REMEDIES FOR BREACH OF CONTRACT

In the case of breach of contract on the part of one party, the aggrieved or
injured party has the following remedies available:-
1. Rescission of the contract.
2. Damages.
3. Quantum meruit.
4. Specific Performance.
5. Injunction.

1. Rescission of the Contract-

Rescission means the setting aside of the contract. The aggrieved party may be
allowed by the court of treat the contract at an end and thereby, terminate all his
liabilities under the contract. The court, however, will not allow recession of the
contract in the following cases:
(i) Where the party wishing to set aside the contract has expressly or impliedly
ratified the contract.
(ii) Where only a part of the contract is sought to be set aside and that part
cannot be separated from the rest of the contract.
(iii) Where without fault of either party, there is a change in the circumstances
since the making of the contract, on account of which the parties canot be
substantially restored to the position in which they were before the contract was
made.
(iv) Where during the subsistence of the contract, third parties have acquired
rights in the subject matter of the contract in good faith and for value.
The party rescinding the contract will have to restore all benefits received by
him under the contract to the other party. Of course, he will be entitled to get
compensation for the loss suffered by him on account of non-fulfillment of the
contract.

2. Damages-
Damages mean monetary compensation payable by the defaulting party to the
aggrieved party in the event of the breach of a contract. The object of providing

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damages is to put the aggrieved party in the same position, so far as money can
do, in which he would have been, had the contract been performed.
Types of Damages
Damages may be.
1. Ordinary damages.
2. Special damages.
3. Exemplary or vindictive damages.
4. Nominal damages.
1. Ordinary damages: Damages which arise in the ordinary course of events
from the breach of contract are called ordinary damages. These damages
constitute the direct loss suffered by the aggrieved party. They are estimated on
the basis of circumstances prevailing on the date of the breach of the contract.
Subsequent circumstances tending to change the quantum of damages are
ignored.
2. Special damages: They are those which result from the breach of the
contract under special circumstances. They constitute the indirect loss suffered
by the aggrieved party on account of breach of the contract. They can be
recovered only when the special circumstances responsible for the special losses
were made known to the other party at the time of the making of the contract.
3. Exemplary or vindictive damages: They are quite heavy in amount and are
awarded only in two cases:
1. Breach of a contract to marry.
2. Dishonour of a customer’s cheque by the bank without any proper reason.
These damage are awarded with the intention of punishing the defaulting party.
They are of a different nature and their object is to prevent the parties from
committing breach. In the case of breach of contract to marry damages will
include compensation for the loss of the feelings and the reputation of the
aggrieved party. In the case of dishonour of a cheque damages are awarded
taking into consideration the loss to the prestige and goodwill of the customer
and the general rule is that the smaller the cheque the greater is the amount of
damages.
(4) Nominal Damages: These damages are quite small in amount. They are
never granted by way of compensation for the loss. In such usually actual loss is
very negligible. They are awarded simply to recognize the right of the party of
claim damages for breach of the contract.

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Rules regarding the determination of damages (Sec. 73)
Rules regarding the ascertainment of the amount of damages can be summarised
as follows:
1. The principal upon which damages are to be assessed is that where a party
sustains a loss by reason of breach of contract, he is, so far as money can do it,
to be placed in the same situation with respect to damages if the contract had
been performed. Aggrieved party shall be allowed compensation only for the
actual loss suffered by him.
2. A party who sustains loss by the breach of a contract is entitled to recover
from the party breaking it, compensation for any loss or damages caused to
him:
3. Compensation can be claimed for damages:-
(a) Which arise naturally in the usual course of things from breach of contract
itself. (Hadley V. Baxendale, 1854) Damages are paid only for the proximate
consequences of the breach of a contract; or
(b) As may reasonably be supposed to have been in the contemplation of both
the parties, at the time they made the contract, as the probable result of the
breach of it.
Claim for damages must be fair and reasonable.
4. Special or indirect loss can be recovered only when the special
circumstances have been made known to the other party. Examples (1) A
contracts to buy of B, at a stated price, 50 maunds of rice, no time being fixed
for delivery. A afterwards informs B, that he will not accept the rice if tendered
to him. B is entitled to receive from A, by way of compensation, the amount, if
any, by which the contract price exceeds that which B can obtain for the rice at
the time when A informs B that he will not accept it.
(ii) A contracts with B to pay B Rs. 1,000 if he fails to pay B Rs. 500 on a
given day. A fails to pay B Rs. 500 on that day. B is entitled to recover from A
such compensation, not exceeding Rs. 1,000 as the court considers reasonable.
5. The party suffering from the breach is expected to take reasonable step to
minimise the loss. He cannot claim as damages any loss which he has suffered
due to his own negligence.
Example
A fires B’s ship to go to Bombay, and agrees to take on board on the first of
January, a cargo which A is to provide, and to bring it to Calcutta, the freight to
be paid, when earned. B’s ship does not go to Bombay, but A has opportunities
of procuring suitable conveyance for the cargo upon terms as advantageous as

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those on which he had chartered the ship. A avails himself of those
opportunities; but is put to trouble and expense in doing so. A is entitled to
receive compensation from B in respect of such trouble and expense.
6. Damages are given by way of restitution and compensation and not by way
of punishment. Aggrieved party can recover only the actual pecuniary loss
sustained by him and not exemplary damages, except in the circumstances
already stated in the previous pages.
7. Nominal damages may be granted when breach of a contract is committed
without any real loss.
8. In contracts of sale and purchase of goods the measure of damages will be
the sum by which the contract price falls short of the price at which the
purchaser might have obtained goods of life quality at the time and place that
they should have been delivered. When no date has been fixed for the
performance of the contract and the promisor commits a breach, the measure of
damages will be the difference between the contract price and the market price
at the date of the refusal to perform.
It is to be noted that in case of such a contract if the promisor (seller) retains the
goods after the breach of the contract by the promisee (buyer), he cannot
recover from the buyer and further loss if the market fails, nor will be liable to
have his damages reduced if the market rises, (Jamal V. Molla Dawood and
Sons (1916).
Example
A agreed to sell certain shares to B to be delivered on 30th December. On
account of heavy fall in the value of shares on the date B declined to accept the
delivery of shares. Subsequently A sold the shares at a price higher than that
prevailing on 30th December. Since his shares had picked up in the mean time.
In a suit brought A it was held that he was entitled to recover from B the
difference between the contract price of the shares and their market price on
31st December and B was not entitled to the benefits of the profits accured after
the breach.
9. As regards damages arising from the breach of contracts for the payment of
money on a particular date, interest on the principal sum from the date on which
the sum was agreed to be paid till the actual date of payment will be sufficient
compensation to the aggrieved party.
10. If a sum is named in the contract as the amount to be paid in case of its
breach if the contract contains any other stipulation by way of penalty for
failure to perfrom his part of the obligation under a contract, court will allow
reasonable compensation not exceeding the amount so named in the contract,
(Kemble V. Farren 1829).

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11. Damages for breach of services contracts by the employers will be
determined with reference to the usual terms of wages for the employment
contracted for and the time that would be lost before similar employment can be
obtained.
12. A carrier of goods can be held responsible for damages arising from
deterioration caused by delay even without any prior notice. deterioration in the
value of goods includes both physical damage to the goods as well as damages
arising from the loss of special opportunity for sale. (Wilson V. Luncashire and
Yorkshire Rly. Co.)

3. Quantum Meruit-
Literally speaking the words “Quantum Meruit” mean “as much as merited” or
“as much as earned”. It is principle which provides for payment of
compensation under certain circumstances, to a person who has rendered goods
or services to another person under a contract which could not or has not been
fully performed.
Example:
(i) A person renders some service to a company under contract of employment
which is duly approved by the Board of Directors of that compnay.
Subsequently the constitution of Board of Director’s found to be illegal and,
therefore, the contract of employment becomes void. The employee who has
rendered some service to the company shall be entitled to claim remuneration
for his service under the doctrine of quantum meruit.
(ii) X forgets certain goods at Y’s house. He had no intention to have them with
him gratuitously.Y
uses those goods for his personal benefit. X can compel Y to pay for those
goods. Doctrine of Quantum meruit is however, subject to the following
limitation:
(a) In a contract which is not divisible in to parts and a lumpsum of money is
promised to be paid for the complete work, past performance will not entitle the
party to claim any payment.
Example: A mate was engaged on the term that he would be paid in a lumpsum
for a complete voyage. He died before that voyage was completed. It was held
that his representatives could not recover the lumpsum neither could they sue
for payment for the services rendered by the deceased. (Cutter V. Powel, 6:
TR.320).
(b) A person, who himself is guilty of breach of contract, cannot be allowed
claim any payment under the doctrine of quantum meruit.
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Example: A, a builder, undertakes to build a house on the land of X for a
lumpsum. After A has done part of the work he refuses to finish it, and X
completes the building using some fo the materials left on the premises by A.
Can A recover compensation for the work he has done and for the materials
used by X?
A contract being a complete entity no action lies against X, either on the
original contract or on a quantum meruit respecting the work done. The fact that
X completes the work is no evidence of an undertaking to pay for what he has
been following the rule in Sumpter V. Hedges (1878).
If in completing the premises X uses the materials belonging to A, A will have a
good claim in respect of the value of the materials used.
But the above rule is subject to the following exception:-
(i) In case of a divisible contract, part performance will also entitle the
defaulting party to claim compensation the basis of quantum meruit if the other
party has taken the benefit of what has been done.
(ii) If a lumpsum is to be paid for the compensation of an entire work and the
work has been completed in full though, badly the defaulting party can recover
the lumpsum less a deduction for bad workmanship.
(c) Any claim based upon the doctrine of quantum meruit cannot be entertained
unless there is an evidence of express or implied promise to pay for the work
which has already been done.
Following two remedies are available to the aggrieved party under equity for
breach of a contract.

4. Specific performance:
Law courts can at their discretion, order for the specific performance of a
contract according to the provisions of the Specific Relief Act in those cases
where compensation will not be an adequate remedy or actual damages cannot
accurately be assessed.
Specific performance means the actual carrying out by the parties to contract,
and in proper cases the court will insist on the parties carrying out their
agreement. Specific performance of agreement will not be granted in the
following cases:-
(1) Where the agreement has been made without consideration.
(2) Where the court cannot supervise the execution of the contract e.g. a
building contract.

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(3) Where the contract is of a personal nature.
(4) Where on of the parties is a minor.
Specific performance is usually granted in contracts connected with land or sale
of rare articles. It is, however, to be noted that the plaintiff who seeks specific
performance must, in his term perform all the terms of the contract which he
ought to have performed at the date of the action (Pudi Lazarus V. Rev. Johnson
Edard. 1976 A.P. 243).

5. Injunction:
Where a contract is of a negative character, i.e., a party has promised not to do
come thing and he does it, and thereby commits a breach of the contract, the
aggrieved party may under certain circumstances, seek the protection of the
court and obtain an injunction forbidding the party from committing breach. An
injunction is an order of the court instructing a person to refrain from doing
some act which has been the subject matter of a contract, Courts, at their
discretion, may grant a temporary or a perpetual injunction for an indefinite
period.
For example: A agreed to sing at B’s theatre and to sing nowhere else for a
certain period. Afterwards A made a contract with E to sing at E’s theatre and
refused to sing at B’s theatre. The court refused to order specific performance as
the contract was of a personal nature but granted an injunction to restrain the
breach of A’s promise not to sing elsewhere.
Equitable rights of specific performance or injunction may be lost by laches.
Equity is for the benefit of the diligent and not for the sleepy.