Supreme Court: Abandonment under a Contract is understood in the Context of Right and not Liability.


Sakunjay Vyas

Published on: March 31, 2022 at 18:37 IST

The Two Judge Bench of Justice Hemant Gupta and Justice V. Ramasubramanian of the Supreme Court overturned the Order of the Bombay High Court bench that modified the Decree granted by the Trial Court for Recovery of Rs. 24,97,077/­- together with Interest at 10% per annum was into a Decree for Recovery of Rs. 7,19,412/­- together with Interest.

The Supreme Court recently ruled that a party to a Contract may abandon his Rights under the Contract leading to a Plea of Waiver by the other party. However, there is no question of Abandoning an Obligation.

The Two Judge Bench of Justice Hemant Gupta and Justice V. Ramasubramanian were hearing the present Appeal under Section 96 of the Code of Civil Procedure, 1908, by which the Decree granted by the Trial Court for recovery of Rs.24,97,077/- together with interest at 10% per annum was modified into a Decree for recovery of Rs.7,19,412/- together with interest.

That the issue to be decided for the Apex Court was whether or not the Appellant abandoned the work? The Apex Court, after thoroughly considering the fact, held that the Appellant was not Guilty of anything, including Abandonment, which can be further affirmed by the fact that the Respondent didn’t Claim any of the remedies available to them under the Contract. And we are surprised by the findings of the High Court, which held the Appellant Guilty of Abandonment.

“Admittedly, Clause 3(a) of the Contract enabled the Respondents to rescind the Contract, forfeit the Security Deposit and entrust the work to another contractor at the risk and costs of the Appellant. This Clause was never invoked by the Respondents.” the Court said.

The Apex Court stated that it is Fundamental to the Law of Contract that whenever a material alteration takes place in terms of the Original Contract, on account of any act of omission or commission on the part of one of the parties to the Contract, it is open to the other party not to perform the Original Contract. This will not amount to Abandonment. The Abandonment is to be understood as a Right and not a Liability.

“The Abandonment is normally understood, in the context of a Right and not in the context of a Liability or Obligation.” the Court said.

The Apex Court further stated that it is interesting to note that the Respondents have not claimed any of the remedies present either in the Contract Act or the Contract itself. Instead, they attributed Abandonment to the Appellant and refused to honor the Claims made by the Appellant. That the High Court has errored in considering the acts of the Appellant to be abandoning the Contract when the finding of the Court is itself contradicts the Facts of the Case.

As a result, the Apex Court overturned the Order of the Bombay High Court by stating that the High Court was clearly in error in overturning the Judgment of the Trial Court with a wrong understanding that there was an Abandonment of Contract on the part of the Appellant. Hence this Appeal is allowed.

Also Read: Consumer Protection & Redressal Mechanism in India

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