CHAPTER 11

REMEDIES FOR BREACH OF

CONTRACT

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A contract gives rise to correlative rights and

obligations. A remedy is the means given by law
for the enforcement of a right.
When a contract is broken, the injured party has
one or more of the following remedies:
Rescission of the contract.
Suit for damages
Suit upon quantum meruit.
Suit for specific performance of the contract.
Suit for injuction.

1. RESCISSION

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party may sue to treat the contract as rescinded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 his obligation under the
contract.
Example: A promises B to supply 10 bags of
cement on a certain day. B agrees to pay the price
after the receipt of the goods. A does not supply
the goods. B is discharge from liability to pay the
price.

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When the contract is rescind by the aggrieved

party as a result of the breach of contract, it has
the following effects:
The aggrieved party is not required to perform
his part of obligation under the contract.
The aggrieved party can claim compensation for
any loss.
The party is liable to restore benefit, if any.

2. DAMAGES

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Damages are monetary compensation allowed to the

injured party by the court for the loss or injury
suffered by him by the breach of a contract.
Kinds of damges:
Damages arising naturally ordinary damages
Example: Amar has agreed to give his car on lease to
Aalap for a period of 1 year for Rs 30,000. Amar later
on refuses to give the car on lease and breaches the
contract, and therefore, Aalap has to enter in lease
for taking the car on lease for Rs 40,000. In this case,
Amar is liable to pay Aalap Rs. 10,000, the difference
between the contract price and the price. Aalap pays
for the lease of the care from some other person.
Here, Rs 10,000 is ordinary damage.

2.

Special damages: These are damages which

are payable for the loss arising due to some
special circumstances.
Example: G, a tailor, delivered a sewing
machine and some cloth to a railway company to
be delivered at a place where a festival was to
be held. He expected to earn some exceptional
profit at the festival but he did not bring this
fact to the notice of the railway authorities. The
goods were delivered after the conclusion of the
festival. Held, he could not recover the loss of
profit.

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Vindictive or exemplary damages:

Damages for the breach of a contract are given
by way of compensation for loss suffered, and
not by way of punishment for wrong inflicted.
Exemplary are allowed not to compensate the
party but as a means of punishment to the
defaulting party.

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Nominal damages: Where the injured party has not in

fact suffered any loss by reason of the breach of a
contract, the damages recoverable by him are normal,
i.e. very small, for example, a rupee.
Damages for inconvenience and discomfort: If the
party has suffered physical inconvenience, discomfort, or
mental agony as a result of the 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 the damages for her injured feelings.

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Mitigation of damages: it is the duty of the

injured party to take all reasonable steps to
mitigate the loss caused by the breach.
Difficulty of assessment
Cost of decree (An official order issued by a legal
authority).
Damages agreed upon in advance in case of
breach.
Example: A contracts with B to pay B Rs. 1000
if he fails to pay B Rs. 500 on a given day.

Liquidated damages and penalty:

Sometimes parties to a contract stipulate at the
time of its formation that on the breach of the
contract by either of them, a certain specified sum
will be payable as damages. Such a sum may
amount to either liquidated damages or a
penalty.
Liquidated damages represents a sum, fixed or
ascetained by the parties in the contract, which is a
fair and genuine pre-estimate of the probable loss.
Penalty means an amount fixed in terroem without
any regard to the probable loss.

Payment of interest:
1. Payment of interest in case of default.
2. Payment of interest at higher rate
a) From the date of the bond.
b) From the date of default.
3. Payment of compound interest on default
a) At the same rate as simple interest.
b) At the rate higher than simple interest.
4. Payment of interest at a lower rate, if
interest paid on due date.

3. QUANTUM MERUIT
The phrase quantum meruit means as much as
earned.
A right to sue on quantum meruit arises where a
contract, partly performed by one party, has
become discharged by the breach of the contract
by the other party.

4. SPECIFIC PERFORMANCE
In certain cases of breach of a contract, damages are not
an adequate remedy. The court may direct the party in
breach to carry out his promise according to the terms of
the contract.
Specific performance will not be granted where
1. Damages are an adequate remedy;
2. The contract is not certain, or is inequitable to either
party;
3. The contract is in its nature revocable.
4. The contract is made by trustees in breach of their trust;
5. The contract is of personal nature, e.g. a contract to
marry.
6. The contract is made by a company in excess of its
powers as laid down in its MOA.
7. The court cannot supervise its carrying out. e.g. a
building contract.

5. INJUNCTION

Where a party is in breach of a negative term of a

contract (i.e. where he is doing something which
he promised not to do), the court may, by issuing
an order, restrain him from doing what he
promised not to do. Such an order of the court is
known as an injuction.
Example: N, a film actress, agreed to act
exclusively for W for a year and for no one else.
During the year she contracted to act for Z. held,
she could be restrained by injunction from doing
so.

RECTIFICATION OR CANCELLATION

When through fraud or a mutual mistake of the

parties, a contract or other instrument does not
express their real intention, either party may
institute a suit to have the instrument rectified.
Example: A, the owner of a ship, fraudulently
representing the ship to be seaworthy induces B,
an underwriter, to insure the ship, B may obtain
the cancellation of the policy.

CASES

A contracts to deliver 1,000 bags of rice at

Rs. 100 per bag on a future date. On the due
date, he refuses to deliver. Market price on
that day is Rs. 120 per bag. What amount of
damage can be recovered from A?
Ordinary damage can be recovered here.
Promisee is entitled to recover the price he
has paid to purchase product over and above
the contract price.
Here, promisee can recover damage of Rs.
20 per bag from A (Rs. 120 he has paid
Rs. 100 contract price).

M Ltd. contracts with Shanti Traders to make

and deliver certain machinery to them by 30
June 2004 for Rs. 11.50 lakhs. Due to labour
strike, M Ltd. could not manufacture and
deliver the machinery to Shanti Traders.
Later, Shanti Traders procured the machinery
from another manufacturer for Rs. 12.75
lakhs. Advise Shanti Traders the amount of
compensation which it can claim from M
Ltd., referring to the legal provisions of the
Indian Contract Act.

Section 73 On breach of contract aggrieved party

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 the contract, to be
likely to result from the breach of it.
Such
compensation is not given for any remote and
indirect loss or damage sustained by reason of the
breach.
Applying the above principle of law to the given
case, M Ltd. is obliged to compensate for the loss of
Rs. 1.25 lakhs (i.e. Rs. 12.75 - Rs.11.50 = Rs. 1.25
lakhs) which had naturally arisen due to default in
performing the contract by the specified date.

A, a singer, agreed with B to perform at his theatre for two months, on a

condition that during that period, he would not perform anywhere else.
When A performs somewhere else what remedy B would have available to
him?

B may apply to court for grant of injunction restraining A from performing at

other place.

The injunction may be defined as an order of the courts restraining a person

from doing something which he promised not to do. It means a stay order
granted by the court. This order prohibits a person to do a particular act.
Where there is a breach of contract by one party and the order of a specific
performance is not granted by the court, the injunction may be granted. The
injunction is granted by the courts at their discretion.