Remedies for breach of Contract

The injured party in case of breach of contract is entitled to any one or more of the following remedies 1. Rescission of the contract 2. Suit for damages 3. Suit upon quantum meruit 4. Suit for specific performance 5. Suit for injunction The last two remedies are governed by the Specific Relief Act, 1963. 1963. Rescission of the contract The aggrieved party can treat the contract as rescinded and need not perform his part of the obligation and can opt not to take any legal action against the guilty party. But if he intends to sue for damages then he has to file a suit for rescission of the contract. When the court grants rescission he is freed from all the obligations under the contract and becomes entitled to damages. Usually, both the suit for rescission and that for damages are filed together S. 75.

Suit for damages

Damages is monetary compensation granted to the injured party for the loss or injury suffered by him as a result of the breach. The purpose is to put the injured party in the position in which he would have been, had there been no breach. There is no intention to punish the defaulting party. If the actual loss is not proved, damages will not be allowed. Assessment of Damages - Principles As per S.73 injured party is entitled to receive from the defaulter party : a. Such damages as would naturally arise in the usual course of things out of such kind of breach.(No compensation is given for any remote or indirect loss sustained by reason of the breach)- Ordinary damages. breach)b. Such damages which were in the contemplation of the parties as is likely to result as a consequence of the breach, if proved- special provedDamages. c. In estimating the loss or damage caused to the party by the breach, the means which existed for remedying or minimizing the inconvenience or damage caused by the breach and the extent to which, that is utilized must also be taken into account. Explanation to Sec. 73 ). ( duty to mitigate damage suffered). The principles regarding assessment of damages given in Sec. 73 are based on the rulings made by the court in the English case, Hadley Vs. Baxendale

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arising in the usual course of things from the breach. Special damages It is remote and indirect losses but which were there in the contemplation of parties ( known ), when they entered into the contract as is likely to result from the breach. They arise on account of special or unusual circumstances. Exemplary, Punitive or Vindictive damages Such damages are awarded with a view to punish the guilty party for the breach and not by way of compensation for the loss suffered by the aggrieved party. It is against the general principle regarding assessing damages , given in Sec. 73. It has, therefore, no place in the law of contract. But there is precedence in India of ordering exemplary damages in the following cases. a. Breach of contract to marry. b. Dishonor of cheque by bank though there is sufficient balance to the credit of customer. Nominal damages It is awarded just to estsblish the right to decree for breach of contract. It is awarded neither by way of compensation to injured party nor by way of punishment to the injured party.It is awarded in cases where the aggrieved party has not actually suffered any losses but the court finds it necessary to establish the right to sue for damages. The amount awarded will be nominal.

Kinds of Damages Ordinary or general damages It is damages naturally

Liquidated damages and penalty

In some cases the parties will fix up at the time of contract the sum payable as damages in case of breach. English law classifies the amount of damages fixed in advance into liquidated damages and penalty .Where the sum so fixed is a fair and genuine pre estimate of the probable loss that is likely to result from the breach it is liquidated damages . If the amount fixed up is over and above liquidated damages, it is penalty. Where the damages is fixed up by the parties themselves, English Courts do award it to the extent of liquidated damages. They never award penalty. As per Sec. 74 0f Indian law courts are not bound by the amounts stipulated by the parties. Even where the damages are stipulated The Court is free to decide the amount of damages payable applying the general principle laid down in Sec.73.

Earnest money Money deposited as security for due performance of a contract is known as earnest money . Forfeiture of earnest money is allowed in case of breach, if the amount is reasonable. Cost of suit In addition to damages the aggrieved party is entitled to the cost of getting the decree for damages from the defaulting party. The amount is at the court s discretion.

Suit upon Quantum Meruit Secs.65&70

Quantum Meruit literally means as much as is earned or in proportion to the work done . Right to sue on quantum meruit arises where after part performance of the contract by one party, there is a breach of contract, or the contract is discovered void or becomes void. Here the party sues to recover remuneration for what part is performed. The remedy may be sought along with claim for damages or with out. Planche Vs. Colburn. A party who is guilty of breach of contract may also sue upon quantum meruit provided a. the contract must be divisible, and b. the other party must have enjoyed benefit of the part performed by him, though he had option of declining it.

Suit for Specific Performance The suit is for a decree from the court directing the defendant to perform the promise agreed by him. It may be filed instead of or in addition to suit for damages. It is ordered only in contracts connected with land, buildings, rare articles and unique goods having special value to the plaintiff. In such contracts monetary compensation is not an adequate remedy because the injured party will not be able to get an exact substitute in the market. specific performance is not granted, as a rule, in the following cases. 1. Where monetary compensation is an adequate relief. 2. Where the court cannot supervise the actual execution of the contract. 3. In case of contracts of personal nature Eg. to marry, to paint a picture. Suit for Injunction Injunction is an order of the Court restraining a person from doing a particular act. Where a party is in breach of a negative term of a contract ( ie. Where he is doing something which he promised not to do), the Court may issue an injunction restraining him from doing so. It is particularly adequate in cases of anticipatory breach where damages would not be an adequate relief. Lumley vs. Wagner and Metropolitan Electric Supply Co Vs. Ginder.