocent party who accepts the repudiation of a perfectly valid contract may not recover damages for breach of contract but can only seek restitution in integrum. 

In Capital and Suburban Properties v. Swycher[1]. In this case, the purchaser failed to comply with a notice to complete a contract of sale where time was of the essence.  Such conduct amounts, of course, to a repudiation of the contract of sale, entitling the vendor to elect either to accept the repudiation of the contract and bring it to an end or to affirm the contract despite the breach and proceed by seeking specific performance. In the event, the vendors elected to affirm the contract and sought a decree for the specific performance thereof. The vendors’ claim for specific performance was successful but the purchaser failed to comply with the decree so obtained. The vendors now sought a declaration that they were at the library to resell property and in the Court of Appeal only, damages for breach of contract. The declarations relating to the forfeiture of the deposit and resale of the property were duly granted. By seeking and obtaining these of the contract by the purchaser. Were damages available?

The two members of the Court of Appeal give a judgment, both clearly stating that, where a purchaser under a contract for the sale of land does not complete in due time, the vendor has a choice. He may treat the purchaser as having repudiated the contract, accept the repudiation bring the contract to an end, and claim damages for the breach of contract. Alternatively, he may affirm the contract and seek specific performance. However, these statements were only by way of dicta because in Capital and Suburban Properties v. Swycher, the vendors had not accepted the repudiation of the contract by the purchaser but had instead sought specific performance. Thus, the vendors’ claim for damages involved a different issue- whether damages for breach of contract are available where the innocent party elects to proceed with the contract and obtains a decree for a specific performance with which the other party fails to comply. Both judges held that, in this situation, the innocent party is not entitled to claim damages for breach of contract. Thus the vendors’ claim for damages for breach of contract failed.

Conclusion:-

Thus in conclusion, Capital and Suburban Properties v. Swycher is much to be welcomed in that it establishes, by way of dicta that, where a perfectly valid contract is repudiated, an innocent party who elects to accept the repudiation and brings the contract to an end is entitled to recover damages for breach of contract. But it is rather more difficult to justify the actual decision in the case, namely that an innocent party who instead elects to proceed with the contract and seek specific performance may not subsequently obtain damages for breach of contract if the decree for specific performance is not complied with.

Indian Law:-

As this same, this is provided under Sec. 39 of the Indian Contract Act, 1872 which says that “When a party to a contract has denied to accomplish or disabled himself from accomplishment his promise in its entirety, the promisee may put an termination to the contract, unless he has signified, by words or conduct, his acquiescence in its continuance.

The term used in INDIAN LAW is Anticipatory Breach, which says that:-

Anticipatory Breach of Contract

When such an event occurs, the execution party to the contract is discharged from having to fulfill his or her responsibilities. However, the repudiation can be withdrawn by the promising party so long as there has been no material change in the position of the performing party in the interim. A retraction of the repudiation restores the performer’s duty to perform on the contract.

If the promising party’s repudiation makes it difficult to achieve its promise, then retraction is not possible and no act by the promising party can reinstate the performing party’s requirements under the contract. For example, if A promises to give B a unique sculpture in exchange for B painting A’s house, but A then sells the sculpture to C before B begins the job, this act by A constitutes an anticipatory repudiation that excuses B from performing. Once the sculpture has left A’s possession, there is no way that A can fulfill the promise to give the sculpture to B.

The question arises as to why any party would want to provide notice of the anticipatory breach. The reason is that once the performer has been notified of a foreseeable breach, the performer has a duty to mitigate the damages caused by the breach. Another situation in which preventive rejection can occur is when a party has reason to believe that the other party will not fulfill its obligations and requires reasonable assurances about the performance of the other party (see UCC 2-609 § 1). Failure to provide such reasonable assurances constitutes a preemptive refusal, for which the appearing party has various remedies, including termination. However, prior refusal applies only to bilateral implementation agreements where both parties have outstanding tasks. Additionally, the repudiation must be unequivocal.

When Does Repudiation Occur?

Courts usually recognize three types of repudiation when it comes to contract law:

• A positive and unconditional refusal is made to the other party (“express repudiation”). The other party must tell you, in essence, “I’m not going through with the deal.” It’s not enough to make a qualified or ambiguous refusal. (For example, “Unless this drought breaks, I won’t be able to deliver the apples.”) The repudiation must be clear, straightforward, and directed at the other party. (For example, “I will not be delivering the apples as promised.”)

• An action makes it impossible for the other party to perform. When it comes to repudiation, actions speak as loudly as words. For example, let’s say a couple was supposed to repay two loans from the profits of their business. Instead, the couple ran the business into the ground, incurring lots of other debts and making it impossible to pay back their original loans. Their reckless, voluntary actions counted as a repudiation of the original loan agreements.

• The property that is the subject of the deal is transferred to someone else. If the contract is for the sale of property, repudiation occurs when one party transfers (or makes a deal to transfer) the property to a third party. For example, if you’ve contracted to buy a house and you learn that the other party has subsequently sold it to his brother, your sales contract has been repudiated (even if you never heard a word about it from the other party).

Conclusion:-

Based on the above analysis therefore, the advice to the buyer would be to consider whether he finds it desirable to go forward with an expressed anticipatory breach while being aware that he might have to compensate the seller for any losses of profit that the seller may incur. The advice to the seller would start with a strong recommendation that he does not simply store the goods while making him aware that he does have such an option, but that the chances of succeeding in such a claim are very slim, if any, if he has no ‘legitimate interest’, be that financial or otherwise ‘in completing the contract’. The advice to the seller would recommend that he tries and mitigates his losses and then sue the buyer for the difference in price after communicating to the buyer his acceptance of the repudiation

Bibliography:-

• Books Referred:-

1 Avtar Singh, Contract & Specific Relief, Eastern Book Company, Lucknow, Tenth Edition, 2008

[1] ([1976] 2 W.L.R. 822)