P Chakroborty (Owner) 16 November 2010

Cancellation by Service Provider

I've a small Website Design and Development firm. Recently I entered into a contract with a client where I agreed to build a website for them. The contract was executed on my company letter head and signed by both parties.

I that agreement there is no clause for compensation on termination if the service provider (that's me) cancel the project.

Now I'm suffering from some health and family issues and I cannot complete their work. That's why I requested them to cancel the project/contract and also offer interest @ 4% per month on the down payment amount. I informed this to the client through email.

Now they are saying they will file a law suit against me.

So I've few questions:

1. Whether they can file a suit?

2. Whether any stamp duties need to paid before filing a suit against me and which party will pay the stamp duty?

3. If the contract amount is of Rs.50000 and Advance amount is Rs.10000 how much compensation they can demand?

4. When I surrendered and shown a good gesture by offering an interest on down payment whereas there is not such clause in the agreement, will that be counted as a good deed on my end?

Please help me understanding these.

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3 Replies

Devajyoti Barman (Advocate) 17 November 2010

1. No, I do not think any valid suit could be filed against you as the agreement was an agreement for personal service. Stil, the terms and conditons of the agreement needs to be seen for giving a better reply.

2. No, not much.

3. Anything if the damages could be properly assessed.

4.Yes

JustAdvisor (IT) 25 November 2010

Dear Mr. Chakraborty,

I too am a businessman in the software field (though not in website design) and as a businessman to a businessman, based on my personal experience, I would tell you to relax and forget about it. It is highly unlikely that the other party will pursue the matter and even if they do, they have two options -

1. Go for specific performance with damages - Specific performance is unlikely to be awarded in such case as compensation in money is an adequate relief (refer to specific relief act 1963, section 14)

2. Go for damages on breach of contract - Although there is a breach of contract from your side, it is because of circumstance beyond your control. In breach of contracts, although motive is immaterial, it is considered in actual award of damages and also the party claiming damages is expected to act reasonably to mitigate their damage caused (in this case, hire another web site development firm). Rules of Hadley v Baxendale will also apply.

Practically, I feel they may not go for the legal route (I was faced with somewhat similar circumstances in my line of business and am giving you my opinion based on my experiences).

P Chakroborty (Owner) 25 November 2010

Thank You! all for you advices

Mr. Gokhale you are right. 5 days after I posted this here you sent me another email and asked me continue the work after I get better health and take care of family issue. They extended the period for another month.