TRW & Co · Contracts and disputes
Breach of Contract Remedies in Bangladesh
The breach of contract remedies Bangladesh law offers include damages under the Contract Act 1872, liquidated damages capped at reasonable compensation, termination for repudiation, and specific performance or injunctions under the Specific Relief Act 1877. Which remedy works depends on the contract terms, strict limitation periods and the right forum in Chattogram, including arbitration and the new commercial courts.
Key pointFor contracts to sell land, specific performance is lost unless the agreement was registered and the balance price is deposited with the plaint; the High Court Division has held that a later deposit cannot cure the defect.
At a glance
Damages under section 73
Compensation covers loss arising naturally from the breach or that both parties knew was likely; remote and indirect losses are not recoverable.
Stipulated sums capped
Under section 74, a liquidated damages or penalty clause yields reasonable compensation not exceeding the named sum, not an automatic right to the full figure.
Specific performance
Discretionary relief under the Specific Relief Act 1877, refused where money is adequate; suits must generally be filed within one year under Article 113.
Land contracts
Section 21A requires a registered sale agreement and deposit of the balance consideration when the specific performance suit is filed.
Commercial courts
District-level commercial courts created in January 2026, now under the Commercial Courts Act 2026, hear many supply, trade and construction disputes.
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The breach of contract remedies Bangladesh law offers are damages, liquidated damages, termination, specific performance, injunctions and declarations, plus whatever the contract itself provides, such as cure periods, service credits or arbitration. Which one you can actually get depends on the wording of the contract, how quickly you act, and whether you choose the right forum in Chattogram.
This guide is written for businesses, landowners and investors dealing with a counterparty that has not paid, not delivered, walked away or refused to renew. It covers the statutory framework, the practical sequence of steps and the mistakes that cost claimants their remedy.
The short answer
Under the Contract Act 1872, the injured party can recover compensation for loss that naturally arose from the breach or that both parties knew was likely when they contracted (section 73). Where the contract names a sum payable on breach, the court awards reasonable compensation not exceeding that sum (section 74). Where the other side refuses to perform, the injured party may treat the contract as at an end (section 39) and claim compensation for damage caused by non-performance (section 75).
Where money is not an adequate remedy, the Specific Relief Act 1877 lets the court order performance or grant an injunction, at its discretion. For contracts to sell land, section 21A adds two strict conditions: the agreement must be registered, and the balance price must be deposited in court when the suit is filed.
Time matters. Under the Limitation Act 1908, a suit for specific performance must be brought within one year (Article 113), and most money claims for breach must be brought within three years.
The legal framework
The breach of contract remedies Bangladesh law recognises come mainly from two statutes inherited from the nineteenth century and still in force, together with the procedural law that decides where and when you can sue.
Contract Act 1872
- Section 39: refusal to perform. If a party refuses, or disables itself from, performing its promise in its entirety, the other party may put an end to the contract unless it has signalled acquiescence in its continuance.
- Section 55: time. Where time is of the essence, failure to perform on time makes the contract voidable; where it is not, the remedy is compensation for the delay.
- Section 56: impossibility. A contract that becomes impossible or unlawful to perform becomes void, which is the statutory basis for frustration arguments.
- Section 62: novation and alteration. Parties can substitute, rescind or alter the contract by agreement, which is how renegotiation is papered.
- Section 73: compensation. Loss arising naturally from the breach, or that the parties knew was likely, is recoverable; remote and indirect loss is not, and the means of remedying the loss must be taken into account.
- Section 74: stipulated sums. Liquidated damages and penalty clauses are both cut back to reasonable compensation not exceeding the stated amount.
- Section 75: rescission. A party who rightfully rescinds is entitled to compensation for damage sustained through non-performance.
Specific Relief Act 1877
The Act governs specific performance, injunctions and declarations. Specific performance is discretionary and is generally refused where compensation in money is adequate, where the contract requires continuous supervision, or where it is too uncertain to enforce. Temporary injunctions during a suit are governed by the Code of Civil Procedure; our temporary injunction guide explains the test.
Section 21A and land contracts
Section 21A, inserted in 2004 and in force from 2005, provides that no contract for the sale of immovable property can be specifically enforced unless it is in writing and registered, and the balance consideration is deposited in court when the suit is filed. In Civil Revision No. 6244 of 2023 (judgment of 24 August 2025), the High Court Division rejected a plaint where the balance had not been deposited, holding that the trial court could not allow a later deposit to cure the defect.
Arbitration and the new commercial courts
If the contract has an arbitration clause, the dispute generally goes to arbitration under the Arbitration Act 2001. Otherwise, it goes to the civil courts, and increasingly to the new commercial courts.
The Commercial Court Ordinance 2026, gazetted in January 2026, provided for district-level commercial courts presided over by District and Additional District Judges, a trial timetable, and commercial appellate benches in the High Court Division, according to The Financial Express. It listed at least 24 types of commercial dispute, including import and export, carriage of goods and construction contracts. Parliament replaced it with the Commercial Courts Act 2026, passed on 7 April 2026, and the official cause-list portal lists two Commercial Courts for Chattogram Metropolitan and one for Chattogram district (October 2026). Readers should check the Act's current text for value thresholds, any pre-suit mediation step and trial timelines.
The breach of contract remedies Bangladesh courts grant, compared
| Remedy | Source | When it fits | Watch out for |
|---|---|---|---|
| Damages | Contract Act, section 73 | Unpaid price, defective goods, delay, lost profit that was foreseeable | Proof of loss; remoteness; mitigation; three-year limitation for most claims |
| Liquidated damages | Contract Act, section 74 | Delay penalties in supply, construction and development contracts | Court awards reasonable compensation up to the cap, not automatically the full sum |
| Termination and compensation | Contract Act, sections 39 and 75 | Repudiation or breach going to the root of the contract | Wrongful termination turns you into the party in breach; follow notice and cure clauses |
| Specific performance | Specific Relief Act 1877 | Land sales, unique assets, share transfers | Discretionary; one-year limitation; section 21A for land |
| Injunction | Specific Relief Act; Code of Civil Procedure | Stopping a sale, a call on a guarantee, misuse of confidential information | Need a prima facie case, balance of convenience and irreparable harm; act quickly |
| Arbitration award | Arbitration Act 2001 | Contracts with an arbitration clause | Court proceedings may be stayed; awards are enforced through the court |
Cure periods, renewals and limitation-of-liability clauses
Most commercial disputes in Chattogram are decided less by the statute than by the contract. Before acting, read the contract for these clauses:
- Notice and cure. Many contracts require written notice of breach and a period to remedy it before termination. Terminating without following the clause can itself be a breach.
- Termination rights. Check whether the contract allows termination for convenience, for specified breaches only, or for any material breach, and what payments follow termination.
- Renewal and option clauses. In leases, distribution and service agreements, renewal often depends on notice given within a window and on the renewing party not being in breach. Missed windows are a common source of disputes.
- Limitation and exclusion of liability. Caps and exclusions of indirect loss are common. Courts read them against the party relying on them, so precise drafting matters.
- Liquidated damages. Because section 74 limits recovery to reasonable compensation up to the stated sum, a well-reasoned pre-estimate is more useful than an inflated penalty.
- Dispute resolution. Arbitration, expert determination, jurisdiction and governing law clauses decide where the fight happens. Our arbitration team advises on these.
What to do when the other side breaches
- Secure the documents. Gather the signed contract, amendments, purchase orders, invoices, delivery records, emails and WhatsApp messages. Save electronic records in a form that can be produced in court.
- Diagnose the breach. Identify the term breached, whether time was of the essence, whether the breach goes to the root of the contract, and any notice or cure clause.
- Fix your deadlines. Diary the limitation period, including the one-year limit for specific performance, and any contractual time bar. Our limitation guide sets out the periods.
- Mitigate. Take reasonable steps to reduce your loss, such as buying substitute goods or re-letting premises, and keep records of the cost.
- Serve a notice. A clear demand or breach notice puts the counterparty on record and may trigger the cure period. See our guide to sending a legal notice.
- Negotiate from evidence. Many disputes settle once both sides see the documents. Record any revised deal in writing as a variation or settlement agreement.
- Choose the forum. Arbitration if there is a clause; otherwise the civil or commercial court with jurisdiction. Consider urgent interim relief where assets may disappear.
- File and enforce. Plead the remedies in the alternative where appropriate, and plan enforcement against assets in Bangladesh from the start.
If you may want specific performance of a land contract, prepare the balance consideration before you file. Under section 21A it must be deposited with the plaint, and the High Court Division has held that a later deposit does not save the suit. This is one of the breach of contract remedies Bangladesh courts apply most strictly.
Renegotiation, variation and settlement
Litigation is rarely the first or only step. Section 62 of the Contract Act allows parties to substitute a new contract, or to rescind or alter the existing one, and section 63 allows the party entitled to performance to extend time or accept less. Used well, these provisions let a business keep a valuable relationship while resetting price, volume or delivery terms.
Renegotiation has its own risks. Accepting late performance without reserving rights can be argued as a waiver, and an informal "we will sort it out" message may later be read as an extension of time. Put any revised terms in a signed variation or settlement agreement that states what is released and what is not, and whether earlier breaches are waived. Where one side is under financial pressure, consider security such as post-dated payments, a guarantee or a mortgage. A clear settlement is often the most valuable of the breach of contract remedies Bangladesh businesses use, because it avoids years in court.
An illustrative scenario
This scenario is illustrative only; the parties are generic. A Chattogram manufacturer agrees to supply packaging to an export garment factory over two years, with monthly orders, a liquidated damages clause for late delivery and a 30-day cure period. After a price dispute, the factory stops placing orders and tells the supplier it has found a cheaper source.
The supplier's lawyer treats the message as a refusal to perform under section 39. Rather than terminating at once, the supplier serves a notice invoking the cure clause, then terminates when the period expires. It claims compensation under sections 73 and 75 for lost margin on the remaining term, reduced by what it earns by selling the spare capacity to other buyers. The factory counterclaims liquidated damages for earlier late deliveries, which the court will reduce to reasonable compensation under section 74. Because the contract has no arbitration clause, the supplier checks whether the claim falls within the new commercial courts.
The scenario shows how the breach of contract remedies Bangladesh courts award interact: the supplier's damages are measured by its proven, mitigated loss, while the buyer's stipulated sum is trimmed to what is reasonable.
Risks and common mistakes
Terminating too early or the wrong way
A party that terminates without a contractual or statutory right, or without following the notice and cure clause, risks becoming the party in breach. The counterparty can then claim damages for wrongful termination. Before terminating, confirm the ground, follow the procedure exactly, and keep proof of service of every notice.
Missing the one-year limit for specific performance
Article 113 of the Limitation Act gives one year, running from the date fixed for performance or, if none was fixed, from when the plaintiff has notice that performance is refused. In First Appeal No. 31 of 2026, the High Court Division found that letters from the defendants asking for more time affected when time began to run. Do not assume correspondence will save you; calculate the date and file early.
Claiming losses you cannot prove
Courts award compensation for loss proved by evidence, not for estimates in a plaint. Lost profit claims need accounts, contracts with third parties and a credible calculation. Losses that were not foreseeable when the contract was made are excluded. Build the evidence while the dispute develops, not after filing, and show what you did to mitigate.
Ignoring the arbitration clause
Filing a suit in the face of an arbitration clause invites an application to stay the proceedings and refer the parties to arbitration, which costs time and money. Equally, taking steps in a suit may be argued as waiving the right to arbitrate. Read the clause first and choose deliberately; our guide to the basics of Bangladesh contract law covers formation and validity issues that often surface in these disputes.
Cross-border contracts
Many Chattogram contracts involve foreign buyers, suppliers, shipowners or investors. Foreign parties will find the breach of contract remedies Bangladesh law provides broadly familiar from other common law systems, but procedure, limitation and enforcement differ in ways that matter. A foreign governing law or court clause does not stop a Bangladeshi court from granting interim relief over assets in Bangladesh, but enforcement of a foreign judgment depends on reciprocity and the Code of Civil Procedure. Foreign arbitral awards are enforced under the Arbitration Act 2001; see our guide to enforcing foreign arbitral awards. TRW & Co's offices in Dhaka, Singapore, Dubai and London help coordinate parallel steps.
Checklist for decision-makers
- Read the notice, cure, termination, liability and dispute resolution clauses before acting.
- Diary the limitation period and any contractual time bar.
- Preserve documents and electronic messages.
- Mitigate and record your costs.
- Serve a precise notice of breach or demand.
- Decide between damages, termination, specific performance and an injunction, pleading in the alternative where needed.
- Choose the forum: arbitration, civil court or commercial court.
TRW & Co's commercial contracts team and commercial litigation team at our Chattogram office advise on the breach of contract remedies Bangladesh law makes available, and our advocates appear in the Chattogram courts and the High Court Division. To discuss a dispute, contact us, email info@trw.co or call +880 1779 127165.
Frequently asked questions
01What are the remedies for breach of contract in Bangladesh?
The main remedies are compensation (damages) under section 73 of the Contract Act 1872, reasonable compensation up to a stipulated sum under section 74, termination where the other party refuses to perform with compensation under section 75, and specific performance, injunctions and declarations under the Specific Relief Act 1877. The contract itself may add remedies such as cure periods, service credits or arbitration. The best remedy depends on the breach, the evidence and the time that has passed.
02How long do I have to sue for breach of contract in Bangladesh?
It depends on the claim. A suit for specific performance must be filed within one year under Article 113 of the Limitation Act 1908, running from the date fixed for performance or, if none was fixed, from notice of refusal. Most money claims for breach must be brought within three years, usually from the breach or the date payment fell due. Contracts may also contain shorter contractual time bars, so check both the statute and the document.
03Will a court award the full liquidated damages in the contract?
Not automatically. Section 74 of the Contract Act provides that where a contract names a sum payable on breach, the injured party receives reasonable compensation not exceeding that sum, whether the clause is described as liquidated damages or a penalty. Courts look at the actual or likely loss. A clause based on a genuine pre-estimate of loss is more persuasive than an inflated figure designed to deter breach.
04Can I get specific performance of a bayna (sale agreement) for land?
Only if the agreement is in writing and registered under the Registration Act 1908, and you deposit the balance consideration in court when filing the suit, as section 21A of the Specific Relief Act requires. In 2025 the High Court Division rejected a plaint where the balance had not been deposited and held that a later deposit could not cure the defect. The suit must also be filed within the one-year limitation period.
05Can I terminate a contract immediately if the other side breaches?
Sometimes, but it is risky. Section 39 allows a party to put an end to the contract where the other party refuses to perform, or disables itself from performing, its promise in its entirety. Many contracts also require written notice and a cure period first. Terminating without a valid ground or without following the contractual procedure can make you the party in breach, exposing you to a damages claim.
06Do commercial disputes in Chattogram now go to commercial courts?
Many will. The Commercial Court Ordinance 2026 created district-level commercial courts for a long list of commercial disputes, including import and export, carriage of goods and construction contracts. Parliament replaced it with the Commercial Courts Act 2026 on 7 April 2026, and two Commercial Courts are listed for Chattogram Metropolitan and one for the district. Readers should check the Act's current text for value thresholds, trial timelines and any pre-suit mediation step. An arbitration clause will usually take the dispute out of court.
Sources and official materials
- Contract Act 1872 — Sections 39, 55, 56, 62, 73, 74 and 75
- Specific Relief Act 1877 — Specific performance, injunctions, declarations; section 21A
- Limitation Act 1908 — Article 113: one year for specific performance
- Arbitration Act 2001 — Arbitration of contract disputes and enforcement of awards
- High Court Division, Civil Revision No. 6244 of 2023 — Section 21A deposit must accompany the plaint (24 Aug 2025)
- High Court Division, First Appeal No. 31 of 2026 — Article 113 limitation and refusal of performance (18 Aug 2026)
- The Financial Express: Commercial court ordinance issued — Commercial Court Ordinance 2026 (since replaced by the Act): courts and disputes
General information only, current as at 27 October 2026. It is not legal advice and does not create an advocate–client relationship. It reflects the law of Bangladesh unless stated otherwise, and the law, court practice and official fees change frequently. Check current official sources and take advice on the facts of your matter.
