Subject- Business Law

Topic- Remedies for breach of contract

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Kushagra Pareek
School of law
 Meaning of breach of contract

• In case the parties do not perform the obligations set out by the
contract then it is called a breach of contract. The purpose of
making a contract is to impose some terms which are to be
fulfilled by the parties, but when one of the parties fails to
perform those terms then it is called the breach of contract.
The party who has not performed his/her obligations is called
the breaching party.
• Now if any party has not performed the terms of the contract
then it becomes unjustifiable for the other party. As the
contract is enforceable by law, then the law has laid down the
remedies for the breach of contract to compensate the other
party
 Remedies for Breach of Contract
Remedies for Breach of Contract

• When one of the parties fails to perform the terms of the contract, then the Indian
Contract Act, 1872 along with the Specific Relief Act, 1963 provides for some
remedies for this breach of contract. Remedies are as follows:
• Damages- It means compensation is provided by the breaching party and it is the
most common remedy for breach of contract. Section 73 and 74 of the Indian
Contract Act, 1872, highlights the provisions for damages.
• Quantum Meruit- In the cases where the injured party has performed its
obligations of the contract, then they are entitled to recover that value from the
breaching party using the remedy of quantum meruit.
• Specific Performance- Sometimes, the injured party is entitled to an alternative
remedy of specific performance of the contract in some cases and the provisions
for the same are discussed under the Specific Relief Act, 1963.
• Injunction- Injunction refers to restraint from breaching the contract by the other
party.
 DAMAGES

In the event of breach of contract; the aggrieved party besides

rescinding the contract can claim for damages. Damages are
monetary compensation allowed for loss suffered by the
aggrieved party due to the breach of contract. The object of the
court in awarding damages for breach is that the aggrieved party
may be put in the financial position which would have existed
had there been no breach of contract. The law does not punish a
party because he has broken a contract but if, by reason of his
wrongful act, the other party has suffered any pecuniary
(monetary) loss, the court will compel the party in breach to
compensate the loss by paying damages to the other party.
• Section 73 of the Indian Contract Act, 1872 says that in case
of breach of contract, the injured party is entitled to
compensation by the breaching party for the loss suffered
during the usual course of things. It has been specifically
mentioned that no compensation is provided in case of remote
or indirect loss.
• Illustration: A contract to buy from B, at a stated price, 50
maunds of rice, no time being fixed for delivery. A afterward
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 that he will
not accept it.
 The remoteness of damages

The remoteness of damages- Damages are provided to the

injured party only in it relates to the usual course of things. This
rule of the remoteness of damages can be understood from a
famous case Hadley v. Baxendale. This rule consists of two parts.
Firstly, the damages arising in the usual course of things, and
there are no special circumstances that have resulted in a loss to
the injured party.
• Liquidated damages and penalty- Sometimes, the parties to
the contract fix the amount to be paid in case of the breach in
advance. In the cases where the damages fixed beforehand are
genuine and pre-estimate of the damages then these are called
liquidated damages while when the damages are fixed in order
to prevent the breach of contract then damages are called a
penalty.
• Compensation for breach of contract where penalty stipulated
for- According to Section 74 when the penalty is already
mentioned in the contract, the injured party is entitled to get
compensation irrespective of the fact that actual damages have
occurred or not. The amount for damages must be reasonable
and should not exceed the amount stated in the contract.
Illustration: A contracts with B to pay B Rs. 1000 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. 1000 as the Court considers reasonable
Quantum Meruit
• The concept of Quantum Meruit can be understood from an example. A and
B have made a contract, and A has already performed a part of the contract.
After that B prevents him from performing the rest of his obligation. In this
case,  A can recover from B reasonable remuneration for whatever he has
already done.
• There are two essentials of this rule which are as follows:
• One of the parties makes a breach of contract or prevents the performance of
it by the other side.
• 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 to compensate for the value of the work he has already
done.
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 to compensate for
the value of the work he has already done.
Injunction
• Injunction refers to the orders of the court restraining a person from
doing an act. Sections 36 to 42 of the Specific Relief Act, 1963
have the provisions regarding an injunction. It is generally
categorized with specific performance but in this, a party is
restrained from doing some act instead of performing some
obligation. It is a prohibitive writ which is issued by a court
forbidding a party to do some act. An injunction can be only for a
specified time which is called a temporary injunction and it can
also be a mandatory or perpetual injunction.
 Specific performance of contract
In certain cases of breach of contract, damages may not be
considered as an adequate remedy. The aggrieved party may not be
interested in monetary compensation. The court may, in such cases,
direct the defaulting party to carry out the promise according to the
terms of the contract. This is called 'Specific Performance' of
contract .‘
Specific performance of a contract may, at the discretion of the
Court, be enforced where the contract involves the sale of a
particular house or some rare article or any other thing for which
monetary compensation is not enough because the injured party
will not be able to get an exact substitute in the market. For
example,
• A agreed to sell an old painting to B for Rs. 10,000.
Subsequently, A refused to sell the painting. Here, B may file a
suit against A for the specific performance of the contract.
Q. What is a breach of contract?
Q. What is an anticipatory breach of contract.?
Q. Explain remedies available for breach of contract?
Q. State whether the following statements are True and . False.
i) Special damages are available as a matter of statutory right. ii) Special
damages cannot be claimed unless extraordinary circumstances result in in a
special loss were communicated to the promisor.
iii) Exemplary damages are available only in case of defamation, like wrongful
dishonor of a cheque by a bank.
iv) In India, although liquidated damages are allowed, penalty provision in a
contract is void.
v) The promisee has a right to refuse to accept monetary compensation and
insist on specific performance of a contract by the promisor.
Fill in the blanks :
i) The rule on special damages was for the first time laid down
in the case of. ......................a.
ii) The measure of ordinary damages is the difference
between. ........ .price . and the. ............... .price.
iii) Specific performance of a contract will not be granted where
the contract is of a.. ...................
iv) Quantum Meruit means. ,.. ................
v) Actual breach of a contract may take place (a) at the time
when performance is due, or (b). ........................
THANK YOU