DISCHARGE OF CONTRACT

Remedies for breach of contract.

 Content
1 - Remedies for breach of contract

2 - Suit for damages

3 - Rules Regarding Assessment of Damages

 Introduction

Breach of contract means to break the obligation imposed by

the contract or not act upon agreed terms and conditions of
the contract. It may be noted that the defendant may be
allowed to commit a breach of contract in case of "Force
majeure" which means the happening of extreme events, such
as war, riot ,or natural disasters.
1. Remedies for breach of contract
A valid contract gives rise to rights and obligations and these rights can be
enforced in case of breach of contract by way of remedies. On the occurrence of
a breach, the aggrieved party is entitled to one or more but not all of the
following remedies : -

a) Suit for damages

b) Suit for rescission
c) Suit upon quantum meruit
d) Suit for specific performance
e) Suit for injunction
2. Suit for Damages
The term damage be defined as monetary
compensation payable to the aggrieved party
1. General or 3. Exemplary or
for the loss or injury suffered by him in case of
ordinary punitive
breach of contract. The primary objective of
awarding damages is to place the aggrieved damages. damages.
party in the same financial position in which he
would have been had the breach of contract not 2. Special 4. Nominal
occurred. The kinds of damages are : - Damages. Charges.
1) General or Ordinary Damage.
Meaning Example

J's wife died from tin poisoning caused

These are the damages that are
by the tinned fish supplied by W. J took
awarded for compensating the loss
action against W for the breach of
that arises naturally from the breach
contract. Held, J was entitled to
of contract. They are confined to the
damages incurred by 1) employing
direct and proximate consequences
extra servants due to the loss of the
and do not cover the remote and
wife's services during illness, 2) medical
indirect losses or consequences. expenses, 3) pecuniary loss.
 2) Special Damages.
Meaning
They are the consequential damages
arising from a breach of contract due to
the existence of special circumstances. If
the special circumstances are already
within the knowledge of the party
responsible for the breach of contract,
the formality of communicating them to
him may not be necessary.
Example
S, a manufacturer, delivered his samples to the railway
company to be exhibited at the New Castle. On the
consignment, he wrote "must reach New Castle on
Monday certain. " On the account of negligence on the
part of the railway company, the samples were
reached only after the exhibition was over. S,
therefore, claimed damages for the loss of his profits
at the exhibition. Held, the company was liable as it
knew the special circumstances, that the equipment
were to be exhibited at the New Castle exhibition, and
must have contemplated that a delay in delivery might
result in such loss.
3) Exemplary or Punitive Damages.
Meaning
These damages are an exception to the
rule that the damages are allowed by way
of compensation and not punishment.
Where a breach of contract by one party
not only results in monetary loss to the
aggrieved party but also subjects him to
disappointment and mental suffering, the
need for vindictive damages arises.
Example
Banker after agreeing to advance
money for Western's tip to California
failed to credit Western's A/c with the
result that the cheques issued by him
were dishonored. Western filed a suit
against the banker for damages. Held,
Western was entitled to damages for
humiliation and mental suffering.
 4) Nominal Charges.
Meaning
These damages are neither allowed
by way of compensation nor by way
of punishment. These are worked
simply to recognize the rights of the
aggrieved party to claim damages in
case of breach of contract. It consists
of a small amount.
Results
A contract to purchase an LG Air Conditioner
from a dealer but he failed to purchase the air
conditioner. However, the demand for LG Air
Conditioner far exceeded the supply, and AC
dealer could sell the AC agreed to be purchased
without loss of profits. Here if the dealer makes
a claim upon A for the breach of contract, he
will be entitled to nominal damages only
because he has not suffered any actual loss.
 Rules Regarding Assessment Of
Damages.

The Indian Contract Act does not lay down the mode and manner of how
and in what manner the assessment of damages or compensation has to
be made. The method used for the assessment of damages will depend
upon the facts and circumstances of each case.
Section 73 lays down, "When a contract is broken, the party who suffers
by such breach is entitled to receive, from the party who has broken the
contract, compensation for any loss or damage caused to him 1) which
naturally arose in the usual course of things from such breach, or 2) which
the parties knew, when they made the contract, to be likely to result from
the breach of it. Such compensation is not to be given for any remote loss
or damage sustained because of the breach.
The rules regarding the damages based on the provision of Secs.
73 to 75 and court judgement may be summarised as follows: -

1) Damages arising naturally.

2) Damages in the contemplation of the parties.
3) Damages for remote and indirect loss.
4) Damages are compensatory and not punitive.
5) Damages are not allowed when the party does not suffer loss.
6) Mitigation of damages or loss.
7) Difficulty of assessment.
8) Damages for mental agony and suffering.
9) Damages in case of breach of contract for sale.
10) Damages in quasi-contract.
11) Damages for inconvenience and discomfort.
12) Cost of suit.
 Liquidated Damages
And Penalty

The contracting parties may stipulate in the contract a sum of money to

be paid in case of breach of contract by either party. Whether it may be
termed as liquidated damages or penalty, depends upon the facts of each
particular case. English Law makes a distinction between liquidated
damages and penalty. But the Indian Law does not recognize the
distinction between liquidated damages and penalty.
 Distinction between liquidated
damages and penalty.

BASIS. LIQUIDATED DAMAGES. PENALTY.

Essence
The essence of liquidated damages is a genuine, Its essence is the payment of money stipulated
covenanted pre-estimate of damages. "in terrorum".

Purpose
The purpose of fixing a sum is to compensate the The purpose of providing a penalty is to
aggrieved party for the loss arising from the breach. discourage a party from breaching it.

Section 74 of ICA, 1872 does not draw any

Position under different laws English law draws a distinction between the two.
distinction between the two.

Basis of assessment
It is a lump sum amount which is imposed upon
Based upon actual loss or probably loss.
a party preventing him to commit a breach.