Recission of Contract

• When there is a breach of contract by one party

the other party may rescind the contract and
need not perform his obligation under the
contract and may sit at home.

• But if the aggrieved party intends to sue the

guilty party for damages of breach of contract he
has to file a suit for rescission of the contract

• When the court grants rescission the aggrieved

party is freed from all his obligation
 Suit for damages
• Damages are monetary compensation allowed
to the injured party for the loss or injury suffered
by him as a result of the breach of contract

• By paying damages the court aims to put the

injured party into the position in which he would
have had there been performance of the
contract.

• Fundamental principle is underlying damages is

not punishment but compensation
 Contd.
• Assessment of damages:The injured party is
entitled to receive from guilty party.
1. Damages which naturally arose from the
breach (Ordinary)
2. Damages which parties knew when they
entered is likely to result from the breach
(Special damages)
3. In estimating loss or damage the means which
existed of remedying the inconvinience
caused by the breach (Duty to mitigate the
damage suffered)
 Types of Damages
• Ordinary or General Damages
• Special Damages
• Exemplary or Punitive or vindictive
damages
• Nominal Damages
 Ordinary Damages
• When a contract is broken or injured party can as a rule
always recover from the guilty party ordinary or general
damages

• They are reasonable and natural outcome of breach

• Example Hadley and Baxendale

• If case of contract for sale and purchase the damages

would be assessed on the difference between the
contract price and the market price at the date of breach.
 Special Damages
• Special damages are those which arise on
account of the special or unusual circumstances
affecting the plaintiff

• Special damages cannot be claimed as a matter

of right

• Prior knowledge of special circumstances at the

time of contract is considered ,however
subsequent knowledge will not create an special
liability
 Exemplary or Vindictive Damages
• This damage is awarded for punishing
the guilty and not by way of
compensation for loss.

• Exemplary damages have no place in

law of contract except in two situations:
1. Breach of contract to marry
2. Dishonour of a cheque by banker when
there are sufficient funds.
 Nominal Damages
• Nominal damages are awarded only for
namesake.

• They are awarded to establish the right to

decree for breach of contract when the
injured party has actually not suffered any
real damage
 Liquidated Damages and
penalty
• Sometimes party fix up at the time of contract the sum
payable as damages in case of breach.

• Section 74 lays down that courts are not bound to treat

the sum mentioned in the contract , either by way of
liquidated damages or penalty, as the sum payable for
damages for breach.

• Instead the courts are required to allow reasonable

compensation as to cover actual loss sustained not
exceeding the amount so named in the contract.
 Duty to mitigate damage
suffered
• It is the duty of the injured party to mitigate the damage suffered as a result of
breach of contract by the other party, he must also make reasonable means of
mitigating the damage, just as a prudent person.

• Example Servant dismissed wrongfully (S.S.SHETTY vs Bharat Nidhi Ltd)

• Rules regarding the measure of damages

1. Damages not for punishing
2. Injured party must be put in the same position, so far as money can do
3. Aggrieved party can recover only actual loss
4. Damages not natural and not in knowledge of both parties at the time of
contract not allowed
5. Damages if difficult to assess does not prevent injured party from recovering it.
6. When no real loss , nominal damages will only be paid
7. If parties fix up in advance the amount to be paid on breach then, that amount
will only be paid
8. Exemplary damages will only be paid under two circumstances
9. It is duty of injured party to minimize damages suffered
 Suit upon quantum merit
• The third remedy for breach of contract available to an injured party against
the guilty party is to file a suit upon quantum merit (as much as is earned)

• Right to sue upon quantum merit arises where after part performance of the
contract by one party there is breach of contract or the contract is
discovered void or becomes void

• This remedy may be availed either without claiming damages or in addition

to damages

• Example : Writer (Planche vs Colburn)

• Quantum merit can be claimed in follwing situations
1) Where the work has been done in pursuance of contract, which has been
discharged by default of the defendant. Ex.

2) When the work done has been done in pursuance of a contract which is
discovered void or becomes void provided the contract is divisible – ex.
3) When a paerson enjoys benefit from non gratutious act although there
exists not express agreement.
4) A party who is guilty may also claim providesd a) The contract is divisible ,
b) the other party enjoyed the benefit of the part which ahs been performed
although he had an option of declining it.
 Suit of specific performance
• Specific performance means actual carrying out of the contract as
agreed.

• Under certain circumstances an aggrieved party may file suit for

specific performance ie for a decree by the court directing the
defendant to actually perform the promise that the promisse has
made.

• Specific performance is not granted as a rule

• 1. When monetary compensation is an adequate relief
• 2. Where court cannot supervise the actual execution of the contract
• 3. Where the contract is for personal services,( Paint a picture) In
such contracts injunction is granted
 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 specific performance. Of

the negative term of contract

• If a party is in breach of negative term of

contract the court may by issuing an injunction
restrain him from doing that(where he is doing
what he promised not to do)
• It is also called preventive relief
 Thought provoking Situations
• A company offers soap buyers an offer “ a
draw would be taken out on 1 st of every
month and those who produce wrapper of
a soap containing a particular series of
number would get a gold coin”

• Does it come under law of contracts?

• If yes what type of contract is it?
• Comment on the nature of offer.
• A wine merchant contracts to sell 5 crates
of wine unaware that his stock is
destroyed ,

what is the legal right of parties that has

entered into contract with him.
• A agrees to sell a scooter B on a certain
date however just after 10 days of
contract , he sells this scooter to C.B sues
A for breach of contract. A says he will
repurchase from C and still oblige the
contract?

Decide the suit.

• A contracts to pay a sum of money on a
specified day . A does not pay the amount on
that day. B in consequence of not receiving the
money on that day is unable to pay his debts to
C and is totally ruined. B claims heavy damages,

Advice A.

• A cow was sold with a warranty that it was free

from disease. .The cow was suffering from foot
and mouth disease at the time of sale . As a
result it not only died but infected other cows as
well.
• By a contract dated 6 Th september a seller had
agreed to sell ground nuts for shipments from
port Sudan during November ,1956 to Belfast. At
the date of contract the usual customary route
was via the suez canal. On Nov 2 the suez canal
was closed for navigation and only route via
cape of good hope was open. The seller did not
ship the goods and buyer sued for breach of
contract .
• Give your decision.
• A contracted to supply B certain
quantity of “Finland Birch Timber” to
be delivered at Mumbai from July to
october 1939. No deliveries were made
from September 1939 when world war II
broke out. Transport was disorganized
and A could not get any timber from
Finland,
• Is A discharged from his obligation.
• P advertises in a daily newspaper that he will give a prize of $ 1000 to
the first person to swim the English channel and back during the
month of august. F who has read the ad. Sets off from Dover on 1 st
august and reaches the coast of france on 2 nd august. On that day a
further advertsisement appears in the paper stating the Offer stands
cancelled.On 3 rd august F completes the return swim to England.

Can F recover the prize.

• A offers to sell a house in Mumbai for Rs. 50,000. The offer is

commuincated to B in delhi by an express letter. The letter is delayed
in the censor office. Before A ‘s letter reaches B receives a telegram
from A revoking his offer.

Is there a contract between A and B.