S.S.

JAIN SUBODH LAW COLLEGE

DR. BHIMRAO AMBEDKAR LAW UNIVERSITY

Session- 2020-21
A PROJECT ON DAMAGES FOR BREACH OF
CONTRACT

Subject – LAW OF CONTRACT

Submitted to: Miss Anjali bhatia

Submitted By: Himanshu gurjar
(Assistant Professor)
BA LLB 1st Semester

Declaration

I, Himanshu gurjar,do hereby declare that, this project titled " Liability of psychiatric
 damages in india and nervous shock” is an outcome of the research conducted by me under
the guidance of Miss ANJALI BHATIA (Asst. Prof. of Law) at S.S. Jain Subodh Law
College in fulfillment for the award of the degree of B.A.LL.B. At the Dr. Bhimrao
Ambedkar Law University, Jaipur.

I also declare that, this work is original, except where assistance from other sources has been
taken and necessary acknowledgements for the same have been made at appropriate places. I
further declare that, this work has not been submitted either in whole or in part, for any
degree or equivalent in any other institution.

Date: 5-4-2021

Place: jaipur

Himanshu gurjar

CERTIFICATE

This is to certify that, the project titled “DAMAGES FOR BREACH OF CONTRACT”
submitted by Himanshu gurjar in fulfillment for the award of the degree of B.A.LL.B. At
S.S. Jain Subodh Law College is the product of research carried out under my guidance and
supervision.
Miss ANJALI BHATIA

Asst. Prof. of Law

S.S. Jain Subodh Law College

Acknowledgement

I acknowledge with profundity, my obligation to Almighty God and my parents for giving
me the grace to accomplish my work, without which this project would not have been
possible.

I express my heartfelt gratitude to my respected faculty, Miss ANJALI BHATIA for

providing me with valuable suggestions to complete this dissertation.

I am especially grateful to all my faculty members at SS Jain Subodh Law College who
have helped me imbibe the basic research and writing skills.

Lastly, I take upon myself, the drawbacks and limitations of this study, if any.
Date: 05-04-2021

Place: jaipur

Himanshu gurjar

INDEX

TITLE PAGE NO.

INTRODUCTION 7

RULES GOVERNING THE

MEASURE OF DAMAGES 8
THE RULE IN “HADLEY V BAXENDALE” 9

TWO TYPES OF DAMAGES 11

CONCLUSION 12

BIBLIOGRAPHY 13

This project talks about liability in case of psychiatric damages in India and also the
present scenario of awarding compensation in common law countries also.
● The first part of the project deals with the introduction which talks about what the
psychiatric injury is and what are damages awarded in the form of compensation and some
conditions in order to claim compensation.
● The second part of the project deals with the evolution of cases of nervous shock
in Indian jurisdiction.
● Then there is a explanation of the concept of determination of plaintiff and defendant
which was aroused through one case law. After the explanation of this concept, Indian
approach in the case of nervous shocks and its landmark cases.
● And the last major part deals with the common law countries approach in awarding the
compensation in the injury caused due to psychiatric illness.
● In the concluding part there is conclusion in which I gave my conclusion remarks
and some suggestions which I felt to be done in Indian
 jurisdiction to improve the condition of these cases and laws which need to codified.
Research Methodology :

I used doctrinal method of research in this project. Sources of internet is also used in
collecting content of topic. Mainly sources which are used are secondary sources which
are relevant books relating to Law of Contract which were available in the library.

Research objective :

To show how psychiatric damages are dealt in different jurisdictions and how it differ in
Indian jurisdictions. Also in complicated cases how to determine who is the plaintiff and
who is the defendant.

This project is mainly focused on the law relating to liability for negligently inflicting
psychiatric damages to any individual. This type of tort relating to psychiatric injury in
which defendant claims compensation gained the popular interest and has gained
widespread media coverage also.

INTRODUCTION

Compensatory damages (also called “actual damages”) cover the loss the nonbreaching
party incurred as a result of the breach of contract. The amount awarded is intended to
make good or replace the loss caused by the breach.

Parties to a contract are legally expected to perform their respective obligations, so

naturally, the law frowns upon a breach by either party. Therefore, as soon as one party
commits a breach of the contract, the law grants to the other party three remedies. He may
seek to obtain: 1. Damages for the loss sustained, or
2. A decree for specific performance, or
3. An injunction.
The laws relating to damages are governed by the Contract Act, whereas the laws relating
to injunctions and specific performance are governed by the Specific Relief Act, 1963.
Damages for the loss sustained :
 Section 73 of the Indian Contract Act 1872 lays down four important rules governing the
measure of damages.

First Rule: Section 73(1)

When a contract has been broken, the party who suffers by such breach is entitled to receive
from the party who has broken the contract, compensation for any loss or damage caused to
him:
● Which naturally arose in the usual course of things from such breach, or
● Which the parties knew, when they made the contract, to be likely to result from the
breach of the contract.
An uncommonly known fact is that Section 73 is based on a case law, i.e. Hadley v.
Baxendale (1854) 9 Ex. 354 1

The well-known rule in this case was stated by the Court as follows: “Where two parties have
made a contract which one of them has broken, the damages which the other party ought to
1 EWHC J70 (1854) 156 ER 145, 9 EXCH 341, (1854) 23 LJ 179, 18 JUR 358,, All ER Rep 461
receive in respect of such breach of contract should be either such as may reasonably and
fairly be considered as arising naturally, i.e. according to usual course of things, from such
breach of contract itself, or such as may reasonably be supposed to have been in the
contemplation of both parties at the time they made the contract as the probable result of the
breach of it.”

Second Rule: Section 73(3)

The second rule of measuring damages deals with remoteness of damage. It states,
“Such compensation is not to be given for any remote and indirect loss or damage sustained
by the reason of the breach.”
Damages are measured by the loss actually suffered by the party. The loss must naturally
arise in the usual course of things from the breach; or it must be such as the parties knew,
when they made the contract, to be likely to result from the breach of it. Therefore, it
follows that a party is not liable for a loss too remote, i.e. which is not the natural or
probable consequence of the breach of the contract.
In Madras Railway Company v. Govinda (1898) 21 Mad. 1722, the Plaintiff, who was a
tailor, delivered a sewing machine and some clothes to the defendant railway company, to be
sent to a place where he expected to carry on his business in an upcoming festival. Due to
mistakes made by the company’s employees, the goods were delayed and were not delivered
until some days after the festival was over. The plaintiff had not given any notice to the
railway company that the goods were required to be delivered within a fixed time for any
special purpose. On a suit by the plaintiff to recover a sum of his estimated profits, the Court
held that the damages claimed were too remote.

Third rule: Explanation to Section 73

The third rule is to be found in the Explanation to Section 73, which provides as
follows:
“In estimating the loss or damage arising from a breach or contract, the means which
existed of remedying the inconvenience caused by the non-performance of the contract
must be taken into account.”
Therefore, if a railway company, having contracted with a passenger to take him to a
particular station fails to do so, the passenger is entitled to damages for the inconvenience
of having to walk and any reasonable expense which he incurs, like staying at a motel, and
he may get some other conveyance, and charge the railways with that expense if it is a

2 (1898) ILR 21 Mad 172

 reasonable thing to do so in that particular circumstance. What is not reasonable is for him
to charter a special train to save himself for waiting and charge the railway company with
the expenses.

Fourth Rule: Section 73

It is to be noted finally, that damages payable for the breach of a quasi-contract are
exactly the same as those payable for any other contract. To rephrase, all the above rules
apply to quasi-contracts in the same manner.
It should be noted that when no loss arises from the breach of contract, only nominal
damages are awarded. Damages are given by way of restitution and compensation only,
and not by way of punishment. The aggrieved party can therefore recover the actual loss
caused to him as compensation.

THE RULE IN “HADLEY V BAXENDALE” :

Hadley & Anor v Baxendale & Ors 3 [1854] EWHC J70 is a leading English contract law
case. It sets the leading rule to determine consequential damages from a breach of
contract: a breaching party is liable for all losses that the contracting parties should have
foreseen, but is not liable for any losses that the breaching party could not have foreseen
on the information available to him.

FACTS :

The claimants, Mr Hadley and another, were millers and mealmen and worked together in a
partnership as proprietors of the City Steam-Mills in Gloucester. They cleaned grain,
ground it into meal and processed it into flour, sharps, and bran. A crankshaft of a steam
engine at the mill had broken and Hadley arranged to have a new one made by W. Joyce &
Co. in Greenwich. Before the new crankshaft could be made, W. Joyce & Co. required that
the broken crankshaft be sent to them in order to ensure that the new crankshaft would fit
together properly with the other parts of the steam engine.
3 EWHC J70 (1854) 156 ER 145, 9 ExCH 341, (1854) 23 LJ Ex 179, 18 Jur 358,, ALL ER 461
Hadley contracted with defendants Baxendale and Ors, who were operating together as
common carriers under the name Pickford & Co., to deliver the crankshaft to engineers for
repair by a certain date at a cost of £2 sterling and 4 shillings.
Baxendale failed to deliver on the date in question, causing Hadley to lose business.
Hadley sued for the profits he lost due to Baxendale's late
delivery, and the jury awarded Hadley damages of £25. Baxendale appealed, contending
that he did not know that Hadley would suffer any particular damage by reason of the late
delivery.
The question raised by the appeal in this case was whether a defendant in a breach of
contract case could be held liable for damages that the defendant was not aware would be
incurred from a breach of the contract.

JUDGEMENT :

The Court of Exchequer, led by Baron Sir Edward Hall Alderson, declined to allow Hadley
to recover lost profits, holding that Baxendale could be held liable only for losses that were
generally foreseeable, or if Hadley had mentioned his special circumstances in advance.
The mere fact that a party is sending something to be repaired does not indicate that the
party would lose profits if it is not delivered on time. The court suggested various other
circumstances under which Hadley could have entered into this contract that would not
have presented such dire circumstances, and noted that where special circumstances exist,
provisions can be made in the contract voluntarily entered into by the parties to impose
extra damages for a breach. Alderson B said the following.
Now we think the proper rule in such a case as the present is this: Where two parties have
made a contract which one of them has broken, the damages which the other party ought to
receive in respect of such breach of contract should be such as may fairly and reasonably
be considered either arising naturally, i.e., according to the usual course of things, from
such breach of contract itself, or such as may reasonably be supposed to have been in the
contemplation of both parties, at the time they made the contract, as the probable result of
the breach of it.
>>THIS DECISION HAS ALWAYS BEEN TAKEN AS LAYING
DOWN TWO RULES.

1. GENERAL DAMAGES :

General damages cover the loss directly and necessarily incurred by the breach of
contract. General damages are the most common type of damages awarded for breaches
of contract.

Example: Company A delivered the wrong kind of furniture to Company B. After

discovering the mistake later in the day, Company B insisted that Company A pick up the
wrong furniture and deliver the right furniture. Company A refused to pick up the furniture
and said that it could not supply the right furniture because it was not in stock. Company B
successfully sued for breach of contract. The general damages for this breach could include:
• refund of any amount Company B had prepaid for the furniture; plus • reimbursement
of any expense Company B incurred in sending the furniture back to Company A; plus
• payment for any increase in the cost Company B incurred in buying the right furniture, or
its nearest equivalent, from another seller.

2. SPECIAL DAMAGES :

Special damages (also called “consequential damages”) cover any loss incurred by the
breach of contract because of special circumstances or conditions that are not ordinarily
predictable. These are actual losses
caused by the breach, but not in a direct and immediate way. To obtain damages for this
type of loss, the nonbreaching party must prove that the breaching party knew of the
special circumstances or requirements at the time the contract was made.
Example: In the scenario above, if Company A knew that Company B needed the new
furniture on a particular day because its old furniture was going to be carted away the night
before, the damages for breach of contract could include all of the damages awarded in the
scenario above, plus:
• payment for Company B’s expense in renting furniture until the right furniture
arrived.

BIBLIOGRAPHY

● www.contract.com
● www.damges.com
● www.judgement.com
● www.specialdamages.com
● www.breachofcontract.com
● www.damages.com