CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

Final draft for the fulfillment of subject law of contracts

Submitted by,

Gyanendra singh

Roll No. (1529)

B.A.LLB 2016-21

Submitted to,

Sushmita mam

Faculty of law

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Contents

ACKNOWLEDGEMENT................................................................................................. 3
RESEARCH METHODOLOGY......................................................................................... 4
INTRODUCTION........................................................................................................... 5
SPECIAL DAMAGES UNDER INDIAN CONTRACT LAW...................................................6
GENERAL DAMAGES.................................................................................................... 7
CONCLUSION.............................................................................................................. 8
REVIEW OF LITERATURE.............................................................................................. 9
BIBLIOGRAPHY.......................................................................................................... 10

ACKNOWLEDGEMENT

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I would like to thank my faculty Sushmita mam, whose assignment of such a relevant and
current topic made me work towards knowing the subject with a greater interest and enthusiasm
and moreover he guided me throughout the project.

I owe the present accomplishment of my project to my friends, who helped me immensely with
sources of research materials throughout the project and without whom I couldnt have
completed it in the present way.

I would also like to extend my gratitude to my parents and all those unseen hands who helped me
out at every stage of my project.

RESEARCH METHODOLOGY

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This project is based upon doctrinal method of research. This project has been done after a
thorough research based upon intrinsic and extrinsic aspects of the project.

Sources of Data:

The following secondary sources of data have been used in the project-

1. Articles.

2. Books

3. Journals

4. Websites

Method of Writing:

The method of writing followed in the course of this research project is primarily analytical.

Mode of Citation:

The researchers have followed a uniform mode of citation throughout the course of this project.

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INTRODUCTION

Damages awarded for breach of contract. Generally, the purpose of an award of damages for
breach of contract is to compensate the injured party. The general rule is that damages are meant
to place the claimant in the same position as if the contract had been performed. Damages are
usually awarded for expectation loss (loss of a bargain) or reliance loss (wasted expenditure).

In some cases the court may award damages which go beyond a strict measure of compensation.
Examples of non-compensatory damages include nominal damages, aggravated damages,
restitutionary damages and account of profits1.

The Indian Contract Act, 1872 ("Act") governs the law of contracts in India and is predominantly
based on English common law. The Act defines the term "contract" as an agreement enforceable
by law. In other words, it is a legally enforceable and binding agreement, which is voluntarily
entered into between two or more competent parties, for consideration and with mutual
obligations. Damages can be broadly divided into two categories, (i) direct damages; and (ii)
indirect / consequential damages.2

Section 73 of the Contract Act is lays down the provision relating to damages. It provides that the
party, who breaches a contract, is liable to compensate the injured party for any loss or damage
caused, due to the breach of contract. For compensation to be payable, Two things should be
taken into consideration (i) The loss or damage should have arisen as a natural consequence of
the breach, or (ii)It should have been something the parties could have reasonably expected to
arise from a breach of the contract. In the former case, an objective test would be applied where
as in the latter case a subjective test would be applied. Under this section, the burden of proof
lies on the injured party. This section, however, provides that compensation shall not be awarded
for any remote or indirect loss sustained by the parties. Section 73 also provides that the same
principles will apply for breach of a quasi-contractual obligation, i.e. in the event that an
obligation resembling that created by contract has not been discharged, the injured party is
entitled to receive compensation as if a contractual obligation has been breached.3

1 PRACTICAL LAW

2 www.mondoq.com

3 Section 73 of ICA

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SPECIAL DAMAGES UNDER INDIAN CONTRACT LAW

Special damages are a specific type of damages available for breach of contract. When a
contract is breached, special damages may be awarded to reimburse the non-breaching party for
damages that result indirectly from, or that flow from the breach. Special damages awards
cover losses besides the contractual losses; this may include a broad range of losses such as loss
of profits or damage to business reputation. Special damages are often requested in addition to
general damages. General damages in a breach of contract claim cover contractual losses, such
as the difference between market prices and contract prices, or losses due to money being
withheld. Both general and specific damages fall under the category of compensatory
damages.

The phrase special damages is often used interchangeably with the term consequential
damages. This is to indicate that the damages are the consequence of a contractual breach,
though they might not have been directly caused by the breach of contract.4

What Are Some Examples of Special Damages?

Special damages cover most losses that are not remedied through a general damages award.
Some examples of losses that flow from a breach may include:

Loss of profits, business opportunities, or contacts

Loss of product or business property
Damage or harm to business reputation
Loss of operating revenue (for example, if a business did not open on the scheduled date
because construction was not completed)
Loss of time or other inconveniences5

A common example of a special damages award is when a breach causes a loss of profits. For
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.

4 LEGALMATCH.COM

5 CHARITABLE TRUST ORS. VS. STATE OF KARNATAKA

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GENERAL DAMAGES

General damages is the broad term given to non-pecuniary loss such as pain and suffering, loss
of amenities, emotional harm, etc and is awarded to a plaintiff as part of a compensatory
damages to cover all those losses which are not easily quantified as opposed to percuniary
damages, ie damages for harm to one's personality and physical integrity.6

When awarding delictual damages, courts have to determine the difference between the present
"financial state" of the plaintiff and the state he or she would have been in had the delict not
occurred. Percuniary damages are quantifiable, whereas quantifying the award to be made in
respect of non-percuniary damages is not as easily determined. The nature of non-pecuniary loss
makes it difficult to assess or calculate an appropriate amount precisely and exactly7. Though the
law attempts to repair the wrong done to a sufferer who has received personal injuries in an
accident by compensating him in money, yet there are no scales by which pain and suffering can
be measured and there is no relationship between pain and money which makes it possible to
express the one in terms of the other with any approach to certainty. This is compensation for
post-trial losses which are likely to continue into the future and where it is difficult to put a final
figure on the losses.

Some examples of general damages are compensation for pain & suffering, loss of promotion or
other opportunities, disadvantage in the labour market, pain and suffering, inability to carry out
day to day tasks / hobbies, future loss of earnings etc.

6 HENDRICKS VS. INSURANCE COMPANY 1993 SA

7 SANDLER VS. WHOLESALE SUPPLIERS

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CONCLUSION

The five basic remedies for breach of contract include the following: money damages,
restitution, rescission, reformation, and specific performance. A money damage award includes a
sum of money that is given as compensation for financial losses caused by a breach of contract.
Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain
that would have accrued but for the breach. The type of breach governs the extent of damages
that may be recovered.

If the breach is a total breach, a plaintiff can recover damages in an amount equal to the sum or
value the plaintiff would have received had the contract been fully performed by the defendant,
including lost profits. If the breach is only partial, the plaintiff may normally seek damages in an
amount equal to the cost of hiring someone else to complete the performance contemplated by
the contract. However, if the cost of completion is prohibitive and the portion of the unperformed
contract is small, many courts will only award damages in an amount equal to the difference
between the diminished value of the contract as performed and the full value contemplated by
the contract. Restitution is a remedy designed to restore the injured party to the position occupied
prior to the formation of the contract. Parties seeking restitution may not request to be
compensated for lost profits or other earnings caused by a breach. Instead, restitution aims at
returning to the plaintiff any money or property given to the defendant under the contract.
Plaintiffs typically seek restitution when contracts they have entered are voided by courts due to
a defendants incompetence or incapacity. The law allows incompetent and incapacitated persons
to disavow their contractual duties but generally only if the plaintiff is not made worse off by
their disavowal.

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REVIEW OF LITERATURE

In the matter of review of literature, I had took the reference from book R.K. BANGIA, section
named measure of damages which is a subtopic in the chapter named remedies for breach of
contracts. Another book which I referred is by prof. A.K. LAKSHMINATHAN. Then one
which I took some reference from is TEXT BOOK OF LAW OF CONTRACTS, INDIAN
CONTRACT ACT. Websites I visited is legalmatch.com, practicallaw.com, mondoq.com,
indiankanoon.com, ica.in and many more. Sections I referred is section 73 of indian contracts
act, 1872.

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BIBLIOGRAPHY

R. K. BANGIA
INDIAN CONTRACTS ACT 1872
LEGAL MATCH.COM
PRACTICALLAW.COM
WWW.MONDOQ.COM
INDIAN KANOON.COM
CONTRACTS.USELEGAL.COM
WWW.LAW.NYU

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