Remedies For Breach Of Contract – Notes

REMEDIES-FOR-THE-BREACH-OF-CONTRACT

Remedy means a course of action available to an aggrieved party when other party breaches the contract.
Remedies for breach of contract:

  1. Rescission of contract
  2. Suit for damage
  3. Suit for specific performance
  4. Suit for injunction
  5. Quantum merit




Recission Of Contract – Section 39

  • It means right to party to cannot contract.
  • In case of breach of contract, other parties may rescind the contract.
  • Effect of rescission of the contract
  • The aggrieved party is not required to perform his party of an obligation under the contract.
  • The aggrieved party claims compensation for any loss.
  • Party is liable to restore benefit if any.
  • When can court grant rescind the contract?
  • The court can rescind the contract in the following situation:
    • The contract is voidable.
    • The contract is unlawful.





Suit For Damages Under Remedies For Breach Of Contract

  • It means monetary compensation allowed for loss.
  • The purpose is to compensate the aggrieved party and not to punish the party as a fault.
  • In India, rules relating to damages are based on English judgment of Hadley vs Baxendale.

The facts of the case were – H’s mill was stopped due to the breakdown of the shaft. He delivered the shaft to the common carrier to repair it and agree to pay a certain sum of repair it and agree to pay a certain sum of money for doing this work. H has informed B that delay would result in a loss of profit. It was held that B is not liable for loss of profit. The court laid down the rule that damage can be recovered if the party has been a breach of contract.




Kind Of Damages Under Remedies For Breach Of Contract
The following are the different kinds of damages:

  • Ordinary damages: These are the damages which are payable for the loss arising naturally and directly as a result of a breach of contract. It is also known as proximate damage or natural damage.
  • Special damages: These are damages which are payable for loss arising due to some special circumstances. It can be recovered only if special circumstances which result in a special loss in case of breach of contract and party have notice of such damage.
    Example: A sends samples of his products for exhibition to an agent of a railway company for carriage to “NEW DELHI” for an exhibition. The consignment note stated: “much be at new Delhi, Monday certain.” Due to the negligence of the company, the goods reached only after the exhibition was over. Held, the company was liable for the loss caused by the late arrival of the products because the company’s agent was aware of the special circumstances.
  • Exemplary or punitive or vindictive damages: These damages are allowed not to compensate party but as mean of punishment to the defaulting party. The court may award these damage in the case of:
    Breach of contract to marry – loss based on mental injury.
    Wrongful dishonour of cheque – smaller amount, larger the damage.
  • Nominal damages: Where the party suffers no loss, the court may allow nominal damages simply to establish that party has proved his case and won. Nominal damage is very small in amount.
  • Damages for the inconvenience: If the party has suffered physical inconvenience, discomfort for mental agony as a result of a breach of contract, the party can recover the damage for such inconvenience.

Example: A photographer agreed to take photographs at a wedding ceremony but failed to do so. The bride brought an action for the breach of contract. Held, she was entitled to damages for her injured feeling.




  • Liquidated damages and penalty: Party may specify amount at the time of entering into the contract. The amount so specified may be (a) liquidated damage, or (b) penalty.
    But if the specified sum is disproportionate to the damages, it is called a penalty.
    As regard, the payment of liquidated damages and penalty court can’t increase the number of damages beyond the amount specified in the contract.

Example: A given B, a bond for the repayment of Rs,1000 with interest at 12 per cent, at the end of six months, with a stipulation that, in case of default, the interest shall be payable at the rate of 75 per cent, from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the court considers reasonable.

Forfeiture of the security deposit: Any clause in contract entitling the aggrieved party to forfeit security deposit like penalty and court may award reasonable compensation.

Payment of interest: It is permissible. If interest in nature of the penalty, the court may grant relief. If no rate of interest is specified in contract party shall be liable to pay as per the law in force or as per custom or usage of trade.

Cost of suit or decree: The court has also the discretion to award cost of suit for damages in addition to the damages for breach of contract.

Suit for specific performance under Remedies For Breach Of Contract:
It means, demanding an order from the court that promise agreed in contract shall be carried out.

  • When is specific performance allowed?
  • Where actual damages arising from a breach is not measurable.
  • Where monetary compensation is not an adequate remedy.
  • When specific performance is not allowed?
  • When damages are an adequate remedy.
  • When the performance of the contract requires the number of minute details and therefore not possible for the court to supervise.
  • When the contract is of personal.
  • When a contract made by the company beyond its power. (ultra – virus)
  • Where one party to contract is minor.
  • Where a contract is inequitable to either party.

Example: A agrees to sell B an artist painting for Rs.30000. later on, he refused to sell it. Here B can file suit against A for specific performance of the contract.

Suit for an injunction:

  • It means stay order granted by the court. This order prohibits a person to do a particular activity.
  • Where there is a breach of contract by one party and order, of specific performance, is not granted by the court, an injunction may be granted.

Example: film actress agreed to act exclusively for W for a year and no one else. During the year she contracted to act for Z.

Suit Upon Quantum Meruit: Quantum merits means, “As much as is earned” or “ in proportion to the work done.” Ordinarily, if a person has agreed to do some work or render some services, has done only a part of what he was required to do, he cannot claim anything for what he had done.
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 act of ‘Quantum Meruit’.

ILLUSTRATION:

  1. If A and B have entered into a contract, is prevented by B from performing the rest of his obligation under the contract, A can recover from B reasonable for whatever he has already done. By this action, the injured party (who himself has not made the breach of contract) is entitled to be compensated for whatever work he may have already done, or whatever expense he may have incurred.
  2. If A agrees to deliver B,500 bags of cement &when A has already delivered 100 bags, B refuses to accept any further supply, A can recover from B the value of wheat which he has already delivered.

DIFFERENCE BETWEEN QUASI CONTRACT AND CONTRACT MATTER QUASI-CONTRACT CONTRACT

  • Intentionally from It is not formed but the law imposes upon the parties. It is intentionally formed by parties.
  • Essential of contract A quasi-contract does not possess all the essential of a valid contract. A contract possesses all the essentials of a valid contract.
  • Obligations Obligation are implied by the law. It is mutually created by the parties.
  • Foundation: It is founded upon the principle of equity. It is founded upon the general principle of the law of contracts.
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