What is a Breach of Contract?
A breach of contract occurs when one party to a valid and legally enforceable contract fails to perform
their obligations, either fully or partially, without any lawful justification.
Under the Indian Contract Act, 1872, when a contract is broken by one party, the other party gains the
right to claim compensation or seek enforcement.
Types of Breach:
1. Actual Breach – When a party fails to perform when the time for performance arrives.
2. Anticipatory Breach – When a party, in advance, refuses or disables itself from performing the
contract.
Key Ingredients:
• Existence of a valid contract
• Defined obligations for both parties
• Non-performance or violation of terms by one party
• No legal excuse or defence for such failure
Remedies under Law:
• Monetary Compensation (Damages) under Section 73 of the Contract Act
• Specific Performance under the Specific Relief Act, 1963
• Injunctions – To restrain a party from breaching the terms further
• Restitution – Restoring benefits wrongly retained
Example:
If X contracts to deliver machinery to Y on a fixed date but fails to do so without valid reason, Y may
sue X for breach and claim damages or seek specific performance, if applicable.
What is Fraud?
Fraud, in legal terms, is a deliberate deception intended to secure unfair or unlawful gain. In the context
of contracts, it refers to acts done knowingly with the intent to deceive the other party.
As per Section 17 of the Indian Contract Act, 1872, fraud includes:
• False suggestion of fact
• Active concealment
Page 25• Promise made without intent to perform
• Any other act fitted to deceive
In addition, fraud may also lead to criminal charges under Sections 415 to 420 of the Indian Penal Code
(IPC).
Key Ingredients:
• A wilful act of deception
• False representation or concealment of material facts
• Knowledge of falsity
• Intent to induce or cause damage
• Actual or potential harm suffered by the victim
Remedies under Law:
• Rescission of contract (i.e., cancellation)
• Civil damages under the Indian Contract Act
• Criminal prosecution under IPC (cheating, criminal breach of trust)
• Restitution of benefits derived through fraud
Example:
If A sells a car to B claiming it’s new and accident-free while hiding that it has major damage and was
involved in a past accident, A is guilty of fraud. B can file a criminal complaint and also seek damages
or rescind the agreement.
Key Differences Between Breach of Contract and Fraud
Basis Breach of Contract Fraud
Definition Failure to fulfill contractual obligations Intentional deception to induce a party into
a contract
Nature of Wrong Civil Civil + Criminal
Intent Not necessary Always deliberate and with intention to deceive
Legal Provision Indian Contract Act, 1872 Section 17 of Contract Act + IPC Sections 415–
420
Remedies Available Damages, Specific Performance, Injunction Rescission, Damages, Criminal
Complaint, Restitution
Burden of Proof Proof of valid contract and failure of performance Must prove intention to
deceive and actual loss
Result of Violation Monetary compensation or order for performance Cancellation of contract +
possible imprisonment
Legal Advice: When Should You File for Breach and When for Fraud?
• If the contract was valid, and the other party failed to perform (e.g., didn’t deliver goods or services),
it’s likely a breach.
• If the contract itself was induced by lies, manipulation, or concealment, then it may amount to fraud,
and both civil and criminal remedies can be explored.
In some situations, both breach and fraud may arise together — for example, if someone entered into a
contract with no intention of fulfilling it from the beginning.
Conclusion
Page 26The distinction between breach of contract and fraud lies in intent, legal consequences, and remedies.
While both harm the aggrieved party, fraud involves a more serious violation as it strikes at the root of
consent and often carries criminal liability.
At Narendra Madhu Associates, we help individuals and businesses assess their situation correctly and
proceed with the right legal action — whether it’s a breach, fraud, or both. If you’re unsure about your
rights or wish to initiate legal proceedings, feel free to consult our experienced civil law team.
