Types Of Damages

1. Ordinary damages
Ordinary damages are those which naturally arise in the usual
course of things from such breach.
These damages can be recovered if the following two
condition are fulfilled:-
1. The aggrieved party must suffer by breach of contract, and
2. The damages must be direct consequence of the breach of
contract and not the indirect consequences.

Ex.- 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
A party to a contract might receive a notice of special
circumstances affecting the contract. In such cases, if he
breaches the contract, then he is liable for the ordinary
damages plus the special damages.

Ex.- Peter hired the services of John, a goods transporter, to

deliver a machine to his factory urgently. He also informed
John that his business has stopped for want of the machine.
However, John delayed the delivery of the machine by an
unreasonable amount of time. Peter missed out on a huge
order since he didn’t have the machine with him.
In this case, Peter can claim compensation from John. The
compensation amount will include the amount of profit he
could have made by running his factory during the period of
delay. However, he cannot claim the profits that he would
have made if he got the contract since John was not made
aware of the same.
3. Vindictive or Punitive Exemplary
Damages
Exemplary damages are those which are in the nature of
punishment. The court may award these damages in case of:-
1. A breach of promise to marry, where damages shall be
calculated on the basis of mental injury sustained by the
aggrieved party,
2. Wrongful dishonour of cheque by a banker because it
causes loss of reputation and credibility.

In case of a wrongful dishonour of cheque from a

businessman, the compensation will include exemplary
damages even if he has not suffered any financial loss.
However, a non-trader is not awarded heavy compensation
unless the damages are alleged and proved as special
damages.

Ex.- Peter 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 dishonours the cheque. Peter files a suit
claiming compensation for damages to his reputation. The
Court awards a nominal amount as damages since Peter is not
a trader.
4. Nominal Damages
Nominal damages are those which are awarded where there
is only a technical violation of a legal right but the aggrieved
party has not in fact suffered any loss because of brech of
contract. These damages are called nominal because they are
very small. The court may or may not award these nominal
damages.
5. Damages for Inconvenience and
Discomfort
If a party has suffered physical inconvenience and discomfort
due to brech of contract, that party can recover the damages
for such inconvenience and discomfort.

Ex:- H with his wife and children booked a ticket for a

midnight train, to be transported to aparticular place where
he lived. They were, however, transported to a wrong place
and they had to walk several miles on a drizzling night as a
result, his wife caught cold and he had to incur some medical
expenses. It was held that he could recover compensation for
inconvenience and not for medical expenses for the sickness
of his wife because it was very remote consequence.

6. Liquidated Damages and

Penalty
When the parties to a contract at the time of formation of
contract, specify a sum which will become payable by the
party sponsible for breach, such specified sum is called :-
1. Liquidated Damages :- if the specified sum represents a fair
and genuine pre-estimate of the damages likely to result due
to breach;
2. Penalty :- if the specified sum is disproportionate to the
damages likely to result due to brech.

In india, there is no distinction between penalty and

liquidated damages. The courts in india allow only resonable
compensation not exceeding the sum specified in the contract.
[Section 74]