DISCHARGE OF

CONTRACT

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 DISCHARGE OF CONTRACT
When an agreement, which was binding
on the parties to it, ceases to bind them,
the contact is said to be discharged. A
contract may be discharged in the
following ways:
1. By Performance of the contract ;
2. By breach of the contract ;
3. By impossibility of performance ;
4. By Agreement.
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1. DISCHARGE BY PERFORMANCE

Under a contract each party is bound to

perform his part of the obligation.
After the parties have made due
performance of the contract, their liability
under the contract comes to an end.
In such a case the contract is said to be
discharged by performance.

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2. DISCHARGE BY BREACH OF CONTRACT
When a party having a duty to perform a contract fails to do
that, or does an act whereby the performance of the contract
by him becomes impossible, or he refuses to perform the
contract, there is said to be a breach of contract on his part.

On the breach of contract by one party, the other party is

discharged from his obligation to perform his part of the
obligation, and he also gets a right to sue the party making the
breach of contract for damages for the loss occasioned to him
due to the breach of contract.

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The breach of contract may be either actual,
i.e., non-performance of the contract on the
due date of performance, or anticipatory, i.e.,
before the due date of performance has come.

For example, A is to supply certain goods to B on 1st

January. On 1st January A does not supply the goods. He has
made actual breach of contract.
On the other hand, if A informs B on 1st December that he will
not perform the contract on 1st January next year, A has
made anticipatory breach of contract

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ANTICIPATORY BREACH OF CONTRACT

It means the repudiation of a contract by one party to it

before the due date of its performance has arrived.
Section 39, which contains law relating to anticipatory
breach of contract is as follows:

“ When a party to a contract has refused to perform, or

disabled himself from performing, his promise in its
entirety, the promisee may put an end to the contract,
unless he has signified, by words or conduct, his
acquiescence in its continuance.”

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Anticipatory breach of contract could be
made by promisor, either by refusing to
perform the contract, or disabling himself
from performing the contract in its entirety,
before the due date of performance has
arrived.

When the refusal to perform the contract in

its entirety is not there, it is not to be
considered to be a case of anticipatory
breach within the meaning of section 39.

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ANTICIPATORY BREACH OF CONTRACT
In West Bengal Financial Corporation Vs. Gluco Series
AIR 1973 Cal., A granted a loan to B amounting to Rs.
4,38,000 and also agreed to grant a further loan of Rs. 1,
62,000 at its discretion, provided that B made the
repayment of the loan in accordance with the agreement at
the rate of Rs. 60,000 every year.

B failed to make the repayment as agreed.

B insisted that A should grant further loan of Rs. 1,62,000

to him, but A did not grant further loan because B did not
make the repayment of loan as agreed.

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B’s contention was that A had failed to
perform the contract by not advancing further
loan, which should be considered as breach
of contract.

It was, however, held that A had already

advanced some loan, which B had
accepted, hence it cannot be said to be a
refusal on A’s part to performance of the
contract in its entirety.

B was therefore not entitled to put an end to

the contract on the ground of breach of
contract by A .
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ANTICIPATORY BREACH OF CONTRACT
The position is further explained by illustration (b) to section 39,
which is:
A, a singer, enters into a contract with B , the manager of a
theatre to sing at his theatre two nights in every week during the
next two months, and B agrees to pay her 100 rupees for each
night’s performance.
On the sixth night A wilfully absents herself from the theatre. B
is at liberty to put an end to the contract.
The above illustration to section 39 may create a
misapprehension that in this case absenting on one of the nights
is only partial refusal to perform the contract and not failure to
perform the contract in its entirety.

But in Sooltan Chund Vs. Schiller (1879) it was observed that

even absence on one night in this illustration is breach of the
contract in its entirety.

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 EFFECT OF ANTICIPATORY BREACH OF CONTRACT
When the promisor has made anticipatory breach of
contract, “the promisee may put an end to the contract,
unless he has signified by words or conduct his
acquiescence in its continuance.”

It means that on the breach of contract by one party, the

other party has the following two alternatives open to him:

(i) He may rescind the contract immediately, i.e., he may treat

the contract as an end, and may bring an action for the
breach of contract without waiting for the appointed date of
the performance of the contract,

(ii) He may not put an end to the contract but treat it as still
subsisting and alive and wait for the performance of the
contract on the appointed date.
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EFFECT OF ANTICIPATORY BREACH OF CONTRACT

(i) ELECTION TO RESCIND THE CONTRACT

When the promisee accepts the repudiation of the

contract even before the due date of performance,
and elects to treat the contract at an end, he is
discharged from his obligation to perform the
contract, and also gets a right to bring an action for
the breach of contract, if he so likes, even before
the due date of performance has arrived.

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 (i) ELECTION TO RESCIND THE CONTRACT

In Hochester Vs. De La Tour (1853) the Defendant engaged the plaintiff on

12th April, 1852, as a courier to accompany him on the tour of Europe.

The tour was agreed to begin on 1st June, 1852 and the plaintiff was to be paid £
10 per month for his services.

On 11th May, 1952 the defendant wrote to the plaintiff informing him that he has
changed his mind and declined to take the services of the plaintiff.

On 22nd May, 1852, the plaintiff brought an action against the defendant for the
breach of contract.

The defendant contended that there could be no breach of contract before 1st
June.

It was held that a party to an executory contract may make a breach of contract
before the actual date of performance, and the plaintiff, in such a case, is entitled
to put an end to the contract and he can bring an action even before the actual
date of performance has arrived.

The plaintiff’s action therefore succeeded.

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In Frost Vs. Knight (1872) the defendant
promised to marry the plaintiff on the
defendant’s father’s death. While defendant’s
father was, still alive, he renounced the
contract.

The plaintiff did not wait till the defendant’s

father’s death and immediately sued him,
and she was successful in her action.

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 (ii) ELECTION TO KEEP THE CONTRACT ALIVE
Anticipatory breach of contract by one party does not automatically put
an end to the contract. It has already been noted above that on the
anticipatory breach by one party the other party can exercise the
option either to treat the contract at an end, or, to treat it as still
subsisting until the due date of performance comes.
As pointed out by the Supreme Court in the case of State of Kerala
Vs. Cochin Chemical Refineries, AIR. 1968, “Breach of contract by
one party does not automatically terminate the obligation under the
contract : the injured party has the option either to treat the contract as
still in existence, or to regard himself a discharged. If he accepts the
discharge of the contract by the other party, the contract is at an end. If
he does not accept the discharge, he may insist on the performance.”

When the contract is kept alive by the promisee, the promisor may
perform the same, in spite of the fact that he had earlier repudiated it.

If the promisor still fails to perform the contract on the due date, the
promisee will be entitled to claim compensation on the basis of the
breach of the contract on the agreed date of performance.
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 (ii) ELECTION TO KEEP THE CONTRACT ALIVE
Illustration
A, a singer, enters into a contract with B, the
manager of a theatre, to sing at his theatre two
nights in every week during the next two months,
and B engages to pay her at the rate of 100 rupees
for each night.
On the sixth night A wilfully absents herself.
With the assent of B, A sings on the seventh night.
B has signified his acquiescence in the continuance
of the contract, and cannot now put an end to it, but
is entitled to compensation for the damage sustained
by him through A’s failure to sing on the sixth night

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(ii) ELECTION TO KEEP THE CONTRACT ALIVE

The case of Avery Vs. Bowden (1855) illustrates the point where the
promisee elects to keep the contract alive, and the promisor in spite of
his earlier repudiation of the contract is discharged from liability
because of supervening circumstances before the date of the
performance arrives.

In this case, A chartered B’s ship at Odessa, a Russian port, and

undertook to load the ship with cargo within 45 days.

Before this period had elapsed, A failed to supply the cargo and
declined to supply the same.

The master of the ship continued to insist that the cargo be supplied
but A continued to refuse to load.

Before the period of 45 days was over, Crimean War broke out
between England and Russia, whereby it became illegal to load cargo
at a hostile port.
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The question in this case was, whether by declaration of the
war A had been discharged from liability to load the cargo.
In this case, on A’s refusal to load the cargo B could have
rescinded the contract and brought an action against A, but B
instead, by insisting that the cargo be supplied, kept the
contract alive.
The contact continued to be alive and subsisting for the benefit
of both A and B.
By the declaration of war, the performance of the contract
having become unlawful, it was held that A had been
discharged from his duty to supply the cargo, and, therefore, A
could not be made liable for non-performance of the contract.

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 3. DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE

Both under the English and Indian law a contract

the performance of which is impossible the same
is void for that reason.
Section 56, which deals with this question,
mentions two kinds of impossibility.
Firstly, impossibility existing at the time of the
making of the contract.
Secondly, a contract which is possible of
performance and lawful when made, but the
same becomes impossible or unlawful thereafter
due to some supervening event.
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 1. INITIAL IMPOSSIBILITY
An agreement to do an act impossible in itself is
void. The object of making any contract is that the
parties to it would perform their respective promises.
If a contract is impossible of being performed, the
parties to it will never be able to fulfil their object, and
hence such an agreement is void.

For example, A agrees with B to discover treasure

by magic. The performance of the agreement being
impossible, the agreement is void. Similarly, an
agreement to bring a dead man to life is also void.

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2. SUBSEQUENT IMPOSSIBILITY
The performance of the contract may be possible
when the contract is entered into but because of
some event, which the promisor could not
prevent, the performance may become impossible
or unlawful. Section 56 makes the following
provision regarding the validity of such contracts :

“A contract to do an act which after the contract is

made, becomes impossible, or by reason of some
event which the promisor could not prevent,
unlawful, becomes void when the act, becomes
impossible or unlawful.”

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2. SUBSEQUENT IMPOSSIBILITY

It means that every contract is based on the assumption that the

parties to the contract will be able to perform the same when the due
date of performance arrives. If because of some event the
performance has either become impossible or unlawful, the contract
becomes void. Section 56 explains this point with the help of following
illustrations:

A and B contract to marry each other. Before the time fixed for
marriage, A goes mad. The contract becomes void.

A Contracts to take in cargo for B at a foreign port. A’s Government

afterwards declares war against the country in which the port is
situated. The contract becomes void when war is declared.

A contracts to act at a theatre for six months in consideration of a

sum paid in advance by B. On several occasions A is too ill to act.
The contract to act on those occasions becomes void.
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THE DOCTRINE OF FRUSTRATION

When the performance of the contract

becomes impossible, the purpose which
the parties have in mind is frustrated.
Because of a supervening event when the
performance becomes impossible, the
promisor is excused from the performance
of the contract. This is known as doctrine
of frustration under the English law, and is
covered by section 56 of the Indian
Contract Act
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THE DOCTRINE OF FRUSTRATION
The basis of the doctrine of frustration was explained by
Mukerjea J. in the Supreme Court decision of Satyabrata
Ghose Vs. Mugneeram (1954)m in the following words :
“ The essential idea upon which the doctrine (of
frustration) is based is that of impossibility of performance
of the contract ; in fact impossibility and frustration are
often used as interchangeable expressions. The changed
circumstances make the performance of the contract
impossible and the parties are absolved from the further
performance of it as they did not promise to perform an
impossibility …….. The doctrine of frustration is really an
aspect or part of the law of discharge of contract by reason
of supervening impossibility or illegality of the act agreed
to be done and hence comes within the purview of section
56 of the Contract Act.”

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THE DOCTRINE OF FRUSTRATION
In Taylor Vs. Caldwell (1863) It was held that when
the contract is positive and absolute, but subject to an
express or implied condition, e.g., a particular thing shall
continue to exist, then in such a case, if the thing ceases
to exist, the parties are excused from performing the
contract.

In this case A agreed with B to give him the use of a

music hall and gardens for holding concerts on four
different dates.
B agreed to pay a rent of £ 100 for each of the four
days. Before the date of performance arrived, the music
hall was destroyed by fire. B sued A for the breach of
the contract.

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It was held that the perishing of the hall
without any fault on the part of A had made
the performance of the contract impossible
and, therefore, A was not liable for the non-
performance of the contract.

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THE DOCTRINE OF FRUSTRATION

In Har Prasad Chaubey Vs. Union of India !973 S.C. the

appellant was the highest bidder for a certain type of coal
belonging to the respondents’ railways. The appellant made
full payment for the same.
When he applied for the wagons for transporting the coal to
Ferozabad, the same was refused by Coal Commissioner on
the ground that the coal was meant to be consumed locally
only.
No such condition existed when the auction of the coal was
made.

The appellant then filed suit for the refund of the amount paid
by him and also interest on the amount on the ground that the
contract had become frustrated after the permission to
transport the coal was refused.
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Appellants claim was accepted and he was
allowed the refund of the money.

The reason for the decision was that the

refusal of the Coal Commissioner to allow the
movement of the coal to Ferozabad, in spite of
the fact that no such condition was there at
the time of the auction, had frustrated the
contract.

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 CONTRACT NOT FRUSTRATED BY
MERE COMMERCIAL DIFFICULTY
Merely because the procurement of the
goods becomes difficult because of a strike
in the mill, or there is a rise in prices, or a
person will not be able to earn the expected
amount of profits, it is not enough to
frustrate the contract.

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In Ganga Saran Vs. Ram Charan, (AIR 1952 S.C.) the defendant
agreed to supply 61 bales of cloth of certain specifications
manufactured by the New Victoria Mills, Kanpur, to the plaintiff.

The agreement by the defendant stated: “We shall continue sending

goods as soon as they are prepared to you upto 17-11- 47. We shall
go on supplying goods to you of the Victoria Mills as soon as they
are supplied to us by the Mill.”

As the Mills did not supply the goods to the defendant, he did not
supply any cloth to the plaintiff.

In an action by the plaintiff for damages for the non-performance of

the contract, the defendant contended that the contract had been
frustrated by the circumstances beyond his control.

It was held the delivery of the goods was not contingent on the
supply of goods by the Victoria Mills, and therefore, the contract had
not been frustrated by the non-supply of goods to the sellers, by the
particular Mills. It was observed:

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“The agreement does not seem to us to convey the
meaning that delivery of the goods was made contingent on
their being supplied to the respondent firm by the Victoria
Mills. We find it difficult to hold that the parties ever
contemplated the possibility of goods not being supplied at
all. The words “prepared by the Mill” are only a description
of the goods to be supplied, and the expressions “as soon
as they are prepared” and “as soon as they are supplied to
us by the said Mill” simply indicate the process of delivery
…. That being so, we are unable to hold that the
performance of the contract had become impossible”

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RESTORING BENEFIT ON SUBSEQUENT
IMPOSSIBILITY
It has already been noted above that when, due to the
happening of some event, the performance of the contract
becomes impossible or unlawful the contract becomes
void. Each party is discharged from its obligation to
perform the contract. It is just possible that before the
contract becomes void, one of the parties may have
already gained some advantage under the contract. Such
benefit received by a party has to be restored to the other.

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The relevant provision contained in section
65, which permits such restoration of the
benefit, is as under:

“When an agreement is discovered to be void,

or when a contract becomes void, any person
who has received any advantage under such
agreement or contract is bound to restore it, or
to make compensation for it, to the person
from whom he received it”

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 Illustrations
(a) A Pays B 1,000 rupees, in consideration of B’s
promising to marry C, A’s daughter. C is dead at
the time of the promise. The agreement is void, but
B must repay A the 1,000 rupees.
(b) A contracts with B to deliver to him 250 maunds of
rice before first of May. A delivers 130 maunds
only before that day, and none after. B retains the
130 maunds after the first of May. He is bound to
pay A for them.
(c) A, a singer, contracts with B, the manager of a
theatre, to sing at his theatre for two nights in every
week during the next two months, and B engages
to pay her a hundred rupees for each night’s
performance. On the sixth night, A wilfully absents
herself from the theatre, and b, in consequence
rescinds the contract, b must pay a for the five
nights on which she has sung.
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(4) DISCHARGE BY AGREEMENT AND
NOVATION
Section 62 and 63 deals with contracts in which the
obligation of the parties to it may end by consent of the
parties.

Novation
Novation means substitution of an existing contract with
a new one. When, by an agreement between the parties
to a contract, a new contract replaces an existing one,
the already existing contract is thereby discharged, and
in its pace the obligation of the parties in respect of the
new contract comes into existence. Section 62 contains
the following provision in this regard:

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 “62. EFFECT OF NOVATION, RESCISSION
AND ALTERATION OF CONTRACT –

If the parties to a contract agree to

substitute a new contract for it or rescind or
alter it, then original contract need not be
performed,”
Novation is of two kinds :
(i) Novation by change in the terms of the
contract, and
(ii) Novation by change in the parties to the
contract
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 (i) CHANGE IN THE TERMS OF
THE CONTRACT
Then parties to a contract are free to alter the contract
which they had originally entered into. If they do so, their
liability as regards the original agreement is extinguished,
and in its place they become bound by the new altered
agreement.

For example, A owes B 10,000 rupees. A enters into an

agreement with B , and gives B a mortgage of his (A’s)
estate for 5,000 rupees in place of the debt of 10,000
rupees. This is a new contract and extinguishes the old. In
this illustration the parties to the contract remain the same
but there is a substitution of a new contract with altered
terms in place of the old one.

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It may be noted that novation is valid when
both the parties agree to it.

As the parties have a freedom to enter into a

contract with any terms of their choice, they
are also free to alter the terms of it by their
mutual consent.

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 (ii) CHANGE IN THE PARTIES
TO THE CONTRACT
It is possible that by novation an obligation may be created for one party in
place of another. If under an existing contract A is bound to perform the
contract in favour of B , the responsibility of A is bound to perform the
contract in favour of B, the responsibility of A could be taken over by C.

Now instead of A being liable towards B, by novation C becomes liable

towards B .

For example, A owes money to B under a contract. It is agreed

between A, B and C that B shall thenceforth accept C as his debtor,
instead of A. The old debt of A to B is at end and new debt from C to
B has been contracted.

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It may be noted here that in such cases there should be
consent of all the three persons, viz., the person who wants to
be discharged from the liability, the person who undertakes to
be liable in place of the person discharged, and the person in
whose favour the performance of the contract is be liable to be
made.

Thus, if A and B agree that in place of A, now C will be liable,

but C does not consent to it, there would be no novation.

For example, A owes B 1,000 rupees under a contract. B

owes C 1,000 rupees. B orders A to credit C with 1,000
rupees in his books, but C does not assent to the agreement.
B still owes C 1,000 rupees and no new contract has been
entered into.
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 (ii) CHANGE IN THE PARTIES
TO THE CONTRACT
The working of the doctrine of novation has been explained by
Lord Selborne in Scarf Vs. Jardine in the following words:
“That, there being a contract in existence, some new contract
is substituted for it either between the same parties or
between different parties, the consideration mutually being the
discharge of the old contract. A common instance of it in
partnership cases is where upon the dissolution of a
partnership the person who are going to continue in business
agree and undertake as between themselves and the retiring
partner, that they will assume and discharge the whole
liabilities of the business, usually taking over the assets : and
if, in that case, they give notice of that arrangement to a
creditor, and ask for his accession to it, there becomes a
contract between the creditor who accedes and the new firm
to the effect that he will accept their liability instead of the old
liability, and on the other hand, that they promise to pay him
that consideration.”.
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REMISSION OF PERFORMANCE
Section 63 enables the promisee to agree to
dispense with or remit performance of promise.
The section reads as under:
“ 63. Promisee may dispense with or remit
performance of promise – Every promisee
may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may
extend the time for such performance, or may
accept instead of it any satisfaction which he
thinks fit.
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REMISSION OF PERFORMANCE
Illustrations
a) A promises to paint a picture for B. B afterwards
forbids him to do so. A is no longer bound to perform
the promise.
b) A owes B 5,000 rupees. A pays to B and B accepts,
in satisfaction of the whole debt 2,000 rupees paid at
the time and place at which the 5,000 rupees were
payable. The whole debt is discharged.
c) A owes B 2,000 rupees, and is also indebted to other
creditors. A makes an arrangement with the creditors
including B, to pay them a composition of eight annas
in a rupee upon their respective demands. Payment to
B of 1,000 rupees is a discharge of B’s demand.

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 REMISSION OF PERFORMANCE
The section permits a party, who is entitled
to the performance of a contract, to

i. Dispense with or remit, either wholly or in

part, the performance of the contract, or

i. accept any other satisfaction instead of

performance.

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 (I) DISPENSING WITH OR
REMITTING PERFORMANCE
The promisee has been authorised, by the above stated
provision, to remit or dispense with the performance of the
contract without any consideration.
He may fully forgo his claim, or may agree to a smaller
amount in full satisfaction of the whole amount.
Thus, if A promises to paint a picture for B, B may forbid
him to do so, or if A owes Rs. 5,000 to B, B may accept
from A only Rs. 2,000 in satisfaction of the whole of his
claim.
In such cases A is discharged so far as the performance of
that contract is concerned. It means that if B agrees to
accept Rs 2.000 in lieu of Rs 5,000 from A, he cannot
thereafter ask a to pay the balance of Rs. 3,000.
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ACCEPTING PERFORMANCE FROM THIRD PARTY
The promisee, if he so likes, may accept performance from a third party, and
while accepting such performance he may agree to forgo his claim in part.
Once the promisee accepts a smaller amount in lieu of the whole of his claim,
the promisor would be thereby discharged. This is clear from the illustration

(c) to section 63, which is as follows:

A owes B 5,000 rupees. C Pays B 1,000 rupees, and B accepts them, in

satisfaction of his claim on A. This payment is a discharge of the whole claim.

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Lala Kapuchand Vs. Mir Nawab Himayatali :SC decision

In this case the plaintiff had a claim of Rs. 27 lakhs against the
defendant, the Prince Of Berar In 1949 there was a Police action
and Hyderabad was taken over by the military. The Princes Debt
Settlement Committee set up by the Military Governor decided
that the plaintiff be paid Rs. 20 lakhs in full satisfaction of his claim
of Rs. 27 lakhs.
The plaintiff accepted the sum of rupees 20 lakhs from the
Government in full satisfaction of his claim.
He thereafter brought an action against the defendant to recover
the balance of Rs. 7 lakhs.
It was held that the position was fully covered by section 63, and
the plaintiff having accepted the payment from a third person, i.e.,
the Government, in full satisfaction of his claim had no right to
bring an action against the defendant for the balance.
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(II) EXTENDING THE TIME OF PERFORMANCE
Section 63 permits a party to extend the time of performance,
and no consideration is needed for the same. The extension of
time must be by a mutual understanding between the parties. A
promisee cannot unilaterally extend the time of performance for
his own benefit.
Thus, if a certain date of delivery of goods has been fixed in a
contract of sale of goods and the seller fails to supply the goods
on such date, the buyer cannot unilaterally extend the time of
delivery so as to claim compensation on the basis of rates
prevailing on the extended date.
He will be entitled to compensate only on the basis of the rates
prevailing on the actual date of performance.
If the promisee grants the extension of time be becomes bound
thereby.
Therefore, if the creditor allows some time for making the
payment to a debtor, he cannot bring an action against the
debtor to recover the debt, and if such an action is brought it will
be dismissed by the court as being premature.
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(III) ACCEPTING ANY OTHER SATISFACTION
INSTEAD OF PERFORMANCE

Section 63 permits the promisee to accept any other

satisfaction in lieu of agreed performance, and this would
discharge the promisor. For example, a owes B, under a
contract, a sum of money, the amount of which has not
been ascertained. A without ascertaining the amount
gives b, and B, in satisfaction thereof, accepts, the sum of
Rs. 2000. This is a discharge of the whole debt, whatever
may be its amount.

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If the promisee pays less than the amount claimed and the
promisor does not consider it to be in full and final satisfaction
of his claim, the promisee’s liability under the contract is not
discharged, and the promisor is free to sue for the balance.

In Union of India Vs. Babulal Uttamchand, AIR 1968 Bom.

Some goods belonging to the plaintiffs were lost during transit
due to the negligence of the railway administration. The
Plaintiffs’ made various claims and the railway administration
sent cheques along with printed letters mentioning that the
said payments were in full and final satisfaction of the plaintiffs’
claims.

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The plaintiffs, however, informed the railway
administration that this payment was being accepted
only as part payment of their claims. In an action to
recover the balance of the amount of claims, the
defendants pleaded that the plaintiffs could not sue for
the balance as the payment already made was in full and
final satisfaction of the claims.

It was held that the plaintiffs’ suit for the balance of the
amount was maintainable, as the amounts were not
accepted in full satisfaction of the claim.

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REMEDIES FOR BREACH OF
CONTRACT

52
 REMEDIES FOR BREACH OF
CONTRACT
When one of the parties to the contract makes
a breach of the contract the following remedies
are available to the other party.
1. Damages : Remedy by way of damages is the
most common remedy available to the injured
party. This entitles the injured party to recover
compensation for the loss suffered by it due to
the breach o9f contract, from the party who
caused the breach. Section 73 to section 75
incorporate provisions in this regard.
53
 REMEDIES FOR BREACH OF
CONTRACT
2. Quantum meruit : When the injured party has
performed a part of his      obligation under the contract
before the breach of contract has      occurred, he is
entitled to recover the value of what he has done,
     under this remedy.

3. Specific Performance and Injunction :

Sometimes a party to the contract instead of recovering
damages for the breach may have recourse to the
alternative remedy of specific performance of the
contract, or an injunction restraining the other party from
making a breach of the contract. Provisions regarding
these      remedies have been contained in the Specific
Relief Act, 1963.

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 DAMAGES
Section 73 makes the following provisions regarding the
might of the injured party to recover compensation for the
loss or damage which is caused to him by the breach of
contract.
Section 73. Compensation for loss or damage caused
by breach of contract. – When a contract has been
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
thereby, which naturally arose in the usual course of things
from such breach, or which the parties knew, when they
made contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason of the breach.

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 DAMAGES
Compensation for failure to discharge obligation
resembling those created by contract. – When an
obligation resembling those created by contract has
been incurred and has not been discharged, any person
injured by failure to discharge it is entitled to receive the
same compensation from the party in default, as if such
person has contracted to discharge it and had broken his
contract.

Explanation :- In estimating the loss or damage arising

from a breach of contract, the means which existed of
remedying the inconvenience caused by non-
performance of the contract must be taken into account.”

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 DAMAGES
The section has been explained with the help of the following
illustrations :
a) A contracts to sell and deliver 50 maunds of saltpetre to B , at certain
price to be paid on delivery. A breaks his promise, b is entitled to
receive from A, by way of compensation, the sum, if any, by which the
contract price falls short of the price for which B might have obtained
50 maunds of saltpetre of like quality at the time when the saltpetre
ought to have been delivered.
b) A contracts to let his ship to B for a year from the first of January, for a
certain price. Freights rise, and on the first of January, the hire
obtainable for the ship is higher than the contract price. A breaks his
promise. He must pay to B, by way of compensation, a sum equal to
the difference between the contract price and the price for which B
could hire a similar ship for a year on and from first January.
c) A contracts to repair B’s house in a certain manner, receives payments
in advance. A repairs the house but not according to contract. B is
entitled to recover from A the cost of making the repairs conform to the
contract.

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 DAMAGES
In an action for damages for the breach of contract there
arise two kinds of problems :
1. Firstly, it has to be determined whether them loss suffered
by the p0laintiff is the proximate consequence of the
breach of contract by the defendant. The person making
the breach of contract is liable only for the proximate
consequences of the breach of contract. He is not liable
for damage which is remotely connected with the breach
of contract. In other words, the first problem is the
problem of “Remoteness of Damage.”
2. It is found that the particular damage is the proximate
result of the breach of contract rather than too remote, the
next question arises is : How much compensation is to be
paid for the same? This involves determining the
quantum of compensation. This, in other words, is the
problem of “Measure of Damages.”
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REMOTENESS OF DAMAGE
The following statement of Alderson B, in case of Hadley Vs.
Baxendale (1854) is considered to be the basis of the law to
determine whether the damage is the proximate or remote
consequence or breach of contract :

“Where two parties have made a contract which one of

them has broken, the damages which the other party ought
to receive in respect of such breach of contract should be
such as may be fairly and reasonably be considered either
arising naturally, i.e., according to the usual course of
things, from such breach of contract itself, or such as may
reasonable be supposed to have been in the
contemplation of both parties, at the time they made the
contract, as the probable result of the breach of it”.

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 REMOTENESS OF DAMAGE
The rule in Hadley Vs. Baxendale consists of two parts.
On the breach of a contract such damages can be recovered,
(1) as may fairy and reasonably be considered arising naturally, i.e., according to
the usual course of things from such breach,
OR
(2) as may reasonably be supposed to have been in the contemplation of both
parties at the time they made the contract.
In either case it is necessary that the resulting damage is the probable result of the
breach of contract.

The principle stated in the two branches of the rule is virtually the rule of
“reasonable foresight.”

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The liability of the party making the breach of contract
depends on the knowledge, imputed or actual, of the
loss likely to arise in case of breach of contact. The first
branch of the rule allows damages for the loss arising
naturally, i.e. in the usual course of things from the
breach. The parties are deemed to know about the
likelihood of such loss.
The second branch of the rule deals with the recovery of
more loss which results from the special circumstances
of the case. Such loss is recoverable, if the possibility of
such loss was actually within the knowledge of the
parties, particularly the party who makes a breach of the
contract, at the time of making the contract.

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 MEASURE OF DAMAGE
After it has been established that a certain consequence
of the breach of contract is proximate and not remote
and the plaintiff deserves to be compensated for the
same, the next question which arises is : What is the
measure of damages for the same, or in other words the
problem is of the assessment of compensation for the
breach of contract.

Damages are compensatory in nature. The object of

awarding damages to the aggrieved party is to put in the
same position in which he would have been if the
contract had been performed.

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 MEASURE OF DAMAGE
In a contract of sale of goods the measure of damages is the
difference between the contract price and the market price on the
date of the breach of contract.

For instance, A agrees to supply B a radio set on January for Rs.

1,000. If A fails to supply the radio set and the market price of the
radio set on that date is Rs. 1,200, B will be entitled to recover
from A Rs. 200 as damages.
The reason is that the loss suffered by the buyer is Rs. 200 because
due to the rise in the market price of the radio set he will have to pay
that much extra if he purchases the radio set from the market.
Similarly, if the buyer (B) refuses to take the radio set on the due
Date, the seller will also be entitled to recover the difference
between the contract price and the market price on 1st January.
For instance the market price of the radio set on that date is Rs.
800, A’s loss is Rs.200 in respect of the transaction, because from
another customer A can get only Rs. 800 whereas B had
promised to pay Rs. 1,000 for the same. A can recover Rs. 200
from B..

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 MEASURE OF DAMAGE
The rule in this regard was stated in Borrow Vs.
Arnaud (1844) in the following words.
“ Where a contract to deliver goods at a certain price is
broken the proper measure of damages in general is the
difference between the contract price and the market
price of such goods at the time when the contract is
broken, because the purchaser having the money in his
hands, may go into the market and buy. So, if a contract
to accept and pay for the goods is broken, the same rule
may be properly applied, for the seller may take his
goods into the market and obtain the current price for
them.”

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 QUANTUM MERUIT
Ordinarily if a person having agreed to do some work or
render some
Service provider has done only a part of what he was
required to do, he cannot claim anything for what he has
done. When a person agrees to complete some work for a
lump sum non-completion of the work does not entitle him
to any remuneration even for the part of the work done.
But the law recognises an important exception to this rule
by way of an action for ‘Quantum Meruit’ Under this
section if A and B have entered into a contract, and A,
who has already performed a part of the contract, is then
prevented by B from performing the rest of his obligation
under the contract, A can recover from B reasonable
remuneration for what ever he has already done.

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 QUANTUM MERUIT
It may be noted that this action is not an action for
compensation for breach of contract by the other side. It is
an action which is alternative to an action for the breach of
contract. This action in essence is one of restitution,
putting the party injured by the breach of contract in a
position in which he would have been had the not been
entered into. It merely entitles the injured party to be
compensated for whatever work he may have already
done, or whatever expense he may have incurred. In the
words of Alderson, B,
Where one party has absolutely refused to perform, or has
rendered himself incapable of performing, his part of the
contract, he puts it in the power of the other party either to
sue for the breach of it or to rescind the contract and sue
on a quantum meruit for the work actually done.”

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 QUANTUM MERUIT
The essentials of an action of quantum meruit are as
follows :

1. One of the parties makes a breach of contract, or

prevents the performance a part of it by the other side.

2. The party injured by the breach of the contract, who has

already performed a part of it, elects to be discharged
from further performance of the contract and brings an
action for whatever he has already done.

For instance, if A agrees to deliver B 500 bags of

wheat and when A has already delivered 100 bags B
refuses to accept any further supply, A can recover from
B the value of wheat which he has already delivered.
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 QUANTUM MERUIT
In De Bernardy Vs. Harding, (1853) the
defendant, who was to erect and le seats to view
the funeral of the Duke of Wellington, appointed
the plaintiff as his agent to advertise and sell
tickets for the seats. The plaintiff was to be paid
commission on the tickets sold by him. The
plaintiff incurred some expense in advertising for
the tickets but before any tickets were actually
sold by him his authority to sell tickets was
wrongfully revoked by the defendant. It was held
that the plaintiff was entitled to recover the
expenses already incurred by him under an
action for quantum meruit.
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