CONTRACT Study Notes:Remedies for Breach of Contract
Dear Readers,Here we are providing you updated and most relevant Study notes on Contract of Remedies for Breach of Contract for Law Entrance Exam. These study notes are highly recommendable for all those who aspire to crack CLAT, DULLB, AILET and other Law Entrance Exam.
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. 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.The fundamental 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.
Different Kinds of Damages
1) Ordinary Damages2) 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.In other words, 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. This is a leading 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.
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.
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.
NOTE: Subsequent knowledge of the special circumstances will not create any special liability on the other party.
Case law: Govinda Rao v. Madras Railway 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.
Case Law: Simpson Vs London & North Western Railway Company
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. 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
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. Exemplary damages 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
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.
5. Damages for inconvenience and discomfort
Damages can be recovered for substantial inconvenience of discomfort resulting from breach of contract.
Case Law: Hobbs v. London & S. W. Rail 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.
Case Law: Addis v. Gramophone Co. & 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.
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.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) Specific performance is not 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.
3) Where the court cannot supervise the actual execution of the 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.
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.
PRACTICE EXERCISE
1. When there is a breach contract the aggrieved party is entitled to
A. Damages B. Loss
C. Damage D. Nothing
Ans.A
2. The fundamental principle 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
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
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?
A. Yes B. No
C. Maybe D. None of the above
Ans.A
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 A. Ordinary Damages B. Nominal Damages
C. Exemplary Damages D. None of the above
Ans.C
7. Exemplary damages are awarded 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
C. All of the above
D. None of the above
Ans.C
8. Damages that are awarded only for the namesake are known as
A. Ordinary damages B. Nominal damages
C. Exemplary damages D. Special damages
Ans.B
