Remoteness Of Damages

By Manas Tiwari
 INTRODUCTION
“ Definition of Contract is defined under Section 2(h):
• “ An agreement enforceable by law is a contract”

Contract = Agreement + Enforceable by Law

This contract does not mean any property. It is only a promise which is
supported by some consideration upon which either are available....

 Remedy of specific performance , or

 Damages
 Damages....

“ Damages means compensation in terms of money for

the loss suffered by the injured party.

Burden lies on the injured party to prove his loss.

Basically two problems arises out of damages;

Remoteness of damages
Measures of damages
Remoteness Of Damages...
Every breach of contract upsets many settled
expectations of the injured party, and can we feel the
consequences for a long time and in a variety of ways.

Theoretically the consequences of a breach may be

endless, but there must be an end to liability.

There must be limit to liability and beyond that limit

the damages is said to be too remote and therefore,
irrecoverable.
Rules in Hadley v. Baxendale
 The rules in Hadley v. Baxendale consists of two parts.

 On the breach of a contract such damages can be recovered.

 as may fairly and reasonably be considered arising naturally, i.e

according to the usual course of things from such breach; or

 as may reasonably be supposed to have been in the contemplation of

both the parties at the time they made the contract.

In either case it is necessary that the resulting damage is the probable

result of the breach of contract
Section 73 states about the compensation
for loss or damage caused by breach of
contract ...
whether 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 be reasonably be
supposed to have been in the contemplation of both
the parties, at the time they made the contract, as the
probable result of the breach of it.
 Or we can say that:

When a contract has been broken, the party who suffer

by such breach is entitled to receive, from the party
who has broken the contract, compensation for any
loss or damage caused to him thereby, which is
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 it.

Such damage is not to be given for any remote and

indirect loss or damage sustained by reason of the
breach.
Compensation for failure to discharge obligation
resembling those created by contract.
When an obligation resembling those created by contract
has been incurred and has not been discharged, it is
entitled to receive the same compensation from the party
in default, as if such person had contracted to discharge
it had broken his contract.

Explanation: in estimating the loss or damage arising

from the breach of contract that means which existed of
remedying the inconvenience caused by the non
performance of the contract must be taken into account.
For Example:

1. A contracts to buy of B’s ship for 60000 rupees, but

break his promise. A must pay to B by way of
compensation, the excess, if any, of the contract price
over the price which B can obtain for the ship at the
time of the breach of contract.

2. A contracts to repair B;s house in certain manner and

receives payment in advance. A repairs the house but
not according to the contract B is entitled to recover
from A the cost of making the repairs conform to the
contract.
Section 74 states about :

When a contract has been broken, if a sum is named

in the contract as the amount to be paid in case of
such breach or if the contract contain any other
stipulation by way of penalty, the party complaining
of the breach is entitled, whether or not actual damage
or loss is proved to have been caused thereby, to
receive from the party who has broken the contract
reasonable compensation not exceeding the amount
so named.
Example:

1. A gives a recognizance binding him in a penalty of Rs.

5000 to appear in court on a certain day. He forfeits his
recognizance. He is liable to pay the whole penalty.

2. A borrows Rs. 1000 from B and give him a bound for Rs.
2000 payable by five yearly instalment of Rs. 400 with a
stipulation that in default of payment of any instalment
the whole shall become due. This is stipulation by way of
penalty.