SUIT FOR

BREACH OF
CONTRACT
Section 55-61
Right against the buyer
• Rights of Unpaid seller against the buyer: An unpaid seller can enforce certain rights
against the goods as well as against the buyer personally. Rights of unpaid seller against
the buyer are otherwise known as seller's remedies for breach of contract of sale.

• The unpaid seller, in addition to his rights against the goods, has the following rights of
action against the buyer personally:
Suit for price
• 1. Suit for price Section 55

• I. Where under a contract of sale the property in the goods has passed to the buyer
and the buyer wrongfully neglects or refuses to pay for the goods according to the
terms of the contract, the seller may sue him for the price of the goods.

• II. Where under a contract of sale the price is payable on a day certain irrespective
of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller
may sue him for the price although the property in the goods has not passed and the
goods have not been appropriated to the contract.
Suit for price
• Where property in goods has passed to the buyer; or where the sale price is payable ‘on a
day certain’, although the property in goods has not passed; and the buyer wrongfully
neglects or refuses to pay the price according to the terms of the contract, the seller is
entitled to sue the buyer for price, irrespective of the delivery of goods. Where the goods
have been delivered, the seller would file a suit for price.
Suit for price
• Thus, It is the duty of the buyer to accept the goods and pay for them. Apart from exercising
rights against the goods, if the buyer does not pay for them, the seller may sue the buyer to
recover the price. Where the property in the goods has passed to the buyer and he wrongfully
neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue
him for the price of the goods.

• For an action for price it is necessary that the property in the goods must have passed to the
buyer and then there must have been a wrongful neglect or refusal on the part of the buyer to pay
the price. When the seller has performed or offered to perform all conditions precedent to the
payment of the price but the buyer does not pay the price, he is deemed to have wrongfully
neglected or refused to pay the price.
Suit for price
• The right of the seller to recover the price, after the property has passed to the buyer can be exercised
irrespective of the fact that no delivery of the goods has yet been made to the buyer.

• When the buyer has obtained the possession of the goods, the seller’s sole remedy is an action for price. On the
other hand, if the goods have not yet reached the possession of the buyer, the seller has, in addition to the right
of recovery of price under section 55 and other rights also.

• In Dunlop v Groat, there was a contract for the sale of a certain quantity of iron and the delivery was to be
made, if the buyer so required, between 3rd March and 30th April. The price was agreed to be paid by 30th
April. By 30th April delivery of only a portion of the iron was made as the buyer did not require the delivery of
the remainder. It was held that the seller was entitled to recover the price of the whole of the iron and he was
not required to show that he had appropriated any specific iron to the contract for completing the delivery of
the remaining iron.
Suit for damages for non-acceptance
• 2. Suit for damages for non-acceptance Section 56

• Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him
for damages for non-acceptance.

• The seller’s remedy in this case is a suit for damages rather than an action for the full price of the goods. The
damages are calculated in accordance with the rules contained in Section 73 of the Indian Contract Act, that
is, the measure of damages is the estimated loss arising directly and naturally from the buyer’s breach of
contract. Where the goods have a ready market the principle applicable is that the seller may recover from
the buyer damages equal to the difference between the contract price and the market price on the day of the
breach of the contract. Thus, if the difference between the contract price and market price is nil, the seller can
get only nominal damages as laid down in Charter V. Sullivan 1957 All ER 809 But where the goods do not
have any ready market, the measure of damages will depend upon the facts of each case.
Suit for damages for non-acceptance
• For example, in Thompson Ltd. V. Robinson 1955 2 WLR 185 the damages were assessed on
the basis of profits lost. In that case, T Ltd., who were car dealers, contracted to supply a
motorcar to R. R refused to accept delivery. It was found as a fact that the supply of cars
exceeded the demand at the time of breach and hence in a sense there was no market price on
the date of breach. Held, T Ltd., were entitled to damages for the loss of their bargain viz.,
the profit they would have made, as they had sold one car less than they otherwise would
have sold. To take another illustration, if the goods have been manufactured to some special
order and they are unsalable and have been manufactured to some special order and they are
unsalable and have no value at all for other buyers, then the seller may even be allowed the
full price of the goods as damages.
Suit for damages for non-acceptance
• Thus, It is the duty of the buyer to accept the goods and pay for them. According to
section 56, where the buyer wrongfully neglects or refuses to accept and pay for the
goods, the seller may sue him for damages for non-acceptance. Such a suit generally
arises when the property in the goods has not yet passed to the buyer. The seller being still
the owner of the goods can dispose them of and recover from the buyer damages for the
loss accruing to him in accordance with the rules regarding damages in section 73 of the
Indian Contract Act.
Suit for damages for non-acceptance
• In Bungo Steel Furniture v Union of India there was a contract for the supply of steel
bins to the Govt. of India by the appellants. The Government wrongfully terminated the
contract before the bins had been actually manufactured. It was held that, in this case,
since the property in the goods has not yet passed to the buyer (Government), the case
was not covered by section 55 and an action for the recovery of the price could not lie but
appellants were entitled to recover damages from the govt for wrongfully refusing to
accept the goods.
Suit for damages for non-acceptance

• Measure of damages: The parties may fix the amount of damages payable by the contract itself. If the
parties have fixed the amount of damages payable on the breach of the contract by either of the parties, the
case will be governed by the provisions of section 73 of the Indian Contract Act. In that case the party
complaining of the breach of contract will be entitled to receive from the party who has broken the
contract, reasonable compensation not exceeding the amount of compensation agreed to between the
parties. In case no compensation has been agreed between the parties, the damages are to be assessed in
accordance with the provisions of section 73 of the Contract Act. According to that provision, the injured
party is entitled to receive from the party making a breach of contract compensation for the loss or
damages to him, which naturally arose in the usual course of things as a result of the breach. In a contract
of sale of goods, therefore, the damages would be assessed on the basis of the difference between the
contract price and the market price prevailing on the date of the breach of the contract.
Suit for damages for non-acceptance

• For example, a buyer having made a contract for the purchase of a certain radio set for Rs. 500/-
wrongfully neglects or refuses to accept and pay for the radio set. In case the market price of the
radio set on the date of the breach of the contract is Rs. 400/-, the seller can recover from the buyer
damages amounting to Rs. 100/- as that is the difference between the contract price and the market
price on the date of the breach of the contract and that is the loss which naturally arose in the usual
course of things.

• In Suresh Kumar v M. Assan Koya & Sons, on the buyer’s wrongful refusal to take delivery, the
seller sold the goods and there was nothing to show either that the sale was not for market price or
it was conducted in an improper manner, the seller was held entitled to claim difference in contract
price and the price fetched on sale of goods, as damages.
Repudiation of contract before due date
• Repudiation of contract before due date Section 60

• Where either party to a contract of sale repudiates the contract before the date of
delivery, the other may either treat the contract as subsisting or wait till the date of
delivery, or he may treat the contract as rescinded and sue for damages for the
breach.

• Thus, where the buyer repudiates the contract before the date of delivery, the seller may
treat the contract as rescinded and sue damages for the breach. This is known as the rule
of anticipatory breach of contract.
Suit for Interest by way of damages and
special damages
• 3) Interest by way of damages and special damages Section 61

• (1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special
damages in any case whereby law interest or special damages may be recoverable, or to recover the
money paid where the consideration for the payment of it has failed.

• (2) In the absence of a contract to the contrary, the Court may award interest at such rate as it
thinks fit on the amount of the price—

• (a) to the seller in a suit by him for the amount of the price— from the date of the tender of the
goods or from the date on which the price was payable;

• (b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on
the part of the seller—from the date on which the payment was made.
Suit for Interest by way of damages and
special damages
• This Section entitles the seller to sue the buyer for ‘special damages’ also for such loss “which the parties
knew, when they made the contract, to be likely to result from the breach of it.” In fact the section is only
declaratory of the principle regarding ‘special damages’ laid down in Section 73 of the Indian Contract Act.
The section also recognizes unpaid seller’s right to get interest at a reasonable rate on the total unpaid price
of the goods sold, from the time it was due until it is actually paid as has been laid down in Telu Ram Jain V.
Aggarwal & Sons AIR 1991 P&H 140.

• Section 73, Indian Contract Act, not only allows damages for the loss “which naturally arose in usual course
of things” but also special damages for such loss “which the parties knew when they made the contract to be
likely to result from the breach of it.”

• Section 61 preserves the right of the parties to a contract of sale to recover special damages, and
also recognises the well-established right of the parties to recover interest by way of damages.
Seller’s right of interest on price
• Seller’s right of interest on price: The parties may agree as to when the price is payable.
The buyer is bound to accept the goods and pay for them in accordance with the contract. If
there is no contract to the contrary, the delivery of the goods and the payment of the price are
concurrent conditions, i.e., in such a case the buyer is bound to pay the price when the goods
are delivered to him. If the buyer does not pay the price in time and wrongfully delays the
payment of the same, the Court may award interest on price. Interest is to be paid on the
amount of the price from the date when the price was payable, at such rate as the court thinks
just. Thus, the Court may order interest on the price from the date of tender of the goods if no
date of payment of price has been decided, or from the date when the price was payable in
terms of the contract.(Section 61)
Seller’s right of interest on price
• Where there is specific agreement between the seller and the buyer as to interest on the
price of the goods from the date on which payment becomes due, the seller may recover
interest from the buyer. If however, there is no specific agreement to this effect, the seller
may charge interest on the price when it becomes due from such day as he may notify to
the buyer.

• In the absence of a contract to the contrary, the court may award interest to the seller in a
suit by him at such rate as it thinks fit on the amount of the price from the date of the
tender of the goods, or from the date on which the price was payable.
Seller’s right of interest on price
• Under section 61 (2), the court has a very wide discretion to award interest as it thinks fit on
the amount of the price from the date when payment was to be made. The seller would be
entitled to interest from the date of delivery of goods upto the date of payment even in the
absence of the contract for the payment of interest. Section 61 (2) (a) gives discretion to the
court to award interest in the absence of contract to the contrary. Such payment of interest
can be made in asuit for recovery of price or damages, and not otherwise. In MKM Moosa
Bhai Amin v Rajasthan Textile Mills,7 the buyer delayed the payment of price by one year.
Even though the contract did not stipulate payment of interest on delay, it was held that the
buyer was bound to pay interest at the rate of 6% p.a. for the period of delay.
Remedies of buyer against the
seller
Breach of contract by seller

Breach of
• Fails to deliver the goods at the time or in manner prescribed
contract
by seller,
where he-

Breach of
• Repudiates the contract
contract
by seller,
where he-

• Deliver non-conforming goods and buyer rejects and revokes

Breach of
contract acceptance
by seller,
where he-
Rights of buyer
• If the seller commits a breach of contract, the buyer gets the following rights against the
seller:
Damages for non-delivery

Suit for specific performance

Suit for breach of warranty

Suit for anticipatory breach

Suit for interest

Damages for non-delivery
• Damages for non-delivery Section 57

• Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the
buyer may sue the seller for damages for non-delivery.

• Eg A a shoe manufacturer, agreed to sell 100 pairs of shoes to B at the rate of Rs 1050 per
pair. A knew that B wanted the shoes for the purpose of further reselling them to C at the
rate of Rs 1100/- per pair. On the due date of delivery, A failed to deliver the shoes to B.
In consequence, B could not perform his contract with C for the supply of 100 pairs of
shoes. In this case, B can recover damages from A at the rate of Rs 50 per pair (the
difference between the contract price and resale price)
Suit for specific performance
• Suit for Specific performance Section 58

• —Subject to the provisions of Chapter II of the Specific Relief Act, 1877 (1 of 1877),
in any suit for breach of contract to deliver specific or ascertained goods, the Court
may, if it thinks fit, on the application of the plaintiff, by its decree direct that the
contract shall be performed specifically, without giving the defendant the option of
retaining the goods on payment of damages. The decree may be unconditional, or
upon such terms and conditions as to damages, payment of the price or otherwise, as
the Court may deem just, and the application of the plaintiff may be made at any
time before the decree.
Suit for specific performance
• Where the seller commits of breach of the contract of sale, the buyer can appeal to the
court for specific performance. The court can order for specific performance only when
the goods are ascertained or specific.

• Eg A agreed to sell a rare painting of Mughal period to B. but on the due date of delivery,
A refused to sell the same. In this case, B may file a suit against A for obtaining an order
from the court to compel A to perform the contract (I.e. to deliver the painting to B at the
agreed price)
Suit for breach of warranty
• Suit for breach of Warranty Section 59

• (1) Where there is a breach of warranty on the part of the seller, or where the buyer elects or is
compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the
buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may—

• (a) set up against the seller the breach of warranty in diminution or extinction of the price; or

• (b) sue the seller for damages for breach of warranty.

• (2) The fact that a buyer has set up a breach of warranty in diminution or extinction of the price
does not prevent him from suing for the same breach of warranty if he has suffered further
damage.
Repudiation of contract before due date
• Repudiation of contract before due date Section 60

• Where either party to a contract of sale repudiates the contract before the date of
delivery, the other may either treat the contract as subsisting and wait till the date of
delivery, or he may treat the contract as rescinded and sue for damages for the
breach.
Suit for interest
• Suit for Interest Section 61

• (1) Nothing in this Act shall affect the right of the seller or the buyer to recover interest or special
damages in any case where by law interest or special damages may be recoverable, or to recover the
money paid where the consideration for the payment of it has failed.

• (2) In the absence of a contract to the contrary, the Court may award interest at such rate as it
thinks fit on the amount of the price—

• (a) to the seller in a suit by him for the amount of the price— from the date of the tender of the
goods or from the date on which the price was payable;

• (b) to the buyer in a suit by him for the refund of the price in a case of a breach of the contract on
the part of the seller—from the date on which the payment was made.
Suit for interest
• Eg in case of a sale of cigarettes which turned out to be mildewed and unfit for
consumption, damages were awarded on the basis of the difference between the contract
price and the price released

• Eg in case of absence of transfer of title or registration the purchaser cannot claim

damages for breach of conditions and warranties relating to sale.
Sale by Auction Section 64
• 64. Auction sale.—In the case of sale by auction—

• (1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject
of a separate contract of sale;

• (2) the sale is complete when the auctioneer announces its completion by the fall of the
hammer or in other customary manner; and, until such announcement is made, any bidder
may retract his bid;

• (3) a right to bid may be reserved expressly by or on behalf of the seller and, where such
right is expressly so reserved, but not otherwise, the seller or any one person on his behalf
may, subject to the provisions hereinafter contained, bid at the auction;
Sale by Auction Section 64
• (4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall
not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for
the auctioneer knowingly to take any bid from the seller or any such person; and any sale
contravening this rule may be treated as fraudulent by the buyer;

• (5) the sale may be notified to be subject to a reserved or upset price;

• (6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the
option of the buyer.
Sale by Auction Section 64
• A sale by auction is a public sale where goods are offered to be taken by bidders. It is a
proceeding at which people are invited to complete for the purchase of property by
successive offer of advancing sums. So, it is a mode of selling property by inviting bids
publicly and the property is sold to the highest bidder. An auctioneer is an agent governed
by the law of agency. When he sells, he is only the agent of the seller.

• Section 64 lays down the rules regulating auction sales.

• Where goods are sold in lots: Where goods are put up for sale in lots, each, lot is prima
facie deemed to be the subject of a separate contract of sale.
Sale by Auction Section 64
• Completion of the contract of sale: The sale is complete when the auctioneer
announces its completion by the fall of the hammer or in other customary
manner. Until such announcement is made, any bidder may retract his bid.

• Right to bid may be reserved: A right to bid may be reserved expressly by or

on behalf of the seller. Where such right is expressly so reserved, the seller or
any other person on his behalf may bid at the auction.
Sale by Auction Section 64
• Where the sale is not notified by the seller: Where the sale is not notified to
be subject to a right to bid on behalf of the seller, it shall not be lawful for the
seller to bid himself or to employ any person to bid at such sale, or for the
auctioneer knowingly to take any bid from the seller or any such person. Any
sale in contravention of this rule may be treated as fraudulent by the buyer.
The sale may be notified to be subject to a reserved price.
Sale by Auction Section 64
• Reserved price: Where there is such notification, every bid is
a conditional offer subject to its being up to the reserve
price. Where an auctioneer inadvertently knocks down to a bidder who has
bid less than the reserved price, there is no contract of sale.

• Pretended bidding: If the seller makes use of pretended bidding to raise the
price, the sale is voidable at the option of the buyer.