Unit IV: Quasi-Contracts and

Remedies for Breach of

Contracts
 Quasi Contracts (Sec 68-72)
- Quasi-contracts are certain relations resembling those created by
contract.
- Under Quasi Contract, one person is obliged to compensate another
although the basis of this obligation is neither a contract between the
parties, nor any tort on the part of the person who is bound to
compensate.
- The basis of the quasi-contract is that no one should have an unjust
benefit at the cost of another.
- For ex: A and B jointly owe 1 lakh Rs to C. ‘A’ alone pays the amount to C.
B, unaware of this fact, pays Rs. 100 over again to C. C is bound to repay
the amount to B.
Section 68 to 72 of the ICA imposes quasi-contractual obligations in the
following cases:
1. Claim for necessaries supplied to a person incompetent to contract
(Sec. 68)
2. Reimbursement of money paid, due by another (Sec. 69)
3. Obligation of person enjoying the benefit of the non-gratuitous act
(Sec. 70)
4. Responsibility of finder of goods (Sec. 71)
5. Liability of a person getting benefit under mistake or coercion (Sec. 72)
1. Claim for necessaries supplied to a person incompetent to contract
(Sec. 68)
- Where one person supplies necessaries suited to the conditions in the life of a
person, who is incompetent to contract, or to anyone whom such
incompetent person is legally bound to support, the person furnishing such
supplies is entitled to reimbursement from the property of such incompetent
person.
- A contract with incompetent persons is declared void. Therefore, no action
under a contract can be brought against such an incompetent person for
necessaries supplied. However, the reimbursement can be claimed only from
the property of such a person.
- For ex: A supplies B, a lunatic, with the necessaries suitable to his conditions
in life. A is entitled to be reimbursed from B’s Property.
2. Reimbursement of money paid, due by another
- Section 69 states that:
69. Reimbursement of person paying money due by another, in payment of which he
is interested.—A person who is interested in the payment of money which another is
bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the
other.
For ex: ‘A’ is a lessee, who holds land under the lease. Suppose, revenue, being in
arrear, is to be paid by A (lessor), is paid by B. A is to make a good to B the amount
so paid.
Essentials:
1. One person is interested in the payment of money, and therefore, he pays it, while;
2. Another person is bound by law to pay the same, but he fails to pay.
1. One should have an interest in making a payment
- The person making the payment must have an interest In making the
payment.
- The purpose of making the payment must be bonafide protection of his
interest by the plaintiff.
- The defendant warehoused certain goods which they had imported from
Russia, with the plaintiffs. The goods were stolen. Under the law of customs,
duty on goods could be recovered from the owner, or from the
warehouseman. The warehouseman (plaintiffs) were called upon to pay the
customs duty which the owner of the goods was bound by the law to pay.
Held: Plaintiffs were entitled to recover the same from the defendant. –
Brook’s Wharf v. Goodman Brothers (1937)
- The plaintiff placed his carriage on the defendant’s premises. Since it was lying on
the defendant’s premises, his landlord seized in distress, as the defendant was in
arrears of rent. The plaintiff was to clear the arrears of rent, which were otherwise
to be paid by the defendant and got his carriage back. Held: plaintiff was entitled
to recover from the defendant the rent so paid by him.- Exall v. Patridge (1799)
2. Another person should be bound by law to pay
- The plaintiff should have an interest and the defendant should be bound by law to
pay the same.
- Due to the negligence of the defendant, the workmen of the plaintiff company
were injured. The Plaintiff paid the compensation under the Workmen
Compensation Act to the workmen and filed suit against the defendant for
reimbursement. Held: He is not entitled to claim reimbursement as the plaintiff
themselves were bound under the law to pay compensation to the employee. -
Port Trust, Madras v. Bombay Company (1967)
3. Obligation of person enjoying the benefit of the non-gratuitous act
(Sec. 70)
- Section70 of the Indian Contract Act provided that,
“ Where a person lawfully does anything for another person, or delivers
anything to him, not intending to do so gratuitously; and such other person
enjoys the benefit thereof, the latter is bound to make compensation to the
former in respect of, or to restore, the thing so done or delivered".
For ex: A, a tradesman, leaves goods at B’s house by mistake and B treats the
goods as his own, B is bound to pay A for them.
4. Responsibility of finder of goods (Sec. 71)
- Section 71 of ICA provides that,
“A person who finds goods belonging to another, and takes them into his
custody, is subject to the same responsibility as a bailee.”
- Finder of goods is a person who finds the goods belonging to another
and takes the goods into his custody.
- There is no contract between the finder and the owner of the goods,
yet some responsibility is imposed on him under Sec 71.
• The finder of lost goods is in the position of a Bailee (Sec. 151)
• Therefore, all the duties of the bailee are equally applicable to the finder of goods
Duties of the finder of goods
1. The finder of lost goods must take reasonable care of the goods.
2. The finder of lost goods must return the goods to the owner.
3. The finder of lost goods must not use the goods for his own purpose.
4. The finder of lost goods must not mix these goods with his own goods.
5. The finder of lost goods must return any increase or accretions in lost goods
along with the lost goods.
6. The finder of lost goods must make all reasonable efforts to find the owner
Rights of the finder of lost goods (Sec 168-169)
1. Right of lien (Sec. 168)
- The finder of lost goods has the right to retain the goods until he receives compensation for trouble and
expenses.
2. Right of claiming the reward, if announced by the owner (Sec. 168)
- Where the owner has offered a specific reward for the return of goods lost, the finder has the right to sue
the owner for such reward and to retain the goods until he receives it.
3. Right to sell the goods found (Sec. 169)
- A finder of lost goods has the right to sell the goods found under the following circumstances:-
▪ If the owner cannot be found with reasonable diligence; or
▪ If the owner when found refuses to pay the lawful charge of the finder; or
▪ If the goods are in danger or of having perishing nature or of losing the greater part of their value; or
▪ If the lawful charges of the finder, in respect of goods found, amounts to two third of its value.
5. Liability of a person getting benefit under mistake or coercion (Sec. 72)
- Section 72 provides that where money has been paid or anything
delivered, by one person to another either by mistake or under coercion.
- Section 72: Liability of person to whom money is paid, or thing delivered,
by mistake or under coercion - A person to whom money has been paid,
or anything delivered, by mistake or under coercion, must repay or return
it.
- For ex: A and B jointly owe 1 lakh Rs to C. ‘A’ alone pays the amount to C.
B, unaware of this fact, pays Rs. 1 lakh over again to C. C is bound to
repay the amount to B
Remedies for Breach of Contract

Remedies for Breach of

Damages

Contract
Quantum Meruit

Specific Performance
and Injunction
1. Damages
• Damages are the monetary compensation allowed to the
injured party for the loss or injury suffered by him as a result
of the breach of contract.
• The fundamental principle underlying the damages is not
punishment but to compensate the aggrieved party for the
loss suffered by him in the original position as he would have
been.
Rules regarding the Damages (Sec 73-75)
- The damage must naturally arise in the usual course of things from
such breach i.e., the damages must be direct or proximate or direct
consequences of breach of contract.
- The aggrieved party must have suffered a loss due to the breach of
contract.
- Damages are allowed to compensate the loss caused by a party but
not to punish the party at default for the breach of contract.
- The amount of damages can be decided at the time of the
agreement by mutual consent of both parties.
Types of Damages
1. Ordinary damages
2. Special damages
3. Vindictive/ exemplary damages
4. Nominal damages
5. Predefined damages –
a) Liquidated Damages
b) Penalty
1. Ordinary damages
- Damages that arise in the ordinary course of events from the breach of
contract are called ordinary damages.
- In other words, Damages arising out of natural and probable
consequences of breach of contract are also considered ordinary
damage.
- For Ex: A agrees to sell 10 bags of rice for 5000Rs after two months.
On the date of the performance, A refuses to sell. However, the price
of 10 bags on the date of performance was 5500/-. B can claim 500 Rs
as compensation.
2. Special Damages
- Special damages are those damages that are payable for the loss
arising on account of some special or unusual circumstances.
- In other words, the losses must not have been caused due to the
natural and probable consequences of the breach of the
contract. Instead, the Indirect loss experienced by the affected
party out of breach of contract is treated as special damage.
- For Ex: loss caused by the cancellation of the Government
contract.
3. Vindictive/ exemplary damages
- Damages are awarded when there is an injury to the reputation or the feelings of the
person.
- For ex: a) ‘A’ cancelling the agreement to marry ‘B’
b) Unlawfully Dishonouring of cheque
4. Nominal damages
- Nominal damages are awarded to the aggrieved party when there is only a technical
violation of the legal rights. Here no substantial loss is caused.
- These damages are very small in amount. They are awarded simply to recognize the right
of the party to claim damages for the breach of the contract.
- For ex: A contracted to purchase a Scooter from B, a dealer. But he failed to purchase the
scooter. However, the demand for the scooters far exceeded the supply, and B could sell
the scooter agreed to be purchased without loss of profit. B is entitled only to nominal
damages.
5. Predefined damages
- Predefined damages means a predetermined amount of money that
the parties agree upon at the time of contract formation, to be paid in
the event of a breach.
- Unliquidated damages are not pre-agreed and are determined by a
court or arbitrator post-breach, based on the actual loss suffered.
- Predefined damages could be of two types:
a) Liquidated damages-
b) Penalty
▪ Liquidated damages: If the amount fixed by all parties is a genuine
estimate of the loss by a future breach of contract, then it is
liquidated damages. Thus, all parties to the contract agree that the
amount is fair compensation for the breach.
▪ Penalty: If the amount fixed by all parties is unreasonable or used to
force the performing party to fulfill the obligation, then it is a penalty.
In such cases, the amount is disregarded and the suffering party
cannot claim more than the actual loss.
▪ English law and Indian Law
- As per English law, the amount specified can be interpreted either as
liquidated damages or a penalty.
• The Indian law makes no distinction between liquidated damages and
penalty. The compensation awarded cannot exceed the amount
mentioned in the contract. According to Section 74 of the Indian
Contract Act, 1872, if the parties fix the damages, the Court will not
allow more. However, it may award a lesser amount, depending on
the case. Hence, the agreeievd party gets reasonable compensation
but no penalty.
• There is an exception to Section 74 which states that if a party enters
into a contract with the State or Central government for the
performance of an act in the interest of the general public, then a
breach of such a contract makes the party liable to pay the entire
amount mentioned in the contract.
- In an action for damages for breach of contract, there arises two
kinds of problems:
a) How to determine whether the damage caused is a loss suffered by
the plaintiff is due to a proximate consequence of the breach of
contract by the defendant. (Remoteness of damages)
b) If the damage is so caused, then how much compensation is to be
paid for such loss? (Measure of damages)
1. Remoteness of damages
- The rule in Hardley v. Baxendale is considered to be a basis of the law
to determine whether the damages are proximate or remote
consequences of breach of contract:
- The rule in Hadley case, consists of two parts:
On the breach of a contract such damages can be recovered:
a) Damage caused in the usual course of things
b) More loss arising from the special circumstances
a) Damage occurring in the usual course of things
- Compensation can be claimed for any loss or damage that arose in the usual course
of things from the breach of contract.
- Hardley v. Baxendale
The plaintiff’s mill had been stopped due to the breakage of a Crankshaft. The broken
shaft had to be sent to the makers at Greenwich. The defendant agreed to carry the
broken shaft. The only information that was given to the defendant was the article to
be carried was a broken crankshaft and the plaintiffs’ were the millers of that mill. Due
to delay, the miller suffered loss- Held: defendant not liable for the special loss.
In Victoria Laundry (Windsor)Ltd v. Newman Industries
- The plaintiffs were carrying on business as launderers and dyers. They
wanted to expand their business and for that purpose, they needed a
boiler of a much greater capacity than the one they already had.
- The defendants agreed to supply them by June 5, 1949, and the
defendants delayed by 5 months.
- The plaintiff incurred a loss (loss caused by the usual profit and also the
loss due to the loss of a government contract)
- Held: no special notice of the loss. Therefore, the defendants were
made liable to pay only for the loss caused in the ordinary course of
business.
- Delay in delivering the goods, the defendant can be made liable to pay
the difference between the slae price prevailing on the agreed date and
the date on which the goods are actually delivered.
b) More loss arising from the special circumstances
- If the loss on the breach of a contract does not arise naturally i.e.,
according to the usual course of things but it arises due to some special
circumstances, the person making the breach of contract can be made
liable for the same provided that those special circumstances were
brought to his knowledge at the time of making the contract.
- If he had no knowledge of the special circumstances which resulted in a
particular loss, he cannot be made liable for the same.
2. Measure of Damages
- In a contract of sale, the measure of the damages is the difference
between the contract price and the market price on the date of the
contract of breach of contract.
- For instance: A enters the agreement to sell the car for 1 lakh on
August 28. B refuses to accept on the said date and the price of the
car is 1,25,000. Rs. 25.000/- would be paid as damages.
- Damages when the goods have fixed market price. That is, where
there is no fluctuation of price. The damages would be paid based on
the profits if in case the same had been sold.
2. Quantum meruit
- Generally, if a person having agreed to do some work or render some
services, has done only a part of what he was required to do, he
cannot claim anything for what he has done.
- Likewise, When a person agrees to complete some work for a lump
sum, non-completion of the work does not entitle him to any
remuneration even for the part of the work done.
- Exception: Where a person has performed his part of the contract
partially. However he is prevented from performing the rest by the
defendant, and the plaintiff can recover for whatever he has already
done.
Essential elements:
a) One of the parties makes a breach of contract or prevents the
performance by the other side/party;
b) The party injured by the breach of the contract, who has already
performed a part of it, elects to be discharged from further
performance of the contract and brings an action to recompense
for the value.
3. Specific Performance and Injunction
- Sometimes the party to the contract instead of recovering damages
for the breach of contract may have recourse to the alternative
remedy of specific performance of the contract or an injunction
restraining the other party from making breach of the contract.
- Where the compensation in money will not provide adequate relief
to the plaintiff or where there exists no standard for ascertaining
actual damage, specific performance may be granted.
Thank You!