Contract Agreement & Breach of Contract in Bangladesh| A complete overview of Contract Agreement in Bangladesh
Tahmidur Rahman, Senior Associate, TR Barristers in Bangladesh
12 Nov 2019
Table of Contents
Find the subsections below, If you want to jump through specific sections instead of reading the whole article.
This post in details will explain Contract Agreement & Breach of Contract in Bangladesh and remedies and consquences with detailed definitions and infographics, i.e will provide a complete overview of Contract Law in Bangladesh and everything you need to know about contracts and breach of contracts.
Definition of Contract in regards to Law of Bangladesh
A contract is generally an agreement made between two or more parties or persons. In order for a contract to have legal effect under the Contract Act 1872, the following factors must be present:
- The Promiser must make a proposal;
- The Promisee must approve the proposal.
- When approved, a proposal becomes a pledge;
- A lawful fee must be given for the promise made, which in effect creates a contract;
- Any legally enforceable arrangement is a contract.
Any Contract shall be concluded with the free consent of the parties with legal capacity for legitimate consideration and legal object.
Contract Agreement & Breach of Contract in Bangladesh
Breach of Contract in Bangladesh
Before we deep dive into Contract Agreement & Breach of Contract in Bangladesh, let’s clarify our knowledge about the types of Breaches in Bangladeshi Law.
There are four main types of contract breaches:
Minor Breach:
Material Breach:
A material violation of a contract is such a significant infringement, it severely impairs the contract as a whole; in addition, the infringement must make the object of the agreement fully defeated. Often, this is considered a complete violation.
Fundamental breach:
A fundamental breach of contract is exactly the same as a material breach, in that the non-breaching party is entitled to terminate the contract and claim damages in the event of a breach. The distinction is that a substantive breach is deemed to be much more egregious than a material breach; and
Anticipatory Breach:
An anticipatory breach happens when one party makes it clear to the other party, either orally or in writing, that they will not be able to fulfill contract terms. Therefore, the other party may immediately claim a contract violation and seek a settlement, such as reimbursement. Anticipatory violation may also be called anticipatory repudiation.
If a party to a contract fails or refuses to meet his / her obligations under the contract (also contains an indication of reason for non-performance) is known as the breach of contract. (Contract Agreement & Breach of Contract in Bangladesh)
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Things the innocent party can do in breach of a contract in Bangladesh
- Specific performance of contracts
- Compensation
- Revocation of contracts after breach of contract
Compensatory Damage:
Upon breach of a contract, the party suffering from such breach shall be entitled to receive compensation from the wrongdoer. The Court is likely to conduct 3-tier tests in awarding the compensation as stipulated below:
- Has there been a breach of contract? The answer is Yes.
- Has there been a failure or injury arising from that breach? Yes should be the resolution.
- Is the damage too remote? Answer is No.
Final Stage: Court grants damages determining the loss number.
Now the consequences of the breach of contract and remedies available in Bangladeshi contract law.
A. Cases in which specific performance enforceable according to the Contract Law of Bangladesh
Specific performance of any contract may be imposed at the Court’s discretion-
- Where the act agreed to be performed is in the service of a trust;
- Where there is no criterion for assessing the actual damage caused by the act agreed to be performed;
- Where the essence of the act agreed to be performed is such that monetary compensation for its failure to perform would not be sufficient
- When it is probable that monetary compensation cannot be obtained for the non-performance of the act agreed to be done.
Since the order of particular performance is voluntary, the Court is not obligated to grant such relief merely because it is lawful to do so.
The following contracts cannot be specifically enforceable-
How ‘TR Barristers in Bangladesh’ help one of the contracting party in any agreement in Bangladesh
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Contracts which is not enforceable according to the Contract Law of Bangladesh:
- A contract for the non-performance of which compensation in cash is an adequate relief;
- A contract which encompasses such a minute or numerous details, or which is so dependent on the parties ‘ personal qualifications, or otherwise by its nature, that the Court can not endorse the specific performance of its material conditions;
- A contact with the duration of which the Court can not find reasonableContract for Sale: If the seller and buyer agree to sell or buy the property at a later stage, the seller and buyer must enter into a contract for sale.
- A agreement establishes a contractual responsibility between the buyer and the seller, and
- A contract for sale does not change ownership of the property. A sales contract in the sub-registry should be registered.
- A contract made by trustees either in excess of their powers of in breach of their trust;
- A contract concluded by or on behalf of a corporation or public company founded for special purposes or by the promoters of such a company which exceeds its powers;
- A contract whose performance involves the performance of a continuous duty stretching over a period of more than 3 years from its date; and
- A contract in respect of which a substantial part of the subject matter is deemed to be performed by both parties
B. Monetary Compensation in Contract Agreement & Breach of Contract in Bangladesh
1. Monetary compensation for loss or damage incurred by infringement:
When a contract has been violated, the party arising from such violation is entitled to receive compensation from the party violating the contract for any loss or damage resulting from such infringement, which inevitably resulted from such infringement in the normal course of events.
This compensation shall not be provided for any loss or damage caused internally or indirectly because of the breach.
2. Compensation for violation of the contract:
Where a penalty has been levied for infringement of the contract, where a sum is specified in the contract as the amount to be paid in the event of such infringement, or where the contract includes any other clause by way of penalty, the party complaining of the infringement is entitled to receive from the contract, whether or not the actual damage or loss has been found to have been incurred thereby. The innocent party may also demand the section interest on the amount listed above.
C. Contract withdrawal
Any person interested in a contract in writing may sue for having it withdrawn, and such withdrawal may be permitted by the Court in the following cases–where the contract is invalid or terminable by the plaintiff; where the contract is unlawful for reasons not apparent to the plaintiff and the defendant is more to blame than the plaintiff; where there is a decree for a contract specific;
Contract Agreement & Breach of Contract in Bangladesh Services By TR Barristers in Bangladesh
At TR Barristers in Bangladesh, as the leading law firm in Dhaka, we also already supported our clients in securing the full compensation for a broken contract by means of out – of-court settlement or litigation. We will inform our clients with full clarity on the steps that need to be taken to minimize the damage caused by the breach and also enable them to obtain the best possible solution in the event of damage that has already been sustained in Contract Agreement & Breach of Contract in Bangladesh.
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