Slide 1
AN ASSIGNMENT ON
by- Sugandh GandotraLaw Of Contract Remedies in Contract
CONSEQUENCES OF BREACH OF CONTRACT
Remedies in Contract Remoteness of damages Two rules in
remoteness of damagesMeasure of damagesSection 73 of ICA,1872 Duty
to mitigate the loss Liquidated damages Penalty Section 74 of
ICA,1872 Quantum merit Section 75 of ICA,1872Conclusion.
CONTENTS:
REMEDIES IN CONTRACT A remedy is a means given by law for the
enforcement of a right Following are the remedies
[1] Damages. [2] Suit upon quantum merit. [3] Suit for specific
performance.[4] Suit for injunction.
When a contract is broken by one party, the other party may sue
to treat the contract as rescinded and refuse further performance .
In such a case , he is absolved of all his obligations under the
contract.
The court may give rescission due to 1)contract is
voidable.2)contract is unlawful
The court may refuse to rescind (END) if 1)Plaintiff has
ratified (confirmed )the contract.2)Parties cannot be restored to
the original position.3)The third party has acquired for
value.4)When only a part is sought to be rescinded.(sec 27 of
specific relief act 1937)RESCISSION:
Damages are a monetary compensation allowed to the injured party
by the court for the loss or injury suffered by him by the breach
of the contract.
The objective of awarding damages for the breach of contract is
to put the injured party in the same position as if he had not been
injured.
The fundamental basis is awarding damages for the pecuniary
loss.2. DAMAGES
After the introduction of the topic now we shall discuss about
section 73, 74 and 75 of the Indian Contract Act,1872 in detail
CONSEQUENCES FOR LOSS OR DAMAGE CAUSED BY BREACH OF
CONTRACT-When a contract has been broken the party who suffers 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 naturally arose in the usual course of things from
such breach , or which the parties knew , when they made contract ,
to be likely to result from the breach of it.Such compensation is
not to be given for any remote and indirect loss or damage
sustained by reason of breach Section 73:According to INDIAN
CONTRACT ACT 1872:
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 ,
any person injured by the failure to discharge it is entitled to
receive the same compensation from the party in default, as if such
person had contracted to discharge it and had broken his contract.
Explanation- in estimating the loss or damage arising from a breach
of contract, the means which existed of remedying the inconvenience
caused by the non-performance of the contract must be taken into
account.
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 , any person injured by the
failure to discharge it is entitled to receive the same
compensation from the party in default, as if such person had
contracted to discharge it and had broken his contract.
Explanation- in estimating the loss or damage arising from a
breach of contract, the means which existed of remedying the
inconvenience caused by the non-performance of the contract must be
taken into account.
In action for damages for the breach of contract there arises
two problems :
REMOTENESS OF DAMAGE The leading case that decided that damage
would be remote or proximate Hadley v. Baxendale(1854)9 Ex. 341,at
354Para 1 of sec 73 of ICA,1872 explains the same. There were two
parts laid in this case : On the breach of contract such damages
can be recovered if, damage arises in the usual course of things or
More loss arises from special circumstances
Hence ,It is the rule of reasonable foresight.
Cases under first rule
Delay in carriage of goods meant for saleWilson v. Lancashire
and Yorkshire Railway Koufos v. C. Czarnikow Ltd. Collard v. South
Eastern Rly.
Compensation for mental anguish Ghaziabad Development Authority
v. Union of India
When monetary compensation is not adequate relief Sandeep Cement
(P) Ltd. v. Union of India
Breach of promise to marryPrema v. Mustak Ahmed Laxminarayan v.
Sumitra
Claim by stranded passengers Hobbs v. L & S.W. Ry. Le
Blanche v. L & N.W. Ry.
Damages for pre-contract and wasted expenditure Anglia
Television Ltd. V. Reed Cullinane v. British Manufacturing Ltd.
Cases under second rule :
Simpson v. London & North Western Railway Co.Dominion of
India v. All India Reporter Ltd. Union of India v. Hari Mohan Ghosh
British Columbia Saw Mill Co. Ltd.Horne v. Midland Railway Co.Smeed
v. Foord Diamond v. Campbell-JonesPilkington v. wood
MEASURE OF DAMAGE :Once it is known that the consequence of
breach of contract is proximate the next step is to know that the
problem is the assessment of compensation for the breach of
contractDamages are compensatory in nature .
Case : State of Kerala v. K. BhaskaranDamages are ascertained as
on date of breach of contract . Thus,If the buyer makes the breach
of contract , the seller can claim damages as arising on the date
of breach of contract and it is not necessary that the seller
should resell the goods on that date If the seller makes a breach
of contract , the buyer can claim damages as arising on the date of
breach of contract, and it is not necessary that the buyer should
re-purchase the goods on that date If the plaintiff makes a delay
in reselling the goods after the breach of contract , he does so at
his own risk.
Actual re-sale by the seller not necessary
Proper measure of damages is the diff. b/w the contract price
and the market price
On the date of breach of contract irrespective of the fact that
the seller does not again sell the goods on that day , but sells
the same on a subsequent date and actual loss to him is different
from the difference in the prices on the date of breach of
contract
Damages when goods have fixed market price
The market price for certain goods may be fixed one and not
subject to any fluctuation , then can the seller recover the
damages from the buyer on the basis of being deprived of the profit
which he would have made, had the buyer taken the goods
Loss Of Profit On a Sub-Contract:When the seller does not supply
the goods to the buyer and the buyer is not able to earn certain
amount of profit which he could have made by supplying the goods
further under a sub- contract , the buyer is not entitled to
recover the loss of expected profit but his right is only to
recover the difference b/w the contract price and market price
only
Damages in case of delivered by installments:In this the measure
of damage is between the C.P and M.P of a particular installment
,on the final date of performance of that installment
DUTY TO MITIGATE THE LOSS:
When the plaintiff sues for the breach of a contract, he owes
the duty of taking all reasonable steps to mitigate the loss
consequent upon the breach and cannot claim as damages any sum
which is due to his own neglect .
The burden of proof is on the plaintiff.
If the concerned party fails to take steps to mitigate the loss
he is debarred from claiming any part of compensation for such loss
that could have been mitigated .
Cases :
Jamal v. Moola Dawood sons & Co.
M.Nanjappa v. Muthuswamy It was held that it would have taken 3
months for plaintiff to secure similar employment in Bangalore
& if not then it was at his own fault. He was held entitled to
recover damages equivalent to his salary for 3 months
Ravindra Kumar v. U.P. State of Handloom Corp. Ltd.
Liquidated damages n Penalty
The parties at the time of making the contract agree to the
amount of compensation payable in the event of the breach of
contract .
The amount of compensation payable may either be liquidated or
penalty.
If the compensation to be paid is genuine pre-estimate of the
prospective damages it is Liquidated Damages .
If the compensation agreed to be paid in the event of breach of
contract is excessive and highly disproportionate to the likely
loss , the amount then fixed is Penalty.
Cases
Dunlop pneumatic Tyre Co. v. New Garage n Motor Co. Ltd.
Dunlopsued its tyre retailer, New Garage, for breaching an
agreement to not resell Dunlop tyres at a price lower than that
listed in the contract. The agreement then said if that did happen,
New Garage would pay 5 per tyre by way of liquidated damages and
not as a penalty.
Judgment: It was held that the sum of compensation payable on
the breach was the genuine pre-estimate of damages, therefore
liquidated damages.
Ford Motor V. Armstrong:
Defendant, who was a retail dealer of the car and car parts
manufactured by the plaintiff company, agreed not to sell any car
or its parts below the companys list price and if that did happen
the amount of damages payable will be $250.
It was held that since parties must have known that actual
likely loss was much more than they agreed, but had still preferred
to fix that, the damages payable must be limited to the agreed
amount only.
NOMINAL DAMAGES:In the absence of any concrete material to show
the extent of damages suffered by the plaintiff , resort will have
to the maxim of Nominal Damages
In case of Ashby v. White ,The High court held that ,Nominal
Damage might be awarded where the fact of the loss was shown but
necessary evidence as to its amount was not given.
Hence in law , damage would always entitle the plaintiff to a
judgment even if without loss but done because it is an injury.
COMPENSATION FOR BREACH OF CONTRACT Where PENALTY STIPULATED
FOR:
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 contains any other stipulation by the way of penalty ,
the party complaining of the breach is entitled , whether or not
actual loss or damage 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 or, as the case may
be, the penalty stipulated for.Explanation a stipulation for
increased interest from the date of default may be a stipulation by
way of penalty SECTION 74:According to INDIAN CONTRACT ACT
1872:
Exception When a person enters into a bail-bond , recognizance
or other instrument of the same nature , or under the provisions of
any law , or under the orders of the Central Government or of any
State Government , gives any bond for the performance of any public
duty or act in which the public are interested , he shall be liable
, upon breach of the condition of any such instrument , to pay the
whole sum mentioned therein.
Explanation A person who enters into a contract , with
Government does not necessarily thereby undertake any public duty,
or promise to do an act in which the public are interested
CASES:Aditya Mass Communication Private Ltd. V. A.P.S.R.T.C
Hyderabad M/s Ganga Maruthi v. NagarajState Of Gujarat v. M.K Patel
&Co.K.P Subbarama Sastri v. K.S. RaghavanT.K. Sundaram v.
Co-operative Sugars Ltd.Delhi Development Authority v. Grithapna
Co-op. group Housing Society Ltd.Hanuman Cotton mills v. Tata
Aircraft Ltd.Dharam Chand Soni v. Sunil Ranjan
FORFIETURE OF THE EARNEST MONEY:
This could be explained in case of State of Bihar v. Bhawani
Industries Ltd.
NO Forfeiture OF ADVANCE IF CONTRACT BECOMES FRUSTRATED:
It is well settled that where the performance of the contract
becomes impossible within the meaning of Section 56 of ICA,1872
forfeiture of any advance paid would be improper
CASES:Thiriveedhi v. Gidipudi Venkata Subba Rao Balasaheb
Dayandeo Naik v. Appa Saheb Dattaraya Pawar
Quantum meruit: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 .But the law
recognizes an important exception to this rule by way of an action
for Quantum Meruit .
Essentials for an action of Quantum Meruit are:One of the
parties makes a breach of contract , or prevents the performance of
it by the other side.The party injured by the breach of contract
who has already performed a part of it, elects to be discharged
from further performance of conntract and brings an action for
recompense for the value of the work he has already done.
CASES:
Puran Lal v. State of U.P. De Bernardy v. harding
Planche v. colburn
Cravan-Ellis v. Cannon Ltd.
Associated cement Co. v. Union Of India
According to INDIAN CONTRACT ACT 1872:Section 75;PARTY
RIGHTFULLLY RESCINDING CONTRACT, ENTITLED TO COMPENSATION-
A person who rightfully rescinds a contract is entitled to
compensation for any damage which he has sustained through the
non-fulfillment of the contract
