Assignment Consequence of Breach of Contract MBA – 114 Legal Framework for Business

Name; Phyoe Myat Aung Khin Roll No. ; 1MBA - 56

Consequence of Breach of Contract

If the party to a contract does not perform his obligations, or expressly refuses to perform the contract it amount to what is called breach of contract. In the case of breach of contract, the party who does not, or refuse to perform his obligation is called the defaulting party, whereas the other party is the aggrieved party in case of breach of contract. The consequences of breach of contract depend on the nature of breach. No matter what the breach is the contract never automatically comes to an end. If there has been a breach of a very important term of contract then the party is given the option to bring the contract to an end. Moreover recent if the party does not want to terminate the contract he can always sue for damages. Remedies There are three kinds of remedies for breach of contract, namely; (i) (ii) (iii) Damages The major remedy available at common law for breach of contract is an award of damages. This is a monetary sum fixed by the court to compensate the injured party. In order to recover substantial damages the injured party must show that he has suffered actual loss; if there is no actual loss he will only be entitled to nominal damages in recognition of the fact that he has a valid cause of action. Damages are given by way of restitution and compensation only and not as punishment, the aggrieved party can therefore, recover the actual loss caused to him and not exemplary damages, which can be recovered only in case of a breach of promise of marriage. The law as the damages for the breach of contract and the measure of damages are laid down in section 73 to 75 of the Contract Act. Damages A decree for specific performance or An injunction

The following are the some of the types of damages General damages; the contract is broken the natural & direct loss suffered by aggrieved party is called general damage. Special damages; a loss that arises out of special circumstances prevailing at the time of breach of contract damages other than those arising from the breach of contract are special damages. Exemplary damages; sometimes the breach of a contract may result in the loss of credibility of a party & may hurt the party’s reputation. Nominal damages; when the aggrieved party has not in fact suffered any loss by reason of the breach of contract, the damages recoverable by him are nominal. Penalty; when making the contract that in the event of a breach of the contract the party responsible for the breach would pay a specified sum as damages to the other party. Interest as damages; when a party to a contract does not make a payment on the stipulated date, is the party liable to pay damages in the form of interest on the amount.

Specific performance The law regarding specific performance and injunction are regulated by Specific Relief Act (S12-30). Specific performance can be granted only when the damages are (i) an inadequate remedy, or (ii) when the contract is certain, fair and just. For example; A agrees to buy and B agrees to sell a picture by a dead painter and two rare China vases. A may compel B specifically to perform the contract for there is no standard ascertaining the actual damages which would be caused by its non-performance. So also A, a singer, contract with B, the manager of a theatre, it sing at his theatre for one year, and to abstain from singing at other theatre during this period. She absents herself. B

cannot compel A to sing at his theatre, but he may sue her for an injunction restraining her from singing at other theatres. Injunction Injunction is used as a mean of enforcing a contract or a promise to forbear, where a contract is about to be broken by a party to the contract. Injunction are of two kinds, namely, temporary or perpetual. Measure of Damages for Breach of Contract “Damages” means compensation in money which the party who suffers by a breach of contract is entitled to receive from the party who has broken the contract. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Remoteness of Damage Section 73 paragraph (2) deals with what is known as ‘remoteness of damage’. Which says, “such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach”. The loss must naturally arise in the usual course of things from the breach or it must be such as the parties knew, when they made the contract to be likely to result from the breach of it. Its follows, therefore, that a party is not liable for loss which is too remote, i.e which is not the natural of probable consequence of the breach of the contract. For example; A delivers to B. a common carrier, a machine to be conveyed without delay, to A’s mill informing B that his mill is stopped for want of the machine B unreasonably delays the delivery of the machine and A in consequence losses a profitable contract with the Government and A is entitled to receive from B by way of compensation the average amount of profit which would have been made by the working of the mill during the time that delivery of it was delayed but not the loss sustained through the loss of the Government contract because it is too remote.

Specific Contract There are four types of specific contract, namely 1. Contract of Indemnity 2. Contract of Guarantee 3. Bailment 4. Agency

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