An Explainer: Default

While entering into a contract which is legally binding, all parties are required to honour the terms and conditions mentioned in the agreement. Any failure to do so is considered illegal and amounts to default.  This could land the erring party in trouble and as a defaulter is liable to face legal action. This could be in form of a monetary penalty or jail term. For instance, in case you fail to pay your EMI (equated monthly installment) for two months, your bank will charge a penalty for this default. A bank may also initiate against you a legal action in case of a willful default.

Similarly, a landlord may initiate action against a tenant in case of a delay in rent payments. A tenant has the same rights in case his landlord is at fault, and has failed to honour the conditions mentioned in the rent agreement.

Real estate developers' failure to deliver projects within the stipulated time limit is also a default and will be punishable under the provisions of the Real Estate (Regulation & Development) Act, 2016. On the same lines, if a buyer is not able to fulfill the terms and conditions, he will also be penalised under the rules of recently enacted law.