Ascertaining the Time of Breach of Contract

Ascertaining the time of breach of contract

George Coucounis explains that when a contract is breached then damages are normally assessed as at the date of the breach.

The contractual relations between the parties to an agreement may come to an end either when one of the parties commits a breach of an essential term or when due notice is given to a party to comply with a formal term made of the essence of the agreement but he fails to do so. Such an agreement may be for the sale of land or other immovable property, a breach of which qualifies the innocent party to terminate it.

The time of breach is relevant with the assessment of damages, since at that time the innocent party can claim compensation in order to be restored to the position he would be if the agreement was executed.

The damages are normally assessed as at the date of the breach, though they may be assessed at a subsequent time where a party persist for good cause to have the contract enforced. The Court in the exercise of its judicial discretion may order the specific performance of a contract or decide to abstain if it seems just; in such a case, damages will be calculated as the time of the trial.

An agreement for the sale of land or other property must be examined properly to establish if a breach has been committed, whether the term is of the essence of the agreement or a formal one, if the agreement has been deposited at the Land Registry in Cyprus for specific performance purposes or not and whether there is a title deed for the property. Also, the ascertainment of the intention of a party to contravene his agreement, his behaviour, the circumstances under which he acted and the remedy available to the innocent party, whether he will elect to have the contract enforced or to accept the breach, all these are factors to be taken into account to ascertain the time of breach.

For example, where the agreement is for the sale of land or property with a title deed but the purchaser failed to deposit it at the Land Registry and the vendor proceeds to sell and transfer the property to a third person, the time of breach is the date the property is sold to the third person. The damages will be assessed as at that date and their measure is the difference between the contract price and the market value at the time the vendor sold the property to the third person.

Where the property has no separate title deed and the purchaser cared to deposit the sale contract at the Land Registry but the vendor declares his intention not to execute the agreement, the purchaser must be careful. He must think properly whether to accept the breach and if not, to persist in the enforcement of the agreement. The lack of a separate title deed gives him a good cause to have the contract enforced until the vendor issues a title deed, so that to claim its specific performance thereafter.

According to the law, the specific performance of an agreement is impossible in the absence of a separate registration covering the immovable property under sale. Therefore, the purchaser who ignorantly proceeds to file an action against the vendor will be considered as having accepted the breach and his claim will remain for damages. He will lose the property and receive only money.

A purchaser, at any event, without a good cause, is not allowed by his own delay to increase his damages.

According to the authorities, the damages that are normally recoverable in a breach of contract action are as follows: (a) the legal costs for approving and executing a contract, (b) the cost of performing an act required to be done by the contract, notwithstanding that the act is performed in anticipation of the execution of the agreement, and (c) damage for any other loss which ought to be regarded as within the contemplation of the parties.

So, in the case of a contract of sale, ordinarily damage takes the form of the difference between the contract price and the market value of the property at the time of the breach.