INDIAN CONTRACT ACT

PERFORMANCE OF CONTRACTS

Meaning of Performance
 Performance of contract means fulfilling

of the terms of the contract by the

respective parties to the contract.
 The Act lays down “The parties to a

contract must either perform, or offer to

perform, their respective promises,
unless performance is dispensed with or
excused under the provisions of this Act,
or of any other law”(S.37).
PERFORMANCE OF CONTRACTS
 Meaning of Performance
 It means that the performance may be
either actual - by fulfilling all
obligations by the parties under the
contract or attempted where an offer to
perform one’s obligations has been
made by the promisor,
 but the performance is not complete
unless the offer of performance is
accepted by the promisee.
PERFORMANCE OF CONTRACTS
 Meaning of Performance
 Such offer to perform one’s obligation
under a contract is called tender.
 the parties may be excused from
performance under the provisions of this
Act or any other law.
 For example, an insolvent is excused from
performing his part of the contract by law.
TYPES OF PERFORMANCE
 Actual performance: fulfilment of
contractual obligations by promisor in
accordance with terms of contract
 Raja enters into contract to build a
house for Rahim; he builds the house
and completes all material and non
material requirements of the house
 Substantial performance: fulfilment with slight variances
from exact terms and unimportant omissions or minor
defects;
 applicable only when contract is not an entire contract and is
severable (to avoid one party from evading liabilities that
contract has not been completely performed)

 Raja enters into contract to build a house for Rahim; he

builds the house but fails to paint the interior in colour
prescribed in contract; this contract substantially performed
and do not give rise to action for breach; Rahim may recover
cost of painting the walls while paying.
 Partial performance: execution of a part of divisible
contract by one party acceptable by the other party
 There is a thin line of difference between substantial and
partial performance. The two following points would help in
distinguishing the two types of performance.

 Partial performance must be accepted by the other

party.
 In other words, the party who is at the receiving end
of the partial performance has a genuine choice
whether to accept or reject. Substantial performance, on
the other hand, is legally enforceable against the other party.
 Payment is made on a different
basis from that for substantial
performance. It is made on quantum
meruit, which literally means as much
as is deserved.
 So, for example, if half of the work has
been completed, half of the negotiated
money would be payable.
 Attempted performance: attempted
performance or tender may be defined as
an offer to perform the obligation under the
contract in accordance with terms of contract
but it is not the actual performance
 Where a promisor has made an offer of
performance to the promisee, and the offer has
not been accepted, the promisor is not
responsible for non-performance, nor does he
thereby lose his rights under the contract (S.38)
 Attempted performance: A contracts to
deliver to B, 100 tons of basmati rice at his
warehouse, on 6 December 2017. A takes the
goods to B’s place on the due date during
business hours, but B, without assigning any
good reason, refuses to take the delivery.
 Here, A has performed what he was required to
perform under the contract. It is a case of
attempted performance and A is not responsible
for non-performance of B, nor does he thereby
lose his rights under the contract.
BY WHOM CAN CONTRACTS BE PERFORMED?

1.Promisor himself. If it appears from the

nature of the any case
that it was the intention of the contracting
parties to any contract that any promise
contained in it the contract should be
performed by the promisor himself,
such a promise must be performed by the
promisor himself. [Section 40]
BY WHOM CAN CONTRACTS BE PERFORMED?

2. Agent. Where personal consideration is not the

subject matter of the contract, the promisor or his
representatives may employ a competent person to
perform it. [Section 40].

A promises to pay B a sum of money. A may perform

this promise, either by personally paying the money to
B or by causing it to be paid to B by another; and, if A
dies before the time appointed for payment, his
representatives must perform the promise, or they may
employ some proper person to do so.
BY WHOM CAN CONTRACTS BE PERFORMED?

 3. Legal Representative. Promises bind the

representatives of the promisors,
 including in case of the death of such promisors
before performance,
 unless a contrary intention an exemption to that
effect is stated in the appears from the contract
itself. [Section 37]
 However, contracts of personal nature, it comes
to an end should the promisor dies and therefore
such contracts cannot be performed by the
representatives
BY WHOM CAN CONTRACTS BE PERFORMED?

4. Third person. When a promisee accepts performance

of the promise from a third person, he cannot afterwards
enforce it against the promisor.
[Section 41]

5. Joint Promisors. When two or more persons have

made a joint promise, then,
unless a contrary intention appears by the contract,
all such persons, during their joint lives,
and, after the death of any of them, his representative
jointly with the survivor or survivors,
and, after the death of the last survivor, the
representatives of all jointly, must fulfil the
promise(S.42& 43).
PERFORMANCE OF CONTRACTS
 Promises bind the legal representatives
of the promisors in case of death of
such promisors before performance,
unless a contrary intention appears
from the contract. The liability of the
legal representative is limited to the
extent of the value of the property
inherited from the deceased(S.37 &
S.40).
PERFORMANCE OF CONTRACTS
 Illustration:
a) A promises to deliver goods to B on a certain
day on payment of Rs. 1,000. A dies before
that day. A’s representatives are bound to
deliver the goods to B and B is bound to pay
Rs.1,000 to A’s representatives.
b) A promises to paint a picture for B by a
certain day, at a certain price. A dies before the
day. The contract cannot be enforced either by
A’s representatives or by B.
ESSENTIALS OF A VALID TENDER
 (1) unconditional section 38(1).;
 (2) must be made at a proper time and place

section 38(2),
 (3) must be made under such circumstances

that the person to whom it is made

may have a reasonable opportunity of
ascertaining
that the person by whom it is made is able
and willing there and then
to do the whole of what he is bound by his
promise to do section 38(2);
ESSENTIALS OF A VALID TENDER
 (4) if the offer is an offer to deliver
anything to the promisee, the promisee
must have a reasonable opportunity of
seeing that the thing offered is the
thing which the promisor is bound by
his promise to deliver section 38(3).
 (5) An offer to one of several joint
promisees has the same legal
consequences as an offer to all of
them.
ESSENTIALS OF A VALID TENDER
 Illustration: A contracts to deliver to B at his
warehouse, on the 1st March, 1873, 100 bales
of cotton of a particular quality.
 In order to make an offer of a performance with
the effect stated in this section, A must bring
the cotton to B’s warehouse, on the appointed
day, under such circumstances that B may have
a reasonable opportunity of satisfying himself
that the thing offered is cotton of the quality
contracted for, and that there are 100 bales.
ESSENTIALS OF A VALID TENDER
 Illustration: B’s warehouse jointly
owned by B,C and D; A may bring
cotton to warehouse on appointed day
under such circumstances that B or
even C or D on B’s behalf may have a
reasonable opportunity of satisfying
himself that the commodity offered is
cotton of the quality contracted for and
that there are 100 bales;
WHO CAN DEMAND PERFORMANCE?
 It is only the promisee who can demand performance
of the promise. The general rule is that “a person
cannot acquire rights under a contract to which he is
not a party”.
Who Should Perform the Promise?
a)In case of personal contract by the promisor
personally.
b) In case of non-personal contract
i. By the promisor personally.
ii. By a third person on behalf of the promisor.
iii. In the event of the death of promisor - by his legal
representatives.
c) In case of Joint promisor - by the promisors jointly or
third person on behalf of promisors
PERFORMANCE OF RECIPROCAL PROMISES

1. Promisor not bound to perform unless promisee

ready and willing A Promisor is not bound to
perform, unless the promisee reciprocates and is
ready and willing to perform his part of the contract.
[S 51]
A and B contract that A shall deliver goods to B to be
paid for by B on delivery. A need not deliver the goods,
unless B expresses readiness and willing to pay for
the goods on delivery. B need not pay for the goods,
unless A is ready and willing to deliver them on
payment.
.
PERFORMANCE OF RECIPROCAL PROMISES

2. Order of performance of reciprocal

promises. Where the order in which reciprocal
promises are to be performed is expressly fixed by
the contract, they shall be performed in that order;
and, where the order is not expressly fixed by the
contract, they shall be performed in that order
which the nature of the transaction requires.[ S 52]
A and B contract that A shall build a house for B at
a fixed price. A's promise to build the house must
be performed before B's promise to pay for it.
PERFORMANCE OF RECIPROCAL PROMISES

3.Liability of party preventing event on which

the contract is to take effect.
When a contract contains reciprocal promises, and
one party to the contract prevents the other from
performing his promise, the contract becomes
voidable at the option of the party so prevented;

and it is entitled to compensation from the other party

for any loss which it may sustain in consequence of
the non-performance of the contract. [S 53]
PERFORMANCE OF RECIPROCAL PROMISES

 A and B contract that B shall execute

certain work for A for Rs 1,000. B is
ready and willing to execute the work
accordingly, but A prevents him from
doing so. The contract is voidable at
the option of B; and, if he elects to
rescind it, he is entitled to recover
compensation from A for any loss which
he has incurred due to the non-
performance of the contract.
PERFORMANCE OF RECIPROCAL PROMISES

4. Effect of default as to that promise which should be

first performed. When a contract consists of reciprocal
promises, such that one of them cannot be performed,
or that its performance cannot be claimed till the other has
been performed, and the promisor of the promise last
mentioned fails to perform it,
such promisor cannot claim the performance of the
reciprocal promise, and must make compensation to the
other party to the contract for any loss which it may
sustain by the non-performance of the contract.

[S 54]
PERFORMANCE OF RECIPROCAL PROMISES

 A hires B's ship to dispatch a cargo

from Kolkata to Mauritius. The cargo is
to be provided by A, while B is to
receive a certain freight for its
conveyance. A does not provide any
cargo for the ship. A cannot claim the
performance of B's promise, and must
make compensation to B for the loss
which B sustains by the non-
performance.
DOCTRINE OF FRUSTRATION OF CONTRACT
 Doctrine of frustration provided
in Section 56 of the Act, states that an
agreement to do an act impossible in
itself is void.
 Further, a contract to do an act which,
becomes impossible, or, by reason of
some event which the promisor could not
prevent, unlawful, becomes void when
the act becomes impossible or unlawful.
 Hence, frustration is the happening of an act
outside the contract and such act makes the
completion of a contract impossible.
 After the parties have concluded a contract,
events beyond their control may occur which
frustrate the purpose of their agreement, or render
it very difficult or impossible, or as even illegal, to
perform.
 Frustration of contract can be established upon
the fulfilment of the conditions that existence of a
valid contract between parties, the contract is yet
to be performed, the performance of the contract
becomes impossible or unlawful and the impossibility to
perform is caused by an event which is beyond the
control of both the parties.
FACTORS OF FRUSTRATION OF CONTRACT:
 1. Impossible to perform
 Doctrine of Frustration of contract arises from
the impossibility to do an act. But the principle is not
confined to physical impossibilities.
 The performance of an act may not be literally impossible
but it may be impracticable and useless, and if an
untoward event or change of circumstances totally
upsets the very foundation upon which the parties rested
their bargain, it can very well be said that the promisor
finds it impossible to do the act which he promised to do.
 Therefore, if the object of the contract is lost, the contract
is frustrated.
FACTORS OF FRUSTRATION OF CONTRACT
 2. Occurrence of unexpected event or Change of
Circumstances:
 Courts declare frustration of a contract on the ground of
subsequent impossibility when it finds that the whole
purpose or basis of a contract was frustrated by the
intrusion or occurrence of an unexpected event or
change of circumstances which was beyond what was
contemplated by the parties at the time when they entered
into the agreement.
 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.
FACTORS OF FRUSTRATION OF CONTRACT
 3. Contract impracticable with reference to object of
the parties
 The impossibility contemplated by s. 56 is not confined to
something which is not humanly possible. If the
performance of a contract becomes impracticable or useless
 having regard to the object and purpose of the parties then it
must be held that the performance of the contract became
impossible.

 But the supervening events should take away the very basis
of the contract and it should be of such a character that it
strikes at the root of the contract (Sushila Devi And Anr
vs Hari Singh 1971 AIR 1756).
FACTORS OF FRUSTRATION OF CONTRACT
 Frustration of a contract makes the contract
void, and discharges the parties of the
contractual obligations.

 However, Section 65 of the Act states that when

an agreement has become void, the person who
has received any advantage under such
agreement is 'bound' to restore it or to make
compensation for it, from whom he received it. 
  
 S 65. Obligation of person who has received
advantage under void agreement, or contract
that becomes void.—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.
 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.
MEANING OF QUASI-CONTRACT
 A Quasi-Contract is not a contract at all because
the essential elements for the formation of a
contract are absent.
 It is an obligation imposed by law upon a person
for the benefit of another even in the absence of
a contract. It is based on the principle of equity
(i.e. fairness, moral justice or ethics), which
means no person shall be allowed to unjustly
enrich himself at the expense of another.
 Such obligations are called quasi-contracts or
implied contracts because the outcome of such
obligations resemble those created by a contract.
KINDS OF QUASI-CONTRACTS(S.68-72)
 The various kinds of quasi contract (or quasi-
contractual obligations) are given below:
a) Claim for Necessaries Supplied to a Person
Incapable of Contracting or on his Account(S.68):
“If a person, incapable of entering into a contract, or
anyone whom he is legally bound to support, is
supplied by another person with necessaries suited to
his condition in life, the person who has furnished such
supplies is entitled to be re-imbursed from the property
of such incapable person.”
Example - A supplies the wife and children of B, a
lunatic, with necessaries suitable to their condition in
life. A is entitled to be reimbursed from B’s property
KINDS OF QUASI-CONTRACTS
b)Reimbursement of Person Paying Money due
by Another, in Payment of Which he is
Interested(S.69): “A person who is interested in
the payment of money which another is bound
by law to pay, and who therefore pays it, is
entitled to be re-imbursed by the other”.
For example - A, sub-tenant pays the arrears of
rent due by the tenant to the landlord, in order
to save the tenancy from forfeiture. The
subtenant is entitled to recover from the tenant,
the amount paid by him to the landlord,
although there is no contract between the two.
KINDS OF QUASI-CONTRACTS
c) Obligation of Person Enjoying Benefit of
Non-gratuitous Act(S.70): “Where a person
lawfully does anything for another person, or
delivers anything to him, not intending to do
so gratuitously, and such other person enjoys
the benefit thereof, the latter is bound to make
compensation to the former in respect of, or to
restore, the thing so done or delivered”.
For example-A, a tradesman, leaves goods at
B’s house by mistake. B treats the goods as his
own. B is bound to pay A for them.
KINDS OF QUASI-CONTRACTS
d) Responsibility of Finder of Goods(S.71): “A
person who finds goods belonging to another
and takes them into his custody, is subject to
the same responsibility as a bailee”.
For example - X a guest found a diamond ring
on a birthday party of Y. X told Y and other
guests about it. He has performed his duty to
find the owner. If he is not able to find the
owner he can retain the ring as bailee.
KINDS OF QUASI-CONTRACTS
e) Liability of Person to Whom Money is Paid, or
Thing Delivered by Mistake or Under Co-ercion:
“A person to whom money has been paid, or
anything delivered by mistake or under co-
ercion, must repay or return it”.
For example - A and B jointly owe Rs. 1000 to C.
A alone pays the amount to C, and B, not
knowing this fact, pays Rs. 1000 over again to C.
C is bound to repay the amount to B.
DISCHARGE OF CONTRACT

Meaning
 Discharge of a contract means
discontinuation of the contractual
relations between the parties.
 When the rights and obligations
arising out of a contract are
extinguished, the contract is said to
be discharged or terminated.
Mode of Discharge
A contract may be discharged in any of the following
ways:
a) Discharge by Performance: A contract can be
discharged by performance, which can be:
i. Actual - When the parties to the contract perform
their promises in accordance with the terms of the
contract.
ii. Attempted - When the promisor has made an offer
of performance to the promisee but the offer has not
been accepted by the promisee.
DISCHARGE OF CONTRACT

b) Discharge by Mutual Consent or

Agreement: Since a contract is created
by mutual agreement, it can also be
discharged by mutual agreement.
Discharge by mutual agreement can
be done in any of the following ways:
i. Novation- Novation means the
substitution of a new contract for the
original contract either between the
same parties or between different
parties(S.62).
 ii. Rescission- Recission means
cancellation of the contract by any
party or all the parties to a
contract(S.62).

 iii. Alteration- Alteration means a

change in the terms of a contract
with the mutual consent. Alteration
discharges the original contract and
creates a new contract(S.62).
DISCHARGE OF CONTRACT

iv. Remission- Remission is the

acceptance of a lesser sum than
what was contracted for or a lesser
fulfillment of the promise made(S.63).

v. Waiver - Waiver means intentional

relinquishment of a right under the
contract(S.63).
DISCHARGE OF CONTRACT

c) Discharge by Subsequent or Supervening

Impossibility (Supervening Impossibility is the
impossibility in performing a contract arising after it is
formed due to circumstances beyond the control of the
promising party) or Illegality:

1. Cases where the doctrine of supervening

impossibility applies
i. Destruction of subject matter.
ii. Death or personal incapacity of promisor.
iii. Outbreak of war.
iv. Change of law.
v. Non-existence or non-occurrence of a particular
state of things (failure of ultimate purpose).
DISCHARGE OF CONTRACT

2. Cases not covered by supervening impossibility --

i. Difficulty of performance.
ii. Commercial impossibility(say contract to
deliver a particular product and raw material
not available to manufacture that product).
iii. Default of a third person.
iv. Strikes, lockouts and civil disturbances.
v. Partial impossibility or failure of one of the
objects.
DISCHARGE OF CONTRACT

d) Discharge by Lapse of Time - A

contract is discharged if it is not
performed or enforced within a specified
period, called period of limitation.

The Limitation Act, 1963 has prescribed

the different periods for different
contracts, e.g. period of limitation for
exercising right to recover a debt is 3
years.
e) Discharge by Operation of Law:
i. By death of the promisor.
ii. By insolvency.
iii. By unauthorised material alteration.
DISCHARGE OF CONTRACT

f) Discharge by Breach of Contract -

A contract is said to be discharged by
breach of contract if any party to the
contract refuses or fails to perform his
part of the contract or by his act makes it
impossible to perform his obligation
under the contract.
DISCHARGE OF CONTRACT

A breach of contract may occur in the

following two ways:
i. Anticipatory breach of contract - It occurs
when the party declares his intention of not
performing the contract before the
performance is due.
ii. Actual breach of contract - It can occur
either on due date of performance or during
the course of performance(breach as to
condition or breach as to warranty).
 A condition is a stipulation essential to
the main purpose of the contract,
breach of which gives rise to a right to
treat the contract as repudiated
 X goes to Y, a horse dealer and tells
him that he wants a horse that can run
at 35 kilometers per hour. Y points to a
particular horse and says that this will
suit the purpose. X buys the horse
relying on his representation.
Subsequently, X finds that the horse
can run only at a speed of 20 km in an
hour. There is a breach of condition. X
may reject the horse and get back the
 A warranty is a stipulation collateral to
the main purpose of the contract, the
breach of which gives rise to a claim for
damages but not to a right to reject the
goods and treat the contract as
repudiated
 A buyer goes to a car dealer and asks
for a good car. While selling the car, the
dealer claims that the mileage of the
car is 16 km per litre. But subsequently
the buyer discovers that the car gives a
mileage of only 13 km to a litre. Here
the buyer cannot repudiate the
contract but can only claim damages.
MEANING OF BREACH OF CONTRACT

A breach of contract occurs if any party

refuses or fails to perform his part of
the contract or by his act makes it
impossible to perform his obligation
under the contract.
In case of breach, the aggrieved party
(i.e. the party not at fault) is relieved
from performing his obligation and gets
a right to proceed against the party at
fault. A breach of contract may either
be anticipatory or actual.
REMEDIES OF BREACH OF CONTRACT (S.73-75)

A remedy is a relief or courses of action which are

available to an aggrieved party for the enforcement of
a right under a contract should the other side commit
a breach. The various remedies available are:
a) Rescission of Contract: Rescission means a right not
to perform obligations. In case of breach of a
contract, the promisee may put an end to the
contract.
In such a case, the aggrieved party is discharged
from all the obligations under the contract and is
entitled to claim compensation for the damage which
he has sustained because of the non-performance of
the contract.
REMEDIES OF BREACH OF CONTRACT

b) Suit for Damages: Damages are monetary

compensation allowed for loss suffered by the
aggrieved party due to breach of contract.
Damages may be of five kinds:
i. Ordinary or General or Compensatory
Damages: (i.e. damages arising naturally from
the breach; General damages usually cover
losses that are directly related to the subject
matter of the contract, such as failing to meet a
number of shipments).
ii. Special Damages: (i.e. damages in
contemplation of the parties at the time of
contract).
 Special Damages can be claimed only if special
circumstances which would result in a special
loss in case of breach of contract are brought to the
notice of the party.
 These damages arise on account of the special or
unnatural circumstances affecting the plaintiff.
 The special circumstances which are mentioned
above are the circumstances at the time when
the contract is entered into.
 Subsequent knowledge of special circumstances
will not create any special liability.
 Liability Aspect: In the context of liability for loss
(usually in contract), general damages are those which
arise naturally and in the normal course of events,
whereas special damages are those which ‘do not
arise naturally’ out of the defendant’s breach.

 Recovery Aspect: Claim for Special Damages are

recoverable only where they were ‘not beyond
the reasonable contemplation of the parties’ (for
example, where the plaintiff communicated to the
defendant prior to the breach the likely consequences
of the breach)
 Pleading Aspect: Special damage ‘refers
to those losses which must be specifically
pleaded and proved by evidence’, and
particulars of the special damage claimed
must be specified in the plaint,
 whereas general damage is that which will be
presumed to be the natural or probable
consequences of the wrong complained of,
with the result that the plaintiff is required only
to assert that such damage has been suffered
and quantification is left to the court
The losses suffered must be:
 Foreseeable:  The losses must be reasonably

foreseeable or “within the contemplation of the

parties” at the time the contract was formed.

 Flowing from the Breach:  The losses don’t need

to be a direct consequence of the breach.  However,
there should be some causal connection between
the losses and the breach. 

 Calculable:  Since special damages cover losses not

provided for in the contract terms, it can be difficult
to calculate the amount.  For example, it may be
difficult to determine how much one has lost due to
a damaged business reputation.  Losses must be
 A common example of a special damages award is when a
breach causes a loss of profits. 

 For example, suppose that two parties enter into a contract

for the sale of a painting.  The painting is worth Rs.5,000 and
the buyer intended to re-sell the painting at Rs.6,000.  If the
seller breaches the contract by selling the painting to a
different buyer, the non-breaching party may be entitled to
special damages. 

 In this case, the special damages would equal Rs.1,000

(Rs.6,000-Rs.5,000), which is the amount of profit that the
buyer would have gained through the resale.
 Some examples of losses that “flow from” a
breach may include:
 Loss of profits, business opportunities
 Loss of product or business property
 Damage or harm to business reputation
 Loss of operating revenue (for example, if a
business did not open on the scheduled date
because construction was not completed)
 Loss of time or other inconveniences
iii. Exemplary, Vindictive or Punitive
Damages: (i.e. damages which are in the
nature of punishment).
 Punitive damages are issued in order to punish the
defendant, as well as to deter them from repeating
the same type of conduct again in the future.

 These are additional damage amounts that are

issued on top of the normal compensatory damages
award for losses of profit.

 In some cases, the punitive damages can be very

high, especially if the defendant’s conduct was
extremely shocking.
 In a breach of contract claim, punitive damages are
generally not awarded.

 This is because the court is assuming that the

parties are entering into the agreement with “open
eyes,” meaning that they are fully aware of the
risks involved in the contract.

 There are, however, limited circumstances in which

a punitive damages award may result in a contracts
action.
 When Are Punitive Damages
Issued in a Contract Claim?
 Punitive damages can sometimes be
issued in claims involving:
 Certain cases involving tort/contract
crossover issues
 Some fraud cases
iv. Nominal Damages: (i.e. awarded only
for the name sake).

Nominal damages are typically small

amounts of money awarded to the
plaintiff; sometimes the amount can be
as low as Rs.100.
 They are usually awarded for the
following reasons:
 The plaintiff did not suffer from any real
financial loss, or the economic harm
cannot be calculated
Because damages cannot compensate
the plaintiff, nominal damages are
awarded to show that the plaintiff was
right in the lawsuit
v. Liquidated Damages: means a sum
fixed up in advance, which is a fair and
genuine pre-estimate of the probable loss
that is likely to result from the breach.
 A liquidated damages clause may be

included in some contracts. 

 It is basically a contractual provision

which determines in advance the

amount of damages to be paid if a party
breaches the contract. 
 the parties agree upon the damages figure
beforehand when negotiating the contract.
 Liquidated damages clauses are generally
enforceable, so long as the amount stated is
reasonable in light of the contract’s subject
matter. 
 Such clauses are used when the parties have
difficulties calculating the exact measure of
damages in the instance of a breach. 
 vi. Incidental damages: awarded to
compensate for reasonable costs that
injured party incurs after breach to
avoid further loss;
REMEDIES OF BREACH OF CONTRACT

c) Suit for Specific Performance:

means demanding the court’s direction
to the defaulting party to carry out the
promise according to the terms of the
contract.
For example- X agreed to sell an old
painting to Y for Rs. 50000.
Subsequently X refused to sell the
painting. Here, Y may file a suit against
X for the specific performance of the
contract.
REMEDIES OF BREACH OF CONTRACT

 d) Suit for Injunction: means demanding

court’s stay order Injunction means an order
of the court which prohibits a person to do a
particular act. Are of two types:
 prohibitory Injunction: orders defendant to
restrain from committing a breach of a
negative contractual obligation or
mandatory injunction.
 mandatory Injunction: compels performance
of a positive contractual obligation, e.g.
compelling employee to do any work.
 For example -W agreed to sing at L’s
theatre only during the contract period.
During the contract period, W made
contract with Z to sing at another
theatre and refused to perform the
contract with L. It was held that W
could be restrained by injunction from
singing for Z.
REMEDIES OF BREACH OF CONTRACT

 e) Suit for Quantum Meruit: Quantum -

meruit means as much as is earned. In
this suit, claim is made to compensate for
the work already done.
 For example -C an owner of a magazine
engaged P to write a book to be
published by instalments in his magazine.
After a few instalments were published,
the publication of the magazine was
stopped. It was held that P could claim
payment for the part already published
SECTIONS ON BREACH OF CONTRACT
 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 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
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 the failure to
discharge it is entitled to receive the same
compensation from the party in default, as if such
person had contracted to discharge it and had broken
his contract.
 A contracts to sell and deliver to B, on the first of
January, certain cloth which B intends to manufacture
into caps of a particular kind, for which there is no
demand, except at that season.
 The cloth is not delivered till after the appointed time,
and too late to be used that year in making caps.
 B is entitled to receive from A, by way of
compensation, the difference between the contract
price of the cloth and its market price at the time of
delivery, but not the profits which he expected to
obtain by making caps, nor the expenses which he has
been put to in making preparation for the manufacture.
 74. Compensation for breach of contract
where penalty stipulated for.—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 party who has broken the
contract reasonable compensation not exceeding
the amount so named or, as the case may be, the
penalty stipulated for.
Exception
 When any person enters into any bail-bond,
recognizance(Defendants released on their
own recognizance need only sign a written promise to
appear in court as required) or other instrument of the same
nature,
 or, under the provisions of any law,

 or under the orders of the Central Government or of any State

Government,
 gives any bond for the performance of any public duty or act

in which the public are interested,

 he shall be liable, upon breach of the condition of any such

instrument, to pay the whole sum mentioned therein.

 A contracts with B to pay B Rs. 1,000, 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.
1,000, as the Court considers
reasonable.
 75. Party rightfully rescinding
contract, entitled to compensation.
—A person who rightfully rescinds a
contract is entitled to compensation for
any damage which he has sustained
through the non-fulfilment of the
contract.
 Illustration
 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 100 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 is entitled to claim compensation for
the damage which he has sustained through the
non-fulfilment of the contract.