REMEDIES FOR

BREACH OF
CONTRACT:
DAMAGES

INTRODUCTION
When one of the parties makes a breach of contract, the following remedies are
available to the other party:

DAMAGES: Remedy by the 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 him due to the breach of contract, from
the party who causes the breach. Sections 73 to 75 incorporate the provisions
in this regard.
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.
SPECIFIC PERFORMANCE AND INJUNCTION: Sometimes a party to the
contract instead recovering damages for the breach of contract may have
recourse o 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 are contained in the Specific Relief Act,
1963.

BREACH OF
CONTRACT
A contract being a correlative set of rights and obligations for the parties
would be of no value, if there were no remedies to enforce the rights arising
there under. The Latin maxim Ubi jus, ibi remedium denotes where there is a
right, there is a remedy.
The remedies for breach of contract are:
1.
Suit for damages or compensation
2.
Suit for specific performance
3.
Suit for injunction
4.
Suit for rescission
5.
Punitive damages
The law on this issue is dealt with in two statues viz., The Specific Relief Act,
1963 and The Indian Contract Act, 1872.

DAMAGES
Section 73 of the Indian Contract Act, 1872, makes the following provision
regarding the right of the injured party to recover compensation for the loss or
damage which is caused to him by the breach of contract.
73. Compensation for loss or damage caused by breach of contract. When a contact 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 from 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 by reason of the breach.
Compensation for failure to discharge obligations 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 the failure to discharge it is entitled to receive the same compensation
from the party in default, as if such person has contacts to discharge it and
had broken the contract.
Explanation. - in estimating the loss or damage arising from a breach of
contract, the means which existed of remedying the inconvenience caused by
the non-performance of the contract must be taken into account.
The word damages means monetary compensation for the loss suffered.
Whenever a breach of contract takes place, the remedy of damages is the
one that comes to mind immediately as the consequence of breach. The
aggrieved party may seek compensation from the party who breaches the
contract.
When the aggrieved party claims damages as a consequence of breach, the
court takes into account the provisions of law in this regard and the
circumstances attached to the contract. The amount of damages would
depend upon the type of loss caused to the aggrieved party by the breach.
The court would first identify the losses caused and then assess their
monetary value.

Illustrations
(a) A contracts to sell and deliver 50 maunds of saltpetre to B, at a 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 hires B' s ship to go to Bombay, and there take on board, on the first of
January, a cargo which A is to provide and to bring it to Calcutta, the freight to
be paid when earned. B' s ship does not go to Bombay, but A has
opportunities of procuring suitable conveyance for the cargo upon terms as
advantageous as those on which he had chartered the ship. A avails himself
of those opportunities, but is put to trouble and expense in doing so. A is
entitled to receive compensation from B in respect of such trouble and
expense.
(c) A contracts to buy of B, at a stated price, 50 maunds of rice, no time being
fixed for delivery. A afterwards 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 B that he will not
accept it.
(d) A contracts to buy B' s ship for 60, 000 rupees, but breaks his promise. A
must pay to B, by way of compensation, the excess, if any, of the contract
price over the price which B can obtain for the ship at the time of the breach of
promise.
(e) A, the owner of a boat, contracts with B to take a cargo of jute to Mirzapur,
for sale at that place, starting on a specified day. The boat, owing to some
avoidable cause, does not start at the time appointed, whereby the arrival of
the cargo at Mirzapur is delayed beyond the time when it would have arrived if
the boat had sailed according to the contract. After that date, and before the
arrival of the cargo, the price of jute falls. The measure of the compensation
payable to B by A is the difference between the price which B could have
obtained for the cargo at Mirzapur at the time when it would have arrived if
forwarded in due course, and its market price at the time when it actually
arrived.
(f) A contracts to repair B' s house in a certain manner, and receives payment
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.
(g) 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 the first of January.

TYPES OF DAMAGES
Keeping in view the provisions of section 73 and the court judgments, the aggrieved
party would be entitled to one of the following types of damages, depending upon the
circumstances of the case:
A.
General or ordinary damages.
Damages arising naturally and directly out of the breach in the usual course of
the things.
B.
Special damages.
Compensation for the special losses caused to the aggrieved party by the
special circumstances attached to the contract.
C.
Exemplary damages.
Damages for the mental or emotional suffering also caused by the breach.
In Ghaziabad Development Authority V Union of India (AIR 2000 SC
2003), the Honble court held that in case of breach of contract mental
anguish not a head of damages in ordinary commercial contract.
In order to claim damages, party has to plead specifically the manner in which
he suffered the loss. [State V Pratibha Prakash Bhawan AIR 2005 Ori 58].
The Plaintiff to the suit must prove damage and the amount of the damage.
[AIR 1962 SC 366]

LIQUDATED DAMAGES
AND PENALTY
Where the contract itself addresses the issue of consequences of a breach
and stipulated a penalty, section 74 of the Indian Contract Act will come into
play. When such a contract has been broken, if a sum is named in the
contract as the amount to be paid in case of such breach, the party
complaining of breach is entitled, to receive from the party who has broken
the contract a reasonable compensation not exceeding the amount so named.
The Honble Supreme court in Fateh Chand V Balkishan Das [AIR 1963 SC
1405], had held that the jurisdiction of the court to award compensation under
section 73 in case of breach of contract is unqualified except as to the
maximum stipulated, and compensation has to be reasonable. This section
has to be read in conjunction with section 74, section 74 emphasizes that in
case of breach of contract, the party complaining of the breach is entitled to
receive reasonable compensation whether or not the actual loss is proved.
There is no impediment or any obstacle for the parties to a contract to make
provisions of liquidated damages for specific breaches only, leaving other
types of breaches to be dealt with as unliquidated damages. There is no
principle which requires that once the provision of liquidated damages has
been made in the contract, in the event of breach of one of the parties, such
clause has to be read covering all types of breaches although parties may not
have intended and provided for compensation in express terms of all types of
breaches. [Steel Authority of India V Gupta Brothers Steel Tubes Ltd.
(2009) 10 SCC 63.]
In Oil and Natural Gas Corporation Ltd V Saw Pipes Ltd [AIR 2003 SC 2629],
the Supreme court laid down the following guidelines:
1. Terms of the contract are required to be taken into consideration before
arriving at the conclusion whether the party claiming is entitled to the same;
2. If the terms are clear and unambiguous stipulating liquidated damages in
case of the breach of the contract, unless it is held that such estimate of
damages/compensation is unreasonable or is by way of penalty, the party
who has committed the breach is required to pay such compensation and that
is what is provided in section 73 of the Contract Act.

3. Section 74 to be read along with section 73 and, therefore, in every case of

breach of contract, the person aggrieved by the breach is not required to
prove actual loss or damage suffered by him before he can claim a decree.
The court is competent to award reasonable compensation in case of breach
even if no actual damage is proved to have been suffered in consequences of
the breach of the contract.
4. In some contracts, it would be impossible for the court to assess the
compensation arising from breach and if the compensation contemplated is
not by way of penalty or unreasonable, the court can award the same if it is a
genuine pre-estimate by the parties as the measure of reasonable
compensation.

NOMINAL DAMAGES
In the absence of any concrete material to show the extent of damages
suffered by the plaintiff, resort will have to the maxim of nominal damages.
The Karnataka high court in M/s. Vikas Electricity Service v. Karnataka
Electricity Board, said that merely because the plaintiff failed to produce
evidence sufficient to ascertain the extent of damage he suffered, he could not
be denied damages. The court explained that technically the law requires not
damage, but an injuria or wrong upon which to base a judgement for the
plaintiff and therefore an injuria, although without loss or damage would entitle
the plaintiff to a judgement.
Nominal damages are appropriate only when plaintiffs are unable to prove
any amount of damages and are not properly awarded when a plaintiff has
established a quantifiable loss of revenue. Nominal damages are a token
award, compensatory in nature. Nominal damages are recoverable where
some legal right has been infringed, but no actual loss or substantial injury
has been sustained. Nominal damages are awarded in recognition of the
right and of the technical injury resulting from its violation. They have been
described as a peg on which to hang the costs. It is a small trivial sum
awarded in recognition of a technical injury which has caused no substantial
damage.
Nominal damages are not compensation for loss or injury. It is the recognition
of a violation of rights. In the absence of authority limiting an award of
nominal damages, the nature of nominal damages compels that the amount
be minimal. Nominal damages are not equivalent to damages small in
amount. Nominal damages are not only recovered where no actual damage
resulted from an ascertained violation of right but also where actual damages
have been sustained, the extent of which cannot be determined.
To recover damages for an emotional injury greater than nominal damages, a
plaintiff must present evidence of an emotional injurys character and severity.
It requires specific evidence of the nature and extent of the harm. However, in
certain cases, a plaintiffs testimony may be sufficient proof of mental
damages.