Introduction

• This case talks about abandonment by a party under the contract entered between the parties.
• The Court held in this case that the refusal to perform an obligation amounts to breach of contract and not abandonment.
• The refusal of a contractor to continue to execute the work, unless the reciprocal promises are performed by the other party, cannot be termed as abandonment of contract.

Facts

• The appellant, a registered contractor, was issued a work order on 03rd July 1986 for a water supply scheme in Ratnagiri District. The agreed time for completion was 30 months.
• On 28th July 1986, the respondents informed the appellant to keep the work order in abeyance. After representation, they asked the appellant to start work on 17th December 1986.
• The appellant notified the non-availability of specified pipes and demanded fresh rates when the respondents proposed using different pipe dimensions.
• Before resolving this issue, the respondents instructed the appellant to stop the pipeline work on 02nd March 1987 and start work at another place.
• There were modifications to the scheme, and the appellant claimed the work could not be completed due to paucity of funds and delay in sanctioning the modified rates.
• The respondents imposed a fine of Rs. 10 per day and called upon the appellant to start work.
• The Trial Court partly decreed the appellant's suit for recovery of Rs. 51,35,289/- by awarding Rs. 24,97,077/- with interest.
• The respondents appealed to the High Court, which reduced the decree amount to Rs. 7,19,412/- on the ground of abandonment by the appellant.
• The appellant appealed to the Supreme Court, challenging the High Court's finding of abandonment.

Issues Involved

• Whether there was abandonment on the part of the appellant?

Observation

• The Supreme Court first of all cited Section 67 of Indian Contract Act, 1872 (ICA) which provides that if promisee refuses or neglects to provide facilities for performance of the contract the promisor is excused by such neglect.
• The Court observed that whenever there is material alteration in the original contract, the party can refuse to fulfill the original contract. However, this will not amount to abandonment.
• Abandonment is understood in the context of right and not in context of 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. Thus, refusal to perform the obligation can be termed as a breach of contract and not as abandonment.
• The refusal of a contractor to continue to execute the work, unless the reciprocal promises are performed by the other party, cannot be termed as abandonment of contract.
  • A refusal by one party to a contract may entitle the other party either to sue for breach or to rescind the contract and sue on a quantum meruit for the work already done.
• Thus, it was held that the High Court had committed error in overturning the findings of the Trial Court.

Conclusion

• A party to the contract may abandon the rights but cannot abandon the obligation. Thus, refusal to fulfil the contract is to be termed as breach and not abandonment.
• The refusal of a contractor to continue to execute the work, unless the reciprocal promises are performed by the other party, cannot be termed as abandonment of contract.

Notes

Section 67 of ICA: Effect of neglect of promisee to afford promisor reasonable facilities for performance

If any promisee neglects or refuses to afford the promisor reasonable facilities for the performance of his promise, the promisor is excused by such neglect or refusal as to any non-performance caused thereby.