REMEDIES FOR BREACH

OF CONTRACT
REMEDIES FOR BREACH OF CONTRACT
Introduction
1. Suit for damages: Types of damages; Remoteness of damages;
Ascertainment of damages
2. Doctrine of quantum meruit
3. Suit for specific performance
4. Suit for injunction
5. Suit for recession of contract
An introduction to remedies
for breaking a contract.
If one party fails to fulfill their obligations
under a contract, the other party can seek
legal remedies such as damages or
specific performance according to Indian
law.

Indian law provides remedies such as

suing for damages, claiming a fair
payment, specific performance, injunction,
and rescinding the contract, each with its
own rules and procedures.
Section 37
The parties to a contract must either perform, or offer to perform, their respective
promises, unless such performance is dispensed with or excused under the
provisions of this Act, or of any other law.

Promises bind the representatives of the promisors in case of the death of such
promisors before performance, unless a contrary intention appears from the
contract.
Types of Remedies:
Legal remedies

Equitable remedies
Remedies for Breach of Contract
1. Damages for the loss sustained

2. Suit for specific performance

3. Suit for injunction

4. Suit for recession of contract

Suit for damages
The primary aim of damages is to compensate the aggrieved party, and to place
them in the same position which they would have occupied had the breach of
contract not occurred. It may, therefore, be noted that damages are given by way
of compensation for the loss suffered by the aggrieved party, and not for the
purpose of punishing the default party.
Kinds of damages
Compensatory damages: These are awarded to compensate the aggrieved party for the
actual loss suffered due to the breach of the contract.

Consequential damages: These are awarded for the indirect or secondary losses that are
incurred due to the breach of the contract.

Liquidated damages: These are predetermined damages that are specified in the contract
itself, which the defaulting party has to pay in case of a breach.

Nominal damages/ Unliquidated damages: These are awarded when the aggrieved party
has suffered a loss, but it is minimal, and cannot be quantified.

Punitive damages: These are awarded to punish the defaulting party and to deter them
from repeating the same behavior in the future.
Types of Damages:
Ordinary/ General Damages: Section 73 of the Indian Contract Act deals with
direct damages, - occurred in the ordinary course of proceedings as a
consequence of the violation or which the parties realized when they entered into
the contract were likely to result from the breach.

Special Damages: When special conditions are attached to the contract and
special damages are inflicted on the aggrieved party,- put forth some details about
the special circumstances affecting it before the other party at the time of making
the contract and warn that if the contract is not properly executed due to those
special circumstances, certain specific types of losses will be incurred.
Breach of Contract under Indian Contract Act

Section 73 states-

“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 the 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 because of the breach.”
Section 73
deals with actual damages following a breach of a contract and the injury resulting
from such breach which is - unliquidated damages

a. The loss or damage should have arisen as a natural consequence of the

breach.

b. It should have been something that the parties could reasonably have expected
to arise from the breach
Simpson v. London & North Western Railway Company

S, a manufacturer used to exhibit his samples of his equipment at agricultural

exhibitions.

He delivered his samples to railway company to be exhibited at New Castle. On

the occasion he wrote “must reach at New Castle on Monday certain”.

On the account of negligence on the part of railway company, the samples

reached only after the exhibition was over.

S, claimed damages from railway company for his loss of profits from the
exhibition.
the court held that the railway company was liable to pay these damages as it had
the knowledge of special circumstances, and must have contemplated that a delay
in delivery might result in such loss.

The plaintiff’s purpose and intention could readily be inferred from the
circumstances, which clearly indicated that the contract was one to carry samples
to the Newcastle show and not simply to Newcastle.
Compensation for breach of contract where penalty stipulated for.

Section 74 of the indian Contract Act, 1872, provides that,

“when a contract has been broken, if a sum is named in the contract as the
amount to be paid in case of such breach, or if the contract contains any
other stipulation by way of penalty, the party complaining of the breach is
entitled, whether or not actual damage or loss is proved to have been
caused thereby, to receive from the other party who has broken the contract
reasonable compensation not exceeding the amount so named or, as the
case may be the penalty stipulated for.
Remoteness of Damage-
legal test used to determine the form of loss can be covered by the award of
damages incurred by the violation of the contract.
HADLEY V. BAXENDALE Facts
Hadley was the proprietor of the City Steam Mills in Gloucester.

The crankshaft running the steam engine broke, causing production to halt.

Hadley contacted W. Joyce & Co. to manufacture a new crankshaft and contacted Baxendale to
ship the broken crankshaft as a reference.

Both parties agreed on a price and deadline for delivery, with Hadley emphasizing the importance
of the deadline.

The shipment was re-routed through London and reached the manufacturer several days after the
deadline.

The mill remained shut down, causing severe loss to Hadley.

Hadley sued Baxendale for damages to compensate for his losses, including loss of goodwill and
customers.
whether Baxendale was liable to compensate for the non-operation of the mill?
Judge Sir Edward Hall Alderson
“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 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 reasonably 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.”

loss will only be compensated if it was anticipated by the parties

● Foreseeable, not just a mere possibility
● Foreseeable at the time of entering the contract
● Foreseeable by whom?
○ A reasonable person?
○ Parties?
● Heron II
● Achilleas case principle
Ascertainment of damages
Liquidated damages are those that are agreed upon and fixed by the parties
in the contract.

Section 74 of the Indian Contract Act applies to liquidated damages.

Ascertainment of damages
Unliquidated damages are those that are not agreed upon by the parties and are assessed by the
court.

The court determines the amount of unliquidated damages resulting from a breach of contract.

Parties may only fix an amount as liquidated damages for specific types of breaches.

If a breach is not covered by the liquidated damages clause, the party suffering from the breach
may sue for unliquidated damages.

In a case where the contract allowed the purchaser to claim damages if goods were not delivered
before the fixed date, and if they were not delivered within seven days of the fixed date, the
purchaser could cancel the contract and pay a guarantee amount to the bank.

If the goods were delivered within the extended period, the buyer was only entitled to claim
damages at the agreed rate, and the banking guarantee confiscation clause could not be invoked
as the contract was not canceled.
"genuine-estimate of damages" to determine whether a provision for liquidated
damages was enforceable or not. The courts held that if the amount agreed
upon was a genuine pre-estimate of the damages likely to be suffered by the
innocent party, it would be enforceable
Cutter v Powell

Warner Brothers Pictures Inc v Nelson

Quantum Meruit
"as much as is deserved"
● legal remedy that allows a party to recover the reasonable value of the work
or services they have provided to the other party,
● common law principle that allows a person who has provided services to
recover the reasonable value of those services even if there is no express
contract for payment
● based on the principle that no person should be unjustly enriched at the
expense of another
● implied agreement or understanding that payment would be made for services
rendered
Quantum Meruit
A claim for quantum meruit can arise in a variety of situations, such as

when the parties have entered into an oral agreement that is later found to be
unenforceable, or

where the parties have not agreed on a price for the services provided.
Quantum Meruit
In a situation in which a contract is entered into, but the services are not
completed, the question of fair payment may be brought to the court.

the theory of quantum meruit is used to determine whether payment is due, in

what amount payment should be made, and which party should be paid
Pricket v. Badger(1856) 1 C.B. (N.S.) 296
the defendant having declined, from whatever cause, to sell the land after the
plaintiff had succeeded in procuring a purchaser willing to take it at the price
proposed, and the plaintiff having thus done all he could to entitle him to the
stipulated commission:, although the plaintiff could not maintain an action upon the
special contract, he was, nevertheless, entitled to recover upon the common count
(i.e., a quantum meruit) a reasonable remuneration for his work and labour."
Cutter v Powell (1795) 6 TR 320
“Ten days after the ship Governor Parry,
myself master, arrives at Liverpool, I
promise to pay to Mr. T. Cutter the sum of
thirty guineas, provided he proceeds,
continues and does his duty as second
mate in the said ship from hence to the
port of Liverpool. Kingston, July 31st,
1793.”
Cutter v Powell (1795) 6 TR 320

Mr Cutter Sailed but died before the ships

arrival in Liverpool.

Mr. Cutter’s wife brought an action for a

proportionate part of his due wages for the
substantial amount of the voyage on which
he acted as second mate.
Cutter v Powell (1795) 6 TR 320
Part performance was no performance at all.

if there had been no contract between these

parties, all that the intestate could have
recovered on a quantum meruit for the
voyage would have been eight pounds
Cutter v Powell (1795) 6 TR 320
Ashhurst J concurred, emphasising that the
contract was entire and that completion was a
condition precedent to the obligation to pay.
Cutter v Powell (1795) 6 TR 320
Where there is a valid contract, the parties must
abide by it. A party performing services does not
have the option of abandoning the contract and
claiming quantum meruit instead.
Indu Mehta v. State of U.P. AIR 1987 All 309
● Miss Indu Mehta was a practicing advocate at the District Court of Kanpur.

● She was appointed as an Asst. District Government Council, whereof she

provided her services.
● After some time it was found out that her appointment violated Section 24(2) of
the Criminal Procedure Code, 1973.
● Her appointment was held to be void but since the State had enjoyed the
benefit of her services, the government could not recover back the fees already
paid for the services.
Pricket v. Badger(1856) 1 C.B. (N.S.) 296

Indu Mehta v. State of U.P. AIR 1987 All 309

Specific Relief Act 1963
specific relief so as to remedy the violation of legal rights

equitable remedy

Damages and specific performance are both remedies available upon breach of
obligations by a party to the contract

The former is a "Substitutional" remedy and the latter is a "Specific" remedy

SR: not a matter of right but discretion of court, amendment(2018): Courts are
bound to enforce the specific performance of a contract as a rule, subject to
limited exceptions.
Rescission of contracts
terminates the contractual duties of both parties,

where there is a breach of contract, the aggrieved party may sue or treat the
contract as rescinded and refuse further performance

Section 27 of SRA, the relief of rescission comes handy to a person who has
become the victim of an imposition by means of contract
Rescission of contracts
section 27 of SRA provides that the courts may allow the relief of rescission
in the following cases:

1. Where the contract is voidable or terminable by the plaintiff.

2. Where the contract is unlawful for causes not apparent on its case and
the defendant is more to blame.
Rescission of contracts
Section 29 deals with alternative prayer for rescission in suit for specific
performance.

A plaintiff instituting a suit for specific performance of contract in writing may pray
in the alternative, that, if the contact cannot be specifically enforced it may be
rescinded and delivered up to be canceled, and the court, if it refuses to enforce
the contract specifically, may direct it to be rescinded and delivered up accordingly
Injunction
restrain the commission or continuance of some wrongful act of the party
informed

order or decree by which a party to an action is required to do or refrain

from doing an act or thing

If nature of the contract does not allow damages to likely serve any purpose
nor admit to specific performance, the court may have to restrain the party
who threatens the breach, to the possible extent.

preventive relief
two types of injunctions:
Temporary Injunction: only granted for a stipulated amount of time or before the
court gives a direction about the matter in question.

They can be accessed at any point of the court and are governed by the Civil
Procedure Code, 1908 (CPC).

Permanent Relief: it is one that is issued at the time of the final judgment and is
thus often, for a longer duration- indefinitely barred from commissioning an act, or
prohibition from commissioning an act that will harm the Plaintiff's interests.

S. 38 of the Special Relief Act, 1963 sets out the cases in which Permanent
Injunctions may be granted.
two types of injunctions:
Temporary and Mandatory Injunction
Warner Bros v Nelson
Issue: all of the options available with regards to remedying the breach of contract
in this instance
Warner Bros v Nelson
Decision:

not meant to force to specific performance but

an injunction would enforce the contract to perform

Damages could not be quantified

On this basis, an injunction, with a time limit was

applied to prevent Nelson from carrying out the
other contract. so far as it prevented Bette Davis
from acting or performing for another, term relating
to no employment was not included in the injunction
Warner Bros v Nelson
Decision:

Court will not enforce negative clauses if they

would force them into starvation or to act out the
positive clauses (service only)
Nair Service Society Ltd v. Rev. Father K. C. Alexander & Ors AIR 1968 SC 1165

"A party ousted by a person who has no better right is, with reference to the
person so ousting, entitled to recover by virtue of the possession he had held
before the ouster even though that "possession was without any title."
Nair Service Society Ltd. v. Rev. Father K.C. Alexander & Ors, AIR 1968 SC 1165

When person in possession of property can get injunction to restrain other side
from dispossessing him?

a person in possession of land in the assumed character of owner and exercising

peaceably the ordinary rights of ownership has a perfectly good title against all the
world but the rightful owner. And if the rightful owner does not come forward and
assert his title by the process of law within the period prescribed by the provisions
of the statute of Limitation applicable to the case, his right is forever extinguished
and the possessory owner acquires an absolute title
Kanchan Udyog Ltd. v. United Spirits Ltd., (2017) 8 SCC 237

Contract and Specific Relief — Remedies/Relief — Remedies for Breach of

Contract — Damages:

Party claiming compensation must establish that breach was cause for loss of
anticipated profit. Causal connection between breach and loss is essential.
Breach should be sufficiently substantial cause of loss. Remoteness of damage
has also to be determined on basis whether loss was within reasonable
contemplation of parties. No compensation is payable for making bad bargain.

https://www.scconline.com/blog/post/2017/09/23/2017-scc-vol-8-september-21-
2017-part-2/
Union of India v. Ibrahim Uddin and Anr
34. Discretion of court as to declaration of status or right.—

Any person entitled to any legal character, or to any right as to any property, may
institute a suit against any person denying, or interested to deny, his title to such
character or right, and the court may in its discretion make therein a declaration that he
is so entitled, and the plaintiff need not in such suit ask for any further relief: Provided
that no court shall make any such declaration where the plaintiff, being able to
seek further relief than a mere declaration of title, omits to do so.

Explanation.—A trustee of property is a “person interested to deny” a title adverse to the

title of some one who is not in existence, and whom, if in existence, he would be a
trustee.
C.S. Venkatesh vs. A.S.C. Murthy (Civil Appeal No. 8425 of 2009) on 07.02.2020

that mere plea that the plaintiff is ready to pay the consideration, without any
material to substantiate this plea, cannot be accepted. It is not necessary for the
plaintiff to produce ready money, but it is mandatory on his part to prove that he
has the means to generate the consideration amount.
Deccan Paper Mills v. Regency Mahavir Properties and Ors.

Remedies under Section 31 of the SRA are in personam in nature.

31. When cancellation may be ordered.—

(1) Any person against whom a written instrument is void or voidable, and who has
reasonable apprehension that such instrument, if left outstanding may cause him serious
injury, may sue to have it adjudged void or voidable; and the court may, in its discretion,
so adjudge it and order it to be delivered up and cancelled.

(2) If the instrument has been registered under the Indian Registration Act, 1908 (16 of
1908), the court shall also send a copy of its decree to the officer in whose office the
instrument has been so registered; and such officer shall note on the copy of the
instrument contained in his books the fact of its cancellation.