1. What is the difference between fraud and misinterpretation?

What do you
understand by mistake?

Ans. Fraud is generally defined in the law as an intentional misrepresentation of material

existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other
person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an
omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.
Misrepresentation means a false statement of fact made by one party to another party,
which has the effect of inducing that party into the contract. For example, under certain circumstances, false
statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has
may constitute misrepresentation. A finding of misrepresentation allows for a remedy ofres cis s ion and
sometimesdamages depending on the type of misrepresentation.
Difference between fraud and misinterpretation:-
1. In misrepresentation the person making the false statement believes it to be true. In fraud the false statement is person
who knows that it is false or he does not care to know whether it is true or false.
2. There is no intention to deceive the other party when there is misrepresentation of
fact. The very purpose of the fraud is to deceive the other party to the contract.
3. Misrepresentation renders the contract voidable at the option of the party whose consent was obtained by
misrepresentation. In the case of fraud the contract is voidable It also gives rise to an independent action in tort for
damages.
4. Misrepresentation is not an offence under Indian penal code and hence not punishable. Fraud, In certain cases is a
punishable offence under Indian penal code.
5. Generally, silence is not fraud except where there is a duty to speak or the relations between parties is fiduciary. Under
no circumstances can silence be considered as misrepresentation.
6. The party complaining of misrepresentation can’t avoid the contract if he had the means to discover the truth with
ordinary deligance. But in the case of fraud, The party making a false statement cannot say that the other party had
the means to discover the truth with ordinary deligance.
MISTAKE
Amis take is an erroneous belief, at contracting, that certain facts are true. It may be used as grounds to invalidate
the agreement. Common law has identified two different types of mistake in contract: "unilateral mistake" and
"mutual mistake," sometimes called "common mistake."

A mistake is an error in understanding facts, meaning of words or the law, which causes one party or both parties to
enter into a contract without understanding the responsibilities or outcomes. Such a mistake can entitle one party or
both parties to a rescission (cancellation) of the contract. A mistaken understanding of the law (as distinguished
from facts) by one party only is usually no basis for rescission since "ignorance of the law is no excuse."
Mistake covers a broad set of situations, and courts often distinguish between unilateral mistake and mutual mistake.
A unilateral mistake is an incorrect belief of one party that is not shared by the other party. A mutual mistake is an
incorrect belief shared by both parties. Courts have traditionally held that mutual mistakes are more likely than
unilateral mistakes to make a contract voidable.
Q.2 What are the remedies for breach of contract.

Ans, 1. The different types of damages.

2. Measures of damages for breach of different types of contracts.

3. The difference between liquidated damages and penalties.

4. Equitable remedies and when they are granted.

5. The doctrine of election of remedies.

Breach of contract is the failure to perform what a party is under a duty to perform. When this happens, the
nonbreaching party can choose one or more remedies. Unless damages would be inadequate, that is usually what a
court will award.

I. DAMAGES
Damages compensate a nonbreaching party for the loss of a bargain and, under special circumstances, for additional
losses. Generally, the party is placed in the position he or she would have occupied if the contract been performed.

A. TYPES OF DAMAGES

1. Compensatory Damages
Damages compensating a party for the loss of a bargain-the difference between the promised performance and the
actual performance.

a. Incidental Damages
Expenses that are caused directly by a breach of contract (such as those incurred to obtain performance from another
source).

b. Measurement of Compensatory Damages

1) Contract for a Sale of Goods

The usual measure is the difference between the contract price and the market price. If the buyer breaches and the
seller has not yet made the goods, the measure is lost profits on the sale.

2) Contract for a Sale of Land

a) Majority Rule
If specific performance (see below) is unavailable, or if the buyer breaches, the measure of damages is the difference
between the land's contract price and its market price.

b) Minority Rule
If the seller breaches and the breach is not deliberate, the buyer recovers any down payment, plus expenses.

3) Construction Contracts

a) Owner's Breach Before, During, or After Construction

Contractor can recover (1) before construction: only profits (contract price, less cost of materials and labor); (2)
during construction: profits, plus cost of partial construction; (3) after construction: the contract price, plus interest.
b) Contractor's Breach
Owner can recover for (1) stopping mid-project: cost of completion; (2) late completion: costs related to loss of use;
(3) substantial performance: cost of completion, if there would be no substantial economic waste (if cost to complete
does not exceed value that the extra work contributes.)

2. Consequential Damages
Damages giving an injured party the entire benefit of the bargain-foreseeable losses caused by special circumstances
beyond the contract.The breaching party must know (or have reason to know) that special circumstances will cause
the additional loss.

3. Punitive Damages
Damages punishing a guilty party and making an example to deter similar, future conduct. Awarded for a tort, but
not for a contract breach.

4. Nominal Damages
Damages (such as $1) establishing, when no actual loss resulted, that a defendant acted wrongfully.

B. MITIGATION OF DAMAGES
An injured party has a duty to mitigate damages. For example, persons whose jobs have been wrongfully terminated
have a duty to seek other jobs. The damages they receive are their salaries, less the income they received (or would
have received) in similar jobs.

C. LIQUIDATED DAMAGES VERSUS PENALTIES

1. Liquidated Damages Provision

Specifies a certain amount to be paid in the event of a breach to the nonbreaching party for the loss. Such provisions
are enforceable.

2. Penalty Provision
Specifies a certain amount to be paid in the event of a breach to penalize the breaching party. Such provisions are
not enforceable.

3. How to Determine If a Provision Will Be Enforced

Ask: (1) When contract was made, was it clear damages would be difficult to estimate? (2) Was amount set as
damages a reasonable estimate? If either answer is "no," provision will not be enforced.

II. RESCISSION AND RESTITUTION

A. RESCISSION
Rescission is an action to undo, or cancel, a contract-to return nonbreaching parties to the positions they occupied
prior to the transaction. Rescission is available if fraud, mistake, duress, or failure of consideration is present. The
rescinding party must give prompt notice to the breaching party.

B. RESTITUTION
To rescind a contract, the parties must make restitution by returning to each other goods, property, or money
previously conveyed.

III. SPECIFIC PERFORMANCE

This remedy calls for the performance of the act promised in the contract.

A. WHEN SPECIFIC PERFORMANCE IS AVAILABLE

Damages must be an inadequate remedy. If goods are unique, a court will decree specific performance. Specific
performance is granted to a buyer in a contract for the sale of land (every parcel of land is unique).
B. WHEN SPECIFIC PERFORMANCE IS NOT AVAILABLE
Contracts for a sale of goods (other than unique goods) rarely qualify, because substantially identical goods can be
bought or sold elsewhere. Courts normally refuse to grant specific performance of personal service contracts.

IV. REFORMATION
Used when the parties have imperfectly expressed their agreement in writing. Allows the contract to be rewritten to
reflect the parties' true intentions.

A. WHEN REFORMATION IS AVAILABLE

(1) In cases of fraud or mutual mistake; (2) to prove the correct terms of an oral contract; (3) if a covenant not to
compete is for a valid purpose (such as the sale of a business), but the area or time constraints are unreasonable,
some courts will reform the restraints to make them reasonable.

B. WHEN REFORMATION IS NOT AVAILABLE

If the area or time constraints in a covenant not to compete are unreasonable, some courts will throw out the entire
covenant.

V. RECOVERY BASED ON QUASI CONTRACT

When there is no enforceable contract, quasi contract prevents unjust enrichment. The law implies a promise to pay
the reasonable value for benefits received.

A. WHEN QUASI-CONTRACTUAL RECOVERY IS USEFUL

A party has partially performed under a contract that is unenforceable. The party may recover the reasonable value
(fair market value).

B. ELEMENTS TO RECOVER IN QUASI CONTRACT

The party seeking recovery must show (1) he or she conferred a benefit on the other party, (2) he or she had the
reasonable expectation of being paid, (3) he or she did not act as a volunteer in conferring the benefit, and (4) the
other party would be unjustly enriched by retaining it without paying.

VI. ELECTION OF REMEDIES

A nonbreaching party must choose which remedy to pursue. The purpose of the doctrine is to prevent double
recovery. The doctrine has been eliminated in contracts for the sale of goods [UCC 2-703, 2-711].

VII. WAIVER OF BREACH

Occurs when a nonbreaching party accepts defective performance.

A. THE EFFECT OF A WAIVER

A waiver keeps a contract going.

1. Past Breaches
A party waiving a breach cannot take later action based on the breach. In effect, the waiver erases the past breach.

2. Future Breaches
Normally, a waiver of one breach does not waive future breaches. It extends to future breaches, however, if a
reasonable person would conclude that similar defective performance would be acceptable in the future.

B. LIABILITY FOR DAMAGES

A nonbreaching party can recover damages for defective performance.

VIII. CONTRACT PROVISIONS LIMITING REMEDIES

A. EXCULPATORY CLAUSES
A provision excluding liability for fraudulent or intentional injury or for illegal acts will not be enforced. An
exculpatory clause for negligence contained in a contract made between parties who have roughly equal bargaining
positions usually will be enforced.

B. LIMITATION-OF-LIABILITY CLAUSES
Provide that the only remedy for breach is replacement, repair, or refund of the purchase price (or some other limit).
Such clauses may be enforced.

C. CONTRACTS FOR SALES OF GOODS