BY

MOSHIKRAJ.S
Shashank komanduri
 INTRODUCTION

 Parties to a lawful contract are bound to perform their respective obligation, but when
one of the parties is refusing to perform the obligation then it is termed as breach of the
contract.

In case of breach of contract, the law provides the following remedies to a injured party.
REMEDIES FOR BREACH OF CONTRACT

CANCELLATION OR RESCISSION
RESTITUTION
SPECIFIC PERFORMANCE
INJUNCTION
DAMAGES
QANTUM MERUIT
 CANCELLATION OR RESCISSION

Where one of the parties to a contract commits a breach, the other party may treat the contract as
rescinded.
He is freed from all the obligation under the contract.
Under sec.75, a person who rightfully rescinds a contract is entitled to compensation for any
damage, which he has sustained through the non-fulfilment of the contract.
EXAMPLE;
A, a singer contracts with the B, the manager of the theater to sing at his theater for two night every
week for two months and B engages to pay 100rs for each night. On the sixth night A willingly
absents himself from the theater so here B can claim the compensation of the damage which is caused
by the A.
 RESTITUTION

It means the return of the benefits received by one party to the contract from the other under a void
contract.
 Sec. 65 provides that when an agreement Is discovered to be void or when a contract become void,
any person who has received any advantages under such agreement or contract id bound to restore it
of to make compensation for it to the person from whom he received it.
EXAMPLE;
A pays B 1000rs in consideration of B’s promising to marry C. A’s daughter C Is dead at the time
of promise. The agreement is void but B must repay A 1000rs in consideration of B’s.
 SPECIFIC PERFORMANCE

Under certain circumstances , a person aggrieved by breach of contract can file a suit for specific
performance that is for an order by the court upon the party giuity of breach of contract directing him
to perform what he has promised to do.
Specific performance of a contract may be enforced are furnished below;
Where monetary consideration is not an adequate remedy for the breach of a contract.
When there exists no standard for ascertaining the actual damage caused by the non performance of
the act.
When it is probable that compensation in money on the non performance of the contract cannot be
obtained.
 INJUNCTION

Injunction means an order from the court,

In case of breach of the contract, the injured party can under certain circumstances, get a negative
inunction that is an order prohibiting a party from doing something.
EXAMPLE;
C agreed to buy the whole of the electric energy required for his house from a certain company.
This was interpreted as a promise not to buy electric energy from any other company. He was ,
therefore restrained by an injunction from buying electricity from any other company.
 DAMAGES

It is an universal liability for the breach of the contract. It can be claimed in almost every case for
breach of the contract.
HADLEY Vs BAXENDALE CASE;
The plaintiff carried on an extension business as miller and the defendant carried on a firm of
repairers. The plaintiff sent a broken shaft to the defendant and told him to deliver it immediately.
The defendant delayed the delivery and the plaintiff’s mill remained idle for 7 days. They , therefore ,
brought an action claiming damages for the loss of profits which they would have earned during the
closure of the mill. It was held that they were not entitled for it.
COMPENSATION FOR LOSS OR DAMAGES
CAUSED BY BREACH OF CONTRACT

General Damages
Special Damages
Nominal Damages
Vindictive or Exemplary Damages
 The compensation for loss or damage caused by breach of contract is based in judgements in above case.

The rules as given ‘sec 73’ are as follows :

1) General Damages : Compensation can be paid for actual loss. No one can be allowed to make profits from loss. Usually, the
difference between the contract price and the market price on the date of breach is determined as compensation. Such compensation is
known as ‘ordinary damages’.
Example Peter agrees to sell and deliver 10 bags of potatoes to John for Rs 5,000 after two months. On the date of delivery, the  price of
potatoes increases and Peter refuses to perform his promise. John purchases 10 bags of potatoes for Rs 5,500. He can receive Rs 500
from Peter as ordinary damages arising directly from the breach.

2 ) . Special Damages : Damages other than those arising from the breach of contract may be recovered, if such damages may
reasonably be supposed to have been in the contemplation of both the parties as the probable result of the breach of contract. Such
damages are known as special damages.
Such damages cannot be claimed as a matter of right. They can be claimed only if special circumstances which would result in a special
loss in case of breach of contract, are brought to the notice of the other party.
EXAMPLE :
suppose that two parties enter into a contract for the sale of a painting.   The painting is worth $5,000 and the buyer intended to re-sell the
painting at $6,000.  If the seller breaches the contract by selling the painting to a different buyer, the non-breaching party may be entitled
to special damages. 
In this case, the special damages would equal $1,000 ($6,000-$5,000), which is the amount of profit that the buyer would have gained
through the resale.
 3) . Nominal Damages : Where the injured party has not, in fact, suffered any loss by reason of the breach of contract, the
damages recovered by him are nominal, i.e., very small. Such damages only acknowledge that the plaintiff has proved his case
and won.
For example : If Joe and Ann have a contract, Ann breaches and Joe suffers a $1,000 loss as a result of Ann's breach, then Joe
may be awarded $1,000 in damages because that was the amount of loss he suffered.
4) . Vindictive or Exemplary Damages: Damages are awarded by way of compensation for loss suffered and not by way of
punishment. Hence, such damages have no place in the Law of Contract because they are punitive by nature. However, there are
two cases in which the court may award exemplary damages.
These cases are:-
(a) Breach of a promise to marry; and
(b) Wrong dishonor of a cheque.
For example :  Suraj is a farmer. He issues a cheque for procuring seeds for his next crop. He has sufficient funds in his account
but the bank erroneously dishonors the cheque. He files a suit claiming compensation for damages to his reputation. The Court
awards a nominal amount as damages since he is not a trader.
 RULES REGARDING THE AMOUNT OF
DAMAGES

Sec.73 provides that in case of a breach of a contract , the aggrieved party is entitled to receive compensation for any loss or damage which
arises naturally from the breach or which parties knew to be likely to arise from the breach .
The leading rules are :
1) Actual loss : The Fundamental purpose of awarding damages is to compensate the aggrieved party for the loss suffered and not to punish
the guilty party for causing breach. Breach of contract is not a crime to attract punishment.
2) Limited damages : The damages are always in limited amount awarded to the aggrieved party to compensate it for the loss caused by the
non-performance of the contract.
3) Damages in contemplation of law : The court may allow damages for remote consequences, i.e. damages are not arising naturally from the
breach , if such damages may reasonably be supposed to have been in the contemplation of both the parties at the time of making the
contract.
Example : a delivers to b a common carrier a machine to be conveyed without delay a’s mill informing him that his mill is
stopped for want of the machine. B unreasonably delays the delivery of the machine and A in consequence loses a profitable contract with the
government. A is entitled to receive compensation from B .
4) Cost of getting decry for damages : the injured party is entitled to get the cost of getting a decree for damages.
5) Duty to mitigate the Loss: The aggrieved party is expected to make sincere effort to mitigate or minimize the losses that are resulting
out of breach of the contract. The aggrieved party cannot be careless about the happenings after the breach of contract. Any losses
which could have been avoided would not be compensated.
6) Penalty Named therein in the contract: If a contract a sum of named as the amount to be paid in
case of breach or if the contract contains any stipulations by way of penalty for failure to perform the
obligations the court will allow reasonable compensation not exceeding the sum named.
Example: X contracts with Y to pay Rs.2000/- if he fails to pay Y Rs.1500/- on a certain day. X fails
to pay Y Rs.1500/- on that day. Y is entitled to recover from X such compensation not exceeding
Rs.2000/-
 LIQUIDATED DAMAGES AND PENALTY

Liquidated damages: If the amount fixed by all parties is a genuine estimate of the loss by a future
breach of contract, then it is liquidated damages. Thus, all parties to the contract agree that the
amount is fair compensation for the breach.

Penalty: If the amount fixed by all parties is unreasonable or used to force the performing party to
fulfill the obligation, then it is a penalty. In such cases, the amount is disregarded and the suffering
party cannot claim more than the actual loss.
The Indian law makes no distinction between liquidated damages and penalty. The compensation
awarded cannot exceed the amount mentioned in the contract. According to Section 74 of the Indian
Contract Act, 1872, if the parties fix the damages, the Court will not allow more. However, it may
award a lesser amount, depending on the case. Hence, the suffering party gets reasonable
compensation but no penalty.
There is an exception to Section 74 which states that if a party enters into a contract with the State or
Central government for the performance of an act in the interest of the general public, then a breach
of such a contract makes the party liable to pay the entire amount mentioned in the contract.
 DISTINCTION BETWEEN LIQUIDATED
DAMAGES AND PENALTY

If a contract mentions an amount payable at a certain date and an additional amount if a default happens,
then the additional sum is a penalty. This is because a mere delay in payment is unlikely to cause damage.
Even if the contract specifies a sum as ‘penalty’ or ‘damages’, the Court needs to discern from the facts of
the case if the amount mentioned therein is, in fact, a penalty or liquidated damages.
The crux of the penalty is the payment of money as a terrorem of the defaulting party. Liquidated
damages, on the other hand, are the true pre-estimate of the damage.
While the English law distinguishes between a penalty and liquidated damages, in India, there is no such
distinction. The Indian Courts focus on awarding a reasonable compensation to the suffering party which
does not exceed the amount fixed in the contract.
 PAYMENT OF INTEREST

• 1. There is an agreement to pay interest

• 2. There is a custom or usage of trade to that effect
• 3. There is an obligation to pay Interest under the provisions of Interest Act 1839
• 4. When in a contract no interest is payable but interest is payable upon the default of payment,
such a stipulation may be penal.
• 5. An agreement to pay a specified rate of interest with a provision that reduce rate will be
accepted if paid regularly is not a stipulation by the way of penalty
 QUANTUM MERUIT

Quantum Meruit refers to the true worth of performed services. The legal ideology of quantum meruit maintains that a party is
not obligated to over-compensate monetarily, and the receiving party shouldn't expect to receive payment in an amount that
exceeds the worth of the services provided. This doctrine is successfully used as an equitable remedy in a  civil lawsuit when
the bargain for services and goods was performed without disclosing a specific amount due in a written contract
Planche v Colburn  [1831]
The claimant agreed to write a book on costume and armour for the defendant as part of a series called 'the Juvenile Library'.
The agreed contract price was £100 to be payable on completion. The claimant commenced writing and had completed a great
deal of it when the defendant cancelled the series. The defendant refused to pay the claimant despite his undertaking and the
fact that the claimant was still willing to complete. The claimant brought an action to enforce payment.
The claimant was entitled to recover £50 because the defendant had prevented the performance.

Example : P contracted to write a book published in instalments in a magazine owned by C after a few instalments were
published the magazine was given up. It is held in planch VS collburn that P was entitled to get damanges for a breach of
contract and payment by the rule of quantum meruit for the work already done.