Most often than not, abandonment of a contract is referred to as a breach of the terms of the contract or refusal to perform the contract, but it is not so. Very recently, the Supreme Court observed that there’s a difference between ‘breach of contract’ and ‘abandonment of the contract’. Abandonment of a contract in its simplest terms is defined as when either of the parties ‘abandon’ the rights granted to them by the virtue of the contract in question and not when either of the parties refuses to perform their obligations or liabilities. Once, there is a refusal to carry out the obligations listed in a contract, it becomes a breach of the contract. The refusal can be on any ground i.e., incapacity to perform, material alterations in the original contract, reciprocal promises not being fulfilled, etc. In all these cases, the remedy available to the aggrieved party is provided under sections 73-75 of the Indian Contract Act,1872.
In a recent finding in Shripati Lakhu Mane v. Maharashtra Water Supply and Sewerage Board, CIVIL APPEAL NO.556 of 2012 (30.03.2022), the Apex Court stated,
“19. …….. Moreover, abandonment is normally understood, in the context of a right and not in the context of a liability or obligation. A party to a contract may abandon his rights under the contract leading to a plea of waiver by the other party, but there is no question of abandoning an obligation. In this case, the appellant refused to perform his obligations under the work order, for reasons stated by him. This refusal to perform the obligations, can perhaps be termed as breach of contract and not abandonment.”
Halsbury’s Laws of England in Paragraph 694 in its 9th Volume states that: -
“694. Work done under a contract terminated for breach. Where one party has absolutely refused to perform or has rendered himself incapable of performing, his part of the contract, he puts in the power of the other party either to sue for a breach of it or to rescind the contract and sue on a quantum meruit for the work actually done. Thus, where a publisher engaged an author to write a work but abandoned the project, the author was entitled to recover reasonable remuneration without tendering the completed work; and where a defendant wrongfully revoked the plaintiff’s authority to sell his land after the latter had found a purchaser, the plaintiff recovered reasonable remuneration for his work and labour up to that date. This type of quantum meruit claim is analogous to claims for the repayment of money on the total failure of consideration. In both cases, the contract must be at an end before the claim can be brought; but once the contract is at an end there is a logical difficulty in saying that the claim is contractual.”
Based on this, it will be appropriate to say that ‘abandonment of a contract’ means abandoning the rights available to the party, and ‘breach of a contract’ means abandoning the project altogether.
It was also explained by the Bombay High Court in Wadhwa Groups Holding Pvt Ltd., vs Homi Pheroze Gandhy and anr, that “Abandonment of an agreement is essentially a question of fact. Abandonment like, waiver of an existing right, benefit, involves, firstly full knowledge of parties right and secondly, intentional act of giving up on that knowledge.”
It is also important to note that a mere delay in not exercising the rights conferred on the parties by the virtue of the contract is not abandonment. There has to be a clear and voluntary giving up of rights (waiver) and the same must be proved in a court of law. So much so that furnishing proof of abandonment is a pre-condition necessary to disentitle the concerned party of their rights.
So to say, voluntary not asserting or intending to assert a particular right conferred upon a party by the virtue of a contract amounts to an abandonment of the contract.