REMIDIES FOR BREACH OFCONTRACT

On refusing to perform his promise by the promisor ,the promisee has some remedies under the Act for breach of contract .Parties to a lawful contract are bound to perform their respective obligations. But when one of the parties repudiates the contract , by refusing to perform his obligations he is said to have committed a breach of the contract .

Introduction

1. CANCELLATION or RESCISSION – rescission is the revocation of a contract . Where one of the parties to a contract commits breach , the other party may treat the contract rescinded . Under section 64 the party rescinding a voidable contract shall if he has received any benefit there under from any party to such contract restore such benefit to the person from whom it was received . Further under section 75 a person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract .

Law provides the following remedies to an injured party :

A singer contracts with B , the manager of

theatre to sing at his theatre for two nights in every week during the next two months and B engages to pay her Rs. 100 for each night of performance. On the sixth night A wilfully absents herself from the theatre and B in consequence rescinds the contract . B is entitled to claim compensation for the damage which he has sustained through the non-fulfilment of the contract .

Example

2. RESTITUTION : It means return of the benefit received by one party to the contract from the other party under a void contract . When a contract becomes void it need not be performed by either party . Section 65 provides that when an agreement is discovered to be void or when a contract becomes void any person who has received any advantage under such agreement or contract is bound to restore it or to make compensation for it to the person from whom he received it .

A pays B Rs. 1000 in consideration of B’s promising to marry C, A’s daughter . C is dead at the time of promise. The agreement is void but B must repay A Rs. 1000.

Example

3. SPECIFIC PERFORMANCE : under certain circumstances a person aggrieved by the breach of the contract can file a suit for specific performance , i.e., for an order order by the court upon the party guilty of breach of contract directing him to perform what he promised to do .

4. INJUNCTION : An aggrieved party can sue for an injunction i.e.,an order of the court restraining the wrong doer from doing or continuing the wrongful act complained of. Injunction are usually granted to enforce negative stipulations in cases where damages are not adequate relief . Injunction is a preventive relief. It is particularly appropriate in cases of anticipatory breach of contract .

N, a film actress agreed to act exclusively for Warner Bros for one year . During the year she contracted to act for X. It was held that she could be restrained by an injunction from action for X. [Warner Bros. v. Nelson. (1937) I.K.B. 209].

Example

5. Quantum Merit : The phrase ‘quantum meruit’ means ‘ payment in proportion to the amount of work done.’ A right to sue on a quantum meruit arises where a contract , partly performed by one party , has become discharged by the breach of the contract by the other party . The right is founded not on the original contract , which is discharged or is void , but on an implied agreement to pay for what has been done .

6. Damages : The term damages is used to mean compenstion in money as a substitute for the promised performance . Damages for the Breach of a contract are intended to compensate the injured party so far as money can do so .It's purpose is compensation and compensation alone .Damages are of four kinds –

1. General or ordinary damages 2. Special damages 3. Vindictive or exemplary damages 4. Nominal damages

1 . General or ordinary damages : general damages are those which arise naturally in the usual course of things for the breach of contract. These include damages which are the natural and probable consequences of the breach of the contract . They are awarded with a view to compensate the injured party and not with a view to punish the party at fault .

A contracts to sell and deliver 50 maunds of salt to B at a certain price to be paid on delivery. A breaks his promise . B is entitled to receive from A by way of compensation the sum , if any by which the contract price falls short of the price for which B might have obtained 50 maunds of salt of like quality at the time when the salt ought to have been delivered.

Example

2. Special damages : special damages are those which are the result of unusual circumstances affecting the plantiff . The notice of special circumstances involved in a contract must be known to the party against whom special damages are claimed for Breach of a contract. Knowledge of the special circumstances must be on the date of the contract subsequent knowledge of special circumstances will not create any special liability .special damages being exceptional in character do not follow ordinary couse .  

A, a builder contracts to erect and finish a house by the 1st of January , in order that B may give possession of it at that time to C, to whom B has contracted to let it . A is informed of the contract between B and C . A builds the house so badly that , before 1st January , it falls down and has to rebuilt by B , who in consequence loses the rent which he was to have received from C for the Breach of his contract . A must make compensation to B for the cost of rebuilding the house , for the rent lost and for the compensation made to C.

Example

3.Vindictive of exemplary damages : They are awarded with a view to punish the wrong doer and not primarily with the idea of awarding compensation to the injured party. Generally vindictive damages are not awarded for breach of contract , but are as a rule awarded in action on tort .1. breach of contract to marry;2. breach of contract by banker having sufficient funds of customer at the disposal , to honor his cheque

A libel was committed by an author and his

publisher against a distinguished naval officer . The officer sued for damages . he was awarded £15000 compensatory and £ 25000 exemplary damages against both attendants .

Example

4. Nominal damages : Nominal damages are awarded where the injured party has sustained damage of a short but not of a substantial nature to be reckoned with e.g., a) where the breach is technical and injured party has

no intention of performing his part of the contract ; b)where the injured party has not suffered any actual

damage or fails to prove that he has ; c) where though damage has been caused , it was

more due to the fault of the injured party than that of the defendant .

D contracted to purchase a Vespa scooter

from a dealer . But he failed to purchase the scooter . However , the demand for vespa scooters far exceeded the supply , and the scooter dealer could sell the scooter agreed to be purchased without loss of profit . The dealer is entitled only to nominal damages .

Example

Point decided is : where the special circumstances are not brought to the notice of the

parties , special damages cannot be claimed Facts of the case are : The crankshaft of P's flour mill had broken . He gave it to D a common

carrier who promised to deliver it to the foundry in two days , where the new shaft was to be made. The mill stopped working . D delayed the delivery of the new crankshaft and so the mill kept idle for another 5 days . P received the repaired crankshaft seven days later than they would have otherwise received . Consequently , the loss of profits suffered by P was greater than if no delay had occurred . P sued D for damages not only for the delay in the delivery of the broken part but also for the loss of profits suffered by the mill for not having been worked . The court help that P was entitled only to ordinary damages and D was not liable for the loss of profits because the only information given by P to D was that the article to be carried was the broken shaft of mill , and it was not made known to them that the delay would result in loss of profits. [(1854) 9 Ex. 341]

HADLEY V. BAXENDALE (1854)

1. restitution : The injured party is entitled to

be placed in same position as if the contract has been performed .

2. general damages : A party who suffers by the breach of a contract is entitled to only such damages which arise naturally in the usual course of things as a result of such breach . Such compensation is not to be given for any remote and indirect loss or damages sustained by reason of the breach.

The rules as laid down are as follows :

X was to provide y with ship on a certain day

to take a cargo of coal to Calcutta . X failed in this . So Y had to charter another ship at advanced freight. He had also to buy coal at a higher price . Y was entitled to recover from X both the increase in freight as well as increase in price of coal.

Example

3. Special damages : where a party claims

special damage for any loss sustained he must prove that the other party knew at the time of the making of the contract that special loss was likely to result from the breach of contract .

P dealing in cattle food sent samples by train for being exhibited at a particular agricultural show which fact was made known to the railway company. The goods reached the destination after the show was over. It was held that the special circumstances having been brought to the notice of the railway company , special damages namely the loss of profits were recoverable .[Simpson v. London and North Western railway Co.(1876) I.Q.B.D.]

Example

4. Remote damages : law does not award

damages which are either indirect or too remore i.e., which are not the natural or probable consequence of the breach of the contract . Damages must be something which are likely to flow out of the breach of contract complained of and not merely connected with it through a series of causes intervening between the immediate consequences of a breach of contract and the damage complained pf .

Mr. Hobbs and family travelled from Hampden to Wimbledon but the train went in a wrong direction and the family had to get down at a place where there was no conveyance and no shelter . The result was that they had to walk at mid-night for about four or five miles .Mrs. Hobbs got ill . Mr. Hobbs filed a suit (i)for damages for inconvenience , and (ii) for damages for illness . The court awarded damages in respect of first claim but as regards second , the court that it did not arise in the usual course of things and was too remote a consequence .

Example

5. Performance of obligation A person who claims damages for a breach of a contract should have performed or was ever ready to perform his part of obligations arising under the contract . Thus , for instance a person who is not in a position to pay the balance of purchase price cannot recover damages from a vendor who may have committed a breach of contract .

6. Liquidated damages : where the parties agree about the damages

for the breach of contract , no more than the agreed amount can be awarded.

EXAMPLE A contracts with B to pay Rs. 1000 if he fails to

pay B Rs. 500 on a certain day . A fails to pay B Rs.500 on that day . B is entitled to recover from A such compensation not exceeding Rs. 1000 as the court considers reasonable .

8. Vindictive damages : Vindictive of exemplary damages are not usually awarded for breach of contract except in case of breach of contract of marriage or wrongful refusal by the bank to honour the customer's cheque. Such damages are awarded by the way of lesson or punishment to wrong doer.

Mrs. G paid a cheque for £9-16s drawn on W.Bank , to her landlord in payment of rent . The cheque was wrongfully dishonored by the bank . She was awarded only 40 sh. as nominal damages , reason being a non-trader cannot get heavy damages , unless the damages are proved.

Example

9. Difficulty of assessment Difficulty of calculating damages is no ground

for refusing damages . The court must make an assessment of loss and pass a decree for it.

H organized a beauty competition in which 50

ladies were to be selected by votes of the readers of certain newspapers. H would select 12 out of 50 and secure theatrical jobs for them. C was one of the 50 and by H's breach of contract was prevented from being present when the final selection was made . held C was entitled to damages even though it was difficult to calculate them.

Example

Penalty and liquidated damages : (sec 74)

English law : According to English law , the sum so fixed in the contract may be interpreted either as liquidated damages or as a penalty .

in the case of liquidated damages , English Courts only the amount stipulated , never more or less even though it is shown that the actual loss is different from the amount mentioned . Penalty clauses , however are treated as invalid . The Court allows only reasonable compensation by way of damages .

Indian laws : Indian law makes no distinction between

penalty and liquidated damages . The court in india award only a reasonable compensation not exceeding the sum so mentioned in the contract. Section 74 of the contract act lays down that if parties have fixed what damages will be , the courts will never allow more.

Exception : Where any person gives any bond to the central or state government for the performance of any public duty or act in while the public are interested , on breach of the condition of any such instrument , he shall be liable to pay the whole sum mentioned therein.

Distinction between liquidated damages and penalty

penalty and liquidated damages have one thing in common that both are payable on the occurrence of a breach of contract .

It is very difficult to draw a clear line of distinction between the two but certain principles as laid down below may be helpful .

(1) if the sum payable is so large as to be far in excess of the probable damage on breach , it is certainly a penalty.

(2) Where a sum is expressed to be payable on a certain date and a further sum in the event of default being made , the latter sum is a penalty because mere delay in payment is unlikely to cause damage.

(3) The expression used by the parties is not final .

The court must find out whether the sum fixed in the contract is in truth a penalty or liquidated damages . If the sum fixed is extravagant or exhorbent , the court will regard it as a penalty even if it is termed as liquidated damages in the contract .

(4) The essence of a penalty is payment of money stipulated as a terrorem of the offending party . The essence of liquidated damages is a genuine pe-estimate of the damage.