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Remedies for Breach of Contract

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•Remedy means a course of action
available to the aggrieved party
when the other party breaches the
contract.When one party to
contract breaches the contract the
other party who is not at fault has
certain remedy available to him.

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Way of Contract Discharged
Suit for Rescission
Suit for Damages
Suit upon Quantum Meruit
Suit for specific Performance
Suit for an Injunction

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Suit for Rescission

When there is a breach of contract by one party, the other


party may rescind the contract and need not perform his
part of obligations under the contract and may sit quietly
at home if he decides not to take any legal action against
the guilty party.

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Effects of Rescission of a contract

• 1.The aggrieved party is not required to perform his part of obligation


under the contract.
• 2.The aggrieved party can claim compensation for any loss.
• 3.The party is liable to restore benefit,if any.

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Illustration:
'A' contracts to supply 100kg of tea leaves for Rs. 8,000 to 'B' on 15
June. If 'A' does not supply the tea leaves on the appointed day, 'B'
need not pay the price. 'B' may treat the contract as rescinded and
may sit quietly at home. 'B' may also file a ‘suit for rescission’ and
claim damages.

B
A
Breach of contract
when ‘A’ don’t supply
to ‘B’.
100 KG tea leaves
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Suit for Damages

Damages are a 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 damages is not
punishment but compensation.

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• The foundation for modern law of damages, both in India and England, is to
be found in the case of Hadley vs. Baxandile.
• X’s mill was stopped by the breakdown of a shaft. He delivered the shaft to
Y, a common carrier, to be taken to a manufacturer to copy it and make a
new one. X did not make known to Y that delay would result in loss of
profits. By some neglect on the part of Y the delivery of the shaft was
delayed in transit beyond a

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reasonable time (so that the mill was idle for a longer
period than otherwise would have been the case had
there been no breach of the contract of carriage).
• Held, Y was not liable for loss of profits during the
period of delay as the circumstances communicated to
Y did not show that a delay in the delivery of the shaft
would entail loss of profits to the mill.

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Illustration:
‘A’ contracts to pay a sum of money to ‘B’ on a specified day. ‘A’
does not pay the money on that day. ‘B’, in consequence of not
receiving the money on that day, is unable to pay his debts, and is
totally ruined.

A
Breach of contract
when ‘A’ don’t give
money to ‘B’.
Payable money

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• There are 4 types of damages; Ordinary, Special, Exemplary & Nominal damages.
• 1. Ordinary Damages-These are the damages which are payable for the loss arising
naturally and directly as a result of the breach of contract. The purpose of ordinary
damage is that the injured party is to be put in the same financial position as he
would have been, if the contract had been performed according to the terms of the
contract. Ordinary damage is also known as Proximate or natural damage.
• e.g. Alap has agreed to give his car on lease to Amar for a period of 1 year for
Rs30,000.Alap later on refuses to give the car on lease and breaches the contract,
and therefore, Amar has to enter in lease for taking the car on lease for Rs
40,000.In this case Alap is liable to pay Amar Rs 10,000,the difference between the
contract price and the price. Here 10,000 is ordinary damage.

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• 2.Special Damages-These are the damages which are payable for the
loss arising due to some special circumstances. It can be recovered
only if the special circumstances which result in a special loss in the
case of breach of contract and the party has a notice of such
damage. If the defaulting party has no knowledge of the special
circumstances, he will not be liable for the special damages.
• E.g. A sent a sample of his products for exhibition to an agent of a
railway company for carriage to New Delhi for an exhibition. The
consignment note stated “Must be at New Delhi Monday Certain”.
Due to the negligence of the company the goods reached only after
the exhibition was over. Held, the company was liable for the loss
caused by the late arrival of the products because the company's
agent was aware of the special circumstances.

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3.Exemplary or punitive or vindictive Damages-Theses damages are a sum
awarded beyond the pecuniary loss sustained by the injured party. Ordinarily
the damages for the breach of contract intended to compensate the plaintiff
and not to punish the defendant. But the exemplary damages are allowed not
to compensate the party but as a means to of punishment to the defaulting
party. The court generally do not award vindictive damage but it may award
these damages in the case of-
(i).Breach of contract to marry-The measure and quantum of the punitive
damages will depend upon the severity of the shock and pain that the other
party might have suffered due to such breach of promise by the promisor.
ii)In the case where the banker wrongfully dishonours the cheque of his
customer under the objection signifying the shortage of funds in the drawers
account, despite the fact that there were sufficient funds in the drawers
account to honour the cheque. Here the principle for fixing the quantum of
damage is based on the underlying principle: ’’Smaller the amount of the
cheque wrongfully dishonoured, higher would be the quantum of the punitive
damages awarded.

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4.Nominal Damages-Nominal damages are awarded where the party
suffers no loss simply to establish that the party has proven his case and
won. The nominal damage is very small in amount. It is awarded at the
discretion of the court. nominal damage cannot be claimed as a matter
of right.
• 5.Liquidated damages and penalty-The party may specify an amount at
the time of entering into a contract. The amount so specified may be
• (i) Liquidated damages-If the specified sum represents fair and genuine
pre-estimate damages, likely to result to result due to breach. It is called
a liquidated damage.
• (ii) Penalty- if the specified sum is disproportionate to damages ,it is
called a penalty. As regards the payment of liquidated damages and the
penalty, the court cannot increase the amount of damages beyond the
amount specified in the contract. The penalty is imposed by a way of
punishment for the breach of contract. While the intention of filing the
liquidated damages is to recover the damages that might arise due to
breach

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• E.g. A gives a bond for the repayment of Rs 100000 with the interest at
12% at the end of six months, with a stipulation that in case of default
the interest shall be payable at the rate of 75% from the date of
default. This is a stipulation by a way of penalty, and B is only entitled
to recover from A such compensation as the court considers
reasonable.
• Cost of suit or decree-The court has also the discretion to award the
cost of damages, in addition to the damages for the breach of
contract. This damage or remedy is available to the party who has won
the case.

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Suit Upon Quantum Meruit

The third remedy for a breach of contract available to an


injured party against the guilty party is to file a suit upon
quantum meruit. The phrase quantum meruit literally means
“as much as is earned” or “in proportion to the work
done.”

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Illustration:
‘A’ engages ‘B’ a contractor, to build a three storied house. After a
part is constructed ‘A’ prevents ‘B’ from working any more. ‘B’ the
contractor, is entitled to get reasonable compensation for work
done under the doctrine of quantum meruit in addition to the
damages for breach of contract.

A
Breach of contract
when ‘A’ told ‘B’ to
stop building.

Uncompleted building
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• Planche vs Colburn
• P agreed to write a volume on ancient armour to be published in a
magazine owned by C. For this he was to receive $100 on completion.
When he had completed part, but not the whole, of his volume, C
abandoned the magazine. P is entitled to get damages for breach of
contract and payment quantum meruit for the part already completed.

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Suit For specific performance

Specific performance means the actual carrying out of the


contract as agreed. Under certain circumstances an
aggrieved party may file a suit for specific performance,
i.e., for a decree by the court directing the defendant to
actually perform the promise that he has made. Such a
suit may be filed either instead of or in addition to a suit
for damages.

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A decree for specific performance is not
Granted for contracts of every description. It is
only where it is just and equitable to do so.
It is usually granted in contracts connected with land, buildings, rare articles and
unique goods having some special value to the party suing.
Cases where specific performance is not granted-
(i)Where monetary compensation is an adequate relief.
)Where the court cannot supervise the actual execution of the contract e.g a
building construction.
(iii)Where the contract is for personal services, e.g. a contract to marry or to paint
a picture.

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Suit for an injunction

‘Injunction’ is an order of a court restraining a person


from doing a particular act. It is a mode of securing the
specific performance of the negative terms of the
contract. To put it differently, where a party is in breach
of negative term of the contract (i.e., where he is doing
something which he promised not to do) the court may,
by issuing an injunction, restrain him from doing, what
he promised not to do.

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Illustration:
A agreed to sing at B’s theatre for three months from 1st April
and to sing for no one else during that period. Subsequently she
contracted to sing at C’s theatre refuse to sing at B’s theatre. And
then that is the breach of contract.

A
Breach of contract
when ‘A’ start singing
on ‘B’s theatre.
Sing a song in theatre
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