Remedies for Breach of Contract: Whenever there is a breach of a contract, the aggrieved party is entitled to damages, amongst other …
Remedies for Breach of Contract:
Whenever there is
a breach of a contract, the aggrieved party is entitled to damages, amongst
other remedies such as specific performance, injunction etc.
a breach of a contract, the aggrieved party is entitled to damages, amongst
other remedies such as specific performance, injunction etc.
A.
Damages
Damages
Damages are a
monetary compensation allowed to the injured party for the loss/injury suffered
by him as a result of the breach of contract.
monetary compensation allowed to the injured party for the loss/injury suffered
by him as a result of the breach of contract.
The fundamental
principle underlying damages is not punishment but compensation.
principle underlying damages is not punishment but compensation.
Generally,
compensation will commensurate with the injury/loss sustained, arising
naturally from the breach. In fact, if actual loss is not proved, no damages
will be awarded.
compensation will commensurate with the injury/loss sustained, arising
naturally from the breach. In fact, if actual loss is not proved, no damages
will be awarded.
Different Kinds of Damages
1) Ordinary Damages
2) Special Damages
3) Exemplary Damages
4) Nominal Damages
5) Damages for inconvenience and discomfort
1. Ordinary Damages
These are
damages, which arise naturally and directly in the usual course of things, from
the breach of contract itself.
damages, which arise naturally and directly in the usual course of things, from
the breach of contract itself.
In other words,
ordinary damages are restricted to the direct and proximate consequences of the
breach of contract.
ordinary damages are restricted to the direct and proximate consequences of the
breach of contract.
Case law: Hadlev Vs Baxendale
The plaintiff was
a mill owner. He entrusted a broken shaft, to the defendant, who was a carrier
to be delivered to the maker as a pattern for a new one. The defendant was only
told that the broken shaft was a part of the machinery and ought to be
replaced. Due to some neglect on the part of the defendant, the delivery of the
shaft was delayed. As a result, the mill remained closed and the plaintiff lost
profits, which he would otherwise have made. The plaintiff claimed the loss of
profits as a part of damages. Held that the plaintiff was only entitled to
recover damages, which arose in the usual course of things from such breach.
Thus, the plaintiff was entitled to recover damages for the delay in delivering
the broken shaft. Since the defendant was not informed, that the mill had to be
kept idle, till the shaft was replaced, the plaintiff was not justified in
claiming loss of profits.
a mill owner. He entrusted a broken shaft, to the defendant, who was a carrier
to be delivered to the maker as a pattern for a new one. The defendant was only
told that the broken shaft was a part of the machinery and ought to be
replaced. Due to some neglect on the part of the defendant, the delivery of the
shaft was delayed. As a result, the mill remained closed and the plaintiff lost
profits, which he would otherwise have made. The plaintiff claimed the loss of
profits as a part of damages. Held that the plaintiff was only entitled to
recover damages, which arose in the usual course of things from such breach.
Thus, the plaintiff was entitled to recover damages for the delay in delivering
the broken shaft. Since the defendant was not informed, that the mill had to be
kept idle, till the shaft was replaced, the plaintiff was not justified in
claiming loss of profits.
This is a leading
case, which has been instrumental in laying the foundation of modern law of
damages in England and India.
case, which has been instrumental in laying the foundation of modern law of
damages in England and India.
Quantum of Damages
The general rule
is that damages would be assessed on difference between the contracted price
and the market price on the date of breach
is that damages would be assessed on difference between the contracted price
and the market price on the date of breach
If there is no
market price for the subject matter of the contract, the rule is to take the
market price of the nearest substitute. If there is no nearest substitute, the
market price is to be arrived at by adding to the price at the place of
purchase, the conveyance charges to the place of delivery plus the usual profit
of the seller.
market price for the subject matter of the contract, the rule is to take the
market price of the nearest substitute. If there is no nearest substitute, the
market price is to be arrived at by adding to the price at the place of
purchase, the conveyance charges to the place of delivery plus the usual profit
of the seller.
2. Special Damages
These damages
arise on account of the special/unusual circumstances affecting the plaintiff.
They are such remote losses, which are not the natural and probable
consequences of the breach of contract. These can be claimed only if the
special circumstances, which would result in special loss in case of breach of
contract are brought to the notice of the other party, at the inception of the
contract itself.
arise on account of the special/unusual circumstances affecting the plaintiff.
They are such remote losses, which are not the natural and probable
consequences of the breach of contract. These can be claimed only if the
special circumstances, which would result in special loss in case of breach of
contract are brought to the notice of the other party, at the inception of the
contract itself.
NOTE: Subsequent knowledge of the
special circumstances will not create any special liability on the other party.
special circumstances will not create any special liability on the other party.
Case law: Govinda Rao v. Madras Railway
Company
Company
G was a tailor
and consigned through rail some sewing machines to a place in Tamil Nadu. He
planned to take part in a village fair, where he hoped to stitch garments and
make profits. However, the train reached the town, after the fair concluded.
Hence G could not participate in the fair. He sued the Railway Company for loss
of profits. Held, he could not recover compensation. As the special
circumstances were not brought to the notice of the Railway Company in the
beginning itself.
and consigned through rail some sewing machines to a place in Tamil Nadu. He
planned to take part in a village fair, where he hoped to stitch garments and
make profits. However, the train reached the town, after the fair concluded.
Hence G could not participate in the fair. He sued the Railway Company for loss
of profits. Held, he could not recover compensation. As the special
circumstances were not brought to the notice of the Railway Company in the
beginning itself.
Case Law: Simpson Vs London & North
Western Railway Company
Western Railway Company
The plaintiff
consigned a parcel along with a consignment note which read as follows: “Must
reach New Castle, Monday certain”.
consigned a parcel along with a consignment note which read as follows: “Must
reach New Castle, Monday certain”.
The train
developed some technical problems and the consignment reached much later. Held
that the plaintiff could recover, special damages from the Railway Company, as
he had brought the special Circumstances, to the notice of the other party in
the beginning itself.
developed some technical problems and the consignment reached much later. Held
that the plaintiff could recover, special damages from the Railway Company, as
he had brought the special Circumstances, to the notice of the other party in
the beginning itself.
3.
Exemplary /Vindictive Damages
Exemplary /Vindictive Damages
These damages are
awarded with a view to punish the erring party for the breach and not by way of
compensation for the loss suffered by the aggrieved party.
awarded with a view to punish the erring party for the breach and not by way of
compensation for the loss suffered by the aggrieved party.
Exemplary damages
are awarded only in two exceptional cases:
are awarded only in two exceptional cases:
a) Breach of Contract to marry
b) Dishonour of a cheque by a banker when there are sufficient funds to
the credit of the customer
the credit of the customer
4. Nominal Damages
These are awarded
only for the namesake. These are neither awarded by way of compensation to the
aggrieved party nor by way of punishment to the guilty party. These are awarded
to uphold the right of the aggrieved party.
only for the namesake. These are neither awarded by way of compensation to the
aggrieved party nor by way of punishment to the guilty party. These are awarded
to uphold the right of the aggrieved party.
5. Damages for inconvenience and discomfort
Damages can be
recovered for substantial inconvenience of discomfort resulting from breach of
contract.
recovered for substantial inconvenience of discomfort resulting from breach of
contract.
Case Law: Hobbs v. London & S. W. Rail
Co:
Co:
The plaintiff
with his wife and children had to travel from Wimbledon to Hampton Court. They
took a train from Wimbledon, which transported them to Esher. They had to walk
several miles on a drizzling wet night to reach their destination. The
plaintiff could recover the sum of 8 pounds to compensate for the
inconvenience. The plaintiff could not recover for the medical expenses of his wife,
who caught cold, as this consequence was too remote and peculiar.
with his wife and children had to travel from Wimbledon to Hampton Court. They
took a train from Wimbledon, which transported them to Esher. They had to walk
several miles on a drizzling wet night to reach their destination. The
plaintiff could recover the sum of 8 pounds to compensate for the
inconvenience. The plaintiff could not recover for the medical expenses of his wife,
who caught cold, as this consequence was too remote and peculiar.
Case Law: Addis v. Gramophone Co. &
Ltd.
Ltd.
An employee was
wrongfully dismissed from service in a harsh and humiliating manner. Held, the
employee could recover, damages representing his wages and commission he would
have earned but for the wrongful dismissal and not anything for his injured
feelings or for his difficulty to obtain a new employment. Damages can be
recovered for substantial inconvenience of discomfort resulting from such breach.
wrongfully dismissed from service in a harsh and humiliating manner. Held, the
employee could recover, damages representing his wages and commission he would
have earned but for the wrongful dismissal and not anything for his injured
feelings or for his difficulty to obtain a new employment. Damages can be
recovered for substantial inconvenience of discomfort resulting from such breach.
B. Suit for Specific Performance
Specific
performance means the actual carrying of contract as agreed. It is a direction
given by the court to the defendant to actually perform the promise that he has
made. It is a remedy, which is sparingly used.
performance means the actual carrying of contract as agreed. It is a direction
given by the court to the defendant to actually perform the promise that he has
made. It is a remedy, which is sparingly used.
Example: A agrees to sell a house to B.
Later, A refuses to sell. Now B can file a suit against A for specific
performance. The court may order A to perform what he had basically agreed to
do. (To sell the house)
Later, A refuses to sell. Now B can file a suit against A for specific
performance. The court may order A to perform what he had basically agreed to
do. (To sell the house)
Specific performance is not
granted as a rule in the following cases:
granted as a rule in the following cases:
1) Where the contract is for personal services.
2) Where one of the parties to the contract lacks the capacity to
contract.
contract.
3) Where the court cannot supervise the actual execution of the
contract.
contract.
4) Where monetary compensation is an adequate remedy.
C. Suit for an Injunction
Injunction is an
order of a court restraining a person from doing a particular act. Thus,
injunction is more of a preventive relief. Injunction may be of temporary or
permanent nature.
order of a court restraining a person from doing a particular act. Thus,
injunction is more of a preventive relief. Injunction may be of temporary or
permanent nature.
Example: X is trying to put up an
illegal construction on the third floor of his house. Y, his immediate neighbour
objects to it, as ventilation to his house is affected. Y can now move the
court for injunction against X to stop the construction.
illegal construction on the third floor of his house. Y, his immediate neighbour
objects to it, as ventilation to his house is affected. Y can now move the
court for injunction against X to stop the construction.
PRACTICE EXERCISE
1. When there is a breach
contract the aggrieved party is entitled to
contract the aggrieved party is entitled to
A. Damages
B. Loss
C. Damage
D. Nothing
Ans: A
2. The fundamental principle
underlying damages
underlying damages
A. Compensation
B. Punishment
C. Consent
D. None of the above
Ans: A
3. Damages that are restricted to the direct and
proximate consequences of the breach of contract are known as
proximate consequences of the breach of contract are known as
A. Ordinary damages
B. Special damages
C. Exemplary damages
D. None of the above
Ans: A
4. Damages arising on account of the special/unusual circumstances
affecting the plaintiff. They are such remote losses, which are not the natural
and probable consequences of the breach of contract. They are
affecting the plaintiff. They are such remote losses, which are not the natural
and probable consequences of the breach of contract. They are
A. Special damages
B. Nominal damages
C. Ordinary damages
D. None of the above
Ans: A
5. The plaintiff consigned a parcel
along with a consignment note which read as follows: “Must reach New Castle,
Monday certain”. The train developed some technical problems and the
consignment reached much later. Will the Railway Company be liable to
compensate?
along with a consignment note which read as follows: “Must reach New Castle,
Monday certain”. The train developed some technical problems and the
consignment reached much later. Will the Railway Company be liable to
compensate?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A (They were informed about the special circumstances at the
beginning itself)
beginning itself)
6. Damages that are awarded with a view to punish the erring party for
the breach and not by way of compensation for the loss suffered by the
aggrieved party are known as
the breach and not by way of compensation for the loss suffered by the
aggrieved party are known as
A. Ordinary Damages
B. Nominal Damages
C. Exemplary Damages
D. None of the above
Ans: C
7. Exemplary damages are awarded
when there is
when there is
A. Breach of Contract to marry
B. Dishonour of a cheque by a banker when there are sufficient funds to
the credit of the customer
the credit of the customer
C. All of the above
D. None of the above
Ans: C
8. Damages that are awarded only
for the namesake are known as
for the namesake are known as
A. Ordinary damages
B. Nominal damages
C. Exemplary damages
D. Special damages
Ans: B
9. The plaintiff with his wife and children had to travel from Wimbledon
to Hampton Court. They took a train from Wimbledon, which transported them to
Esher. They had to walk several miles on a drizzling wet night to reach their
destination. Will they be awarded damages?
to Hampton Court. They took a train from Wimbledon, which transported them to
Esher. They had to walk several miles on a drizzling wet night to reach their
destination. Will they be awarded damages?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
10. An employee was wrongfully dismissed from service in a harsh and
humiliating manner. Will he be awarded damages?
humiliating manner. Will he be awarded damages?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: B
11. A direction given by the court to the defendant to actually perform
the promise that he has made is known as
the promise that he has made is known as
A. Injunction
B. Damages
C. Suit for specific performance
D. Breach
Ans: C
12. A agrees to sell a house to B. Later, A refuses to sell. Can B file
a suit against A for specific performance?
a suit against A for specific performance?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
13. Specific performance is not granted as a rule where
A. Where the contract is for personal services
B. Where one of the parties to the contract lacks the capacity to
contract
contract
C. Where the court cannot supervise the actual execution of the contract
D. All of the above
Ans: D
14.____________ is an order of a court restraining a person from doing a
particular act.
particular act.
A. Damages
B. Suit for specific performance
C. Injunction
D. None of the above
Ans: C
15. X is trying to put up an illegal construction on the third floor of
his house. Y, his immediate neighbour objects to it, as ventilation to his
house is affected. Can Y move the court for injunction against X to stop the
construction?
his house. Y, his immediate neighbour objects to it, as ventilation to his
house is affected. Can Y move the court for injunction against X to stop the
construction?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
