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BUSINESS LAW

MODULE-2(A) BUSINESS CONTRACTS ( Indian Contract Act, 1872)

TOPICS
Elements of Contracts Parties Offer Acceptance Consideration Free consent Legality of object and consideration Types of Contracts Valid and Voidable Contracts Discharge of Contracts & Remedies - Concept of damages Case discussion.

CONTRACT
Definition: An agreement enforceable by law Is a contract. Two elements: 1. Agreement 2. Enforceability (Legal Obligation)

Agreement
Definition: Every Promise and every set of promises, forming the consideration for each other is an agreement.

Promise
When a person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.

Characteristics of an Agreement
Plurality of persons Consensus-ad-idem

Legal obligations.
No legal obligations: Agreements of moral, religious or social nature Legal obligations: Business agreements if made By free consent of parties competent to contract Lawful consideration Lawful object

Problems:
1. A invites B to a dinner. B accepts the invitation. A made elaborate arrangements. But B failed to turn up. Can A sue B for the loss he has suffered. 2. M agrees to pay N Rs.100 if N writes 100 pages within five minutes. Is it a valid contract?

Solution:
1. A cannot sue B for the loss he has suffered because the agreement was of a social nature; hence lacked the intention to create legal relationship an essential element of a valid contract. 2. No. it is not a valid contract. It is a void agreement because an agreement to do an impossible act in itself is void.

Agreements and Contracts


Agreement is a wider term. All agreements are not contracts. Only those agreements giving rise to legal obligations are contracts. Agreements of moral, religious and social nature are not contracts.

VALID CONTRACT ESSENTIAL ELEMENTS


Offer and acceptance Intention to create legal obligations Lawful consideration Competency of parties Free consent Lawful object Writing and registration Certainty Not impossible Not declared void

Intention to create legal obligations Leading Case: Balfour vs. Balfour


Facts: The defendant Mr.Balfour was a Civil servant stationed in Ceylon. Mr.Balfour and his wife were enjoying leave in England. On the due date of return to Ceylon, Mrs. Balfour could not accompany As she was unwell and had to stay back in England. The defendant agreed to send 30 as maintenance expenses during the period they were forced to live apart. Mrs. Balfour sued for breach of this agreement.

Judgment
The plaint was dismissed on the ground that no legal relations had been contemplated. Therefore, there was no contract.

Rose & Frank Co. Vs. Crompton & Brothers Ltd.


Rose & Frank entered into an Agency agreement with Crompton & Bros. One clause in the agreement read: This agreement is not entered into as a formal or legal agreement and shall not be subject to legal jurisdiction in the law courts. R&F in their plaint claimed that there was a binding legal contract of Agency and hence Crompton are liable.

Judgment:
It was held that there was no intention to create legal relations on the part of the parties to the agreement and hence there was no contract.

KINDS OF CONTRACTS
Points of view of
1.Enforceability 2. Mode of Creation

3.Extent of Execution

Enforceability
1. Valid contract 2. Voidable contract 3. Void contract Void agreement 4. Unenforceable contract 5. Illegal or Unlawful contract - Illegal and void agreements

Mode of Creation
1. Express Contract
2. Implied Contract

Extent of Execution
1. Executed contract 2. Executory contract 3. Uni-lateral contract 4. Bi-lateral contract.

The Proposal or offer


'When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

Three essentials of a Proposal


1. expression of willingness 2. to another person 3. with a view to obtaining the assent

Legal Rules Regarding a Valid Offer


1. An offer may be express or implied. 2. An offer must contemplate legal consequences - creating legal relations. 3. The terms must be certain and not vague. 4. An invitation to offer is not an offer. 5. An offer may be specific or general. 6. An offer must be communicated .

General Offer:
Leading case: Carlill Vs. Carbolic Smoke Ball Co.(1893)
Carbolic Smoke Ball Co. issued an advertisement in which the Company offered to pay 100 to any person who contacts influenza, after using their smoke balls three times daily for two weeks, according to the printed directions given in the advertisement. Mrs. Carlill on the faith of the advertisement bought and used the Balls according to the directions, but she nevertheless subsequently suffered from influenza. She sued the company for the promised reward.

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Court of Appeal

Legal rules regarding a Valid Offer


7. An offer should not contain a term the noncompliance of which would amount to acceptance. (Felthouse v. Bindley)

8. An offer can be made subject to any terms and conditions.


9. Two identical cross- offers do not make a contract.

Leading Cases:
Lalman Shukla vs. Gauri Dutt (26)501 Handerson Vs. Stevenson (26) Parker Vs. South Eastern Railway (26)

Handerson Vs. Stevenson


The Plaintiff (Handerson) bought a steamer ticket which bore on its face the words Dublin to Whitehaven. On the back of the ticket certain special terms were printed. According to one of the terms, the company was not liable for loss, injury or delay to the passenger or his luggage. The plaintiff never looked at the back of the ticket and no one told him to do so. The front of the ticket bore no reference to what is written on the back. The plaintiffs luggage was lost. He claimed damages for the loss.

Judgment
It was held that the plaintiff was entitled to recover his loss from the company as there was no sufficient communication of the terms and conditions contained on the back of the ticket.

Parker Vs South Eastern Railway


Plaintiff, Parker deposited his bag at the cloakroom at a railway station and received a ticket containing on its face the words, see back. On the back of the ticket there was a condition that the company will not be responsible for any package exceeding the value of 10 unless extra charge was paid. A notice to the same effect was hung up in the cloak-room also. Ps bag was lot and he claimed the actual value of the lost contents - 24 Sh.10. P admitted knowledge of the printer matter on the ticket, but denied having read it.

Judgment
It was held that, even though he had not read the exemption clause, he was bound by it, as the defendants had done what was reasonably sufficient to give him notice of its existence, and therefore, P was entitled to recover only 10.

Olley Vs Marlborough Court Ltd.


Olley and her husband hired a room at a hotel and paid for a weeks board and lodging in advance. When they went to occupy the room there was a notice on one of the walls which contained the clause:The proprietors will not hold themselves responsible for articles lost or stolen, unless handed over to the manageress for safe custody. Owing to the negligence of the hotel staff, a thief entered the room and stole some of their property. Olley claimed damages.

Judgment
It was held, that the owner of the hotel was liable since the notice formed no part of the contract as it came to the knowledge of the plaintiff after the contract had been entered into.

Doctrine of fundamental breach and strict construction.


M. Siddalingappa Vs T. Nataraj T. Nataraj Laundry owner terms of service: in case of loss of clothes, only 8 times the cleaning charges will be paid. T. Nataraj lost his clothes and claimed damages for the full value of the clothes.

Judgment
Held that the dry-cleaners terms that he will pay only eight times the amount of cleaning charges, is unreasonable. He has to bear full cost less reasonable depreciation.

Felthouse Vs. Bindley


Felthouse offered by letter to buy his nephews horse for 30-15s, adding, If I hear no more about him, I shall consider the horse mine at 30-15s. The nephew sent no reply to this letter but told Bindley, an auctioneer, to keep the horse out of a sale of his farm stock, as he intended to reserve it for his uncle Felthouse. Bindley sold the horse by mistake, and Felthouse sued him for conversion of his property.

Judgment
The court held that as there was no contract and therefore Felthouse had no right to complain of the sale.

Lapse and Revocation of an Offer


1. After stipulated time or reasonable time. 2. not accepted in the prescribed mode. 3. by rejection. 4. by death or insanity of offeror or offeree before acceptance. 5. by revocation

6. non-fulfilment of a condition precedent.


7. by subsequent illegality or destruction of subject-matter.

The Acceptance
When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal when accepted becomes a promise.

Rules Regarding Valid Acceptance


1. Only by the person to whom it is made. 2. absolute and unqualified 3. usual manner unless prescribed 5.within reasonable time before revocation

6. Acceptance must succeed offer

4. communicated by the acceptor.

7. Rejected offers can be accepted only if renewed.

1. Acceptance only by the person to whom the offer is made

Leading Case: Boulton v. Jones


Problem: A was working as the Manager of Bs business. Now A purchased this business from B. C, to whom B owed a debt, placed an order (presuming that the business still is run by B) for the supply of certain goods. A supplied the goods even though the order was not addressed to him. C refused to pay A for the goods, as his intention behind placing the order was to set-off his debt against B.

Boulton Vs. Jones


Held, that the offer could be accepted by B only and not by anyone else

Problems:
2. Absolute and unqualified acceptance
1. A offered to sell his land to B for Rs.50,000. B replied purporting to accept and enclosed Rs.10,000 cheque, promising to pay the balance Rs.40,000 in 4 monthly instalments of Rs.10,000 each.

2.

Purvankara, a real estate company, offers to sell a 3 BHK flat in Venicia to B for Rs.50 lacs. B agrees to purchase it subject to the title to the flat being verified and approved by his solicitor.

4. Offer has to be communicated by the acceptor

Leading Case: Powell Vs. Lee


Powell was a candidate for the post of Headmaster in a school. The managing committee of the school passed a resolution selecting him for the post. A member of the managing committee, acting in his personal capacity, informed Powell that he has been selected, but Powell received no other intimation. Subsequently, the resolution was cancelled, and Powell was not appointed to the post. Powell filed a suit against the Committee for breach of contract.

Judgment
The court held that in the absence of an authorised communication from the Committee there was no binding contract.

5. Acceptance must be given within a reasonable time before revocation.

Leading Case:
Ramsgate Victoria Hotel Co. Vs. Montefiore

M applied for certain shares in the company on 8 June. The applicant was informed on 23 November that the shares were allotted to him. He refused to accept them.

Judgment
Held: offer had lapsed by reason of the delay of the company in notifying their acceptance and M was not bound to accept the shares. Similar case: Jayamahal Coop. Housing Society v. Zenith Chemical Works.1993 (Offer lapsed after 30 days)

Communication - Offer, Acceptance, Revocation


Communication of offer is complete when it comes to the knowledge of the offeree. Communication of acceptance is complete as against the proposer when it is in course of transmission to him as against the acceptor, when it comes to the knowledge of the proposer. Communication of revocation is complete as against the person revoking, when it is put in the course of transmission to the other person as against the person to whom it is made, when it comes to his knowledge.

When can offer or acceptance be revoked?


A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.

An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor but not afterwards.

Acceptance is to an offer, what a lighted match is to a train of gun powder. It produces something which cannot be recalled or undone.-Anson.

PROBLEM
(i) A offers by letter to sell his car to B for Rs.75,000 on 1st Aug. B receives the letter on 3rd Aug. (ii) B posts the letter of acceptance on 4th Aug. which reaches A on 6th Aug. (iii) A writes a letter of revocation of his offer and posts it on 3rd Aug. which reaches B on 5th Aug. Apply the rules of communication of offer, acceptance and revocation of offer and say whether the acceptance is valid or the offer is revoked effectively.

Solution
Communication of offer is complete on 3rd Aug. when it comes to the knowedge of B. ii) Communicatiion of acceptance is complete as against the proposer i.e. A when the letter of acceptance is posted i.e.4th Aug and as against the acceptor i.e.B when the letter of acceptance reaches the proposer i.e.6th Aug. iii) Revocation of offer is complete as against A on 3rd Aug. when the letter of revocation is posted, and as against B on 5th Aug. when the letter of revocation is received by him. i)

Solution (contd.)
iv) As B has put his aceptance into transmission on 4th Aug. and revocation of offer is communicated to him on 5th Aug. his acceptance is valid and there shall be a binding contract. A cannot revoke his offer after 4th Aug. when the communication of acceptance is complete as against him.

Consideration
When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstains from doing, something, such act or abstinence or promise is called a consideration for the promise

Rules Regarding Consideration


1. must move at the desire of the promisor

2. may move from the promisee or any other person; i.e. a stranger to consideration may maintain a suit.
3. A stranger to a contract cannot maintain a suit. 4. may be past, present or future. 5. must be something of value; need not be adequate.. 6. must be legal.

An agreement made without consideration is void


1. 2. 3. 4. 5. 6. 7. No consideration No contract Exceptions: Natural love and affection. Compensation for past voluntary service. To pay time-barred debt. Completed Gift. Contract of Agency. Remission by promisee of performance Contribution to Charity.

Kedarnath Vs. Gorie Mohammad


The defendant Gorie Md. had agreed to subscribe Rs.100 towards the construction of a Town Hall at Howrah. Kedarnath, the secretary of Town Hall, on the faith of the promise entrusted the work to a contractor and undertook responsibility to pay him. Judgment: Gorie Mohd. was held liable.

Abdul Aziz Vs. Masum Ali


Masum Ali the defendant promised to subscribe Rs.500 to a fund started for rebuilding a mosque. No steps had been taken to carry out the repairs. Masum Ali refused to pay up the promised charity. Held: Masum Ali was not liable.

Problem
A and B are friends. B treats A during As illness. B does not accept payment from A for treatment; so A promises Bs son X that he will pay him Rs.1000. A being in poor circumstances is unable to pay. X sues A for the money. Can X recover it from A? Give your answer with reference to the definition of consideration and also consider the exceptions.

Solution
No. X cannot recover the money from A. The agreement between X and A is not a contract for want of consideration. In this case Xs father B voluntarily treats A during his illness. Being voluntary, there is no consideration. Consideration to be valid must be at the desire of the promisor, which is not the case here. The question whether it is covered by any exception if it is a promise to compensate a person who has already voluntarily done something for the promisor and not to a person who has done nothing for the promisor. As Bs son X to whom the promise was made, has done nothing for the promisor A, As promise is not enforceable even under the exception.

Capacity of Contracting Parties


Every person is competent to contract Who is of the age of majority according to the law to which he is subject and Who is of sound mind. and is Not disqualified from contracting by any law to which he is subject.

Minor
Every person who has completed the age of 18 years becomes a major. But Minors of whose person or property or both a guardian is appointed by a court and minors whose property superintendence has been assumed by a Court of Wards, attain majority at the age of 21 years.

Minors liability in agreements


1. 2. 3. An agreement by a minor is absolutely void and inoperative as against him. Beneficial agreements are valid contracts. No ratification on attaining majority.

4.
5. 6.

Rule of estoppel does not apply to a minor.


Minors liability for necessaries. Specific performance.

Minors liability (contd.)


7. Minor Partner benefits of Partnership. 8. Minor Agent not liable for negligence or breach of duty. 9. Minor cannot be adjudicated insolvent. 10.Minor and adult only adult liable. 11.Surety for a minor adult surety is liable not the minor. (However, Bombay HC in Manju Mahadev vs. Shivappa Manju, and Madras HC in Edavan Nambiar vs Moolaki Raman considered the question and held that if a minor could not default, liability of guarantor being secondary, does not arise at all) 12.Minors parents. Not liable except when minor acted as agent of parents. 13.Minor shareholder. 14.Minors liability in tort. Liable in tort not in contract.

Persons of Unsound Mind


A person is said to be of unsound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effects upon his interests.

Agreements treated on the same footing as minors.

Disqualified Persons
1. 2. 3. 4. 5. 6. Alien Alien friend can contract but not alien enemies. Foreign sovereigns and ambassadors they can sue but cannot be sued upon. Convict incompetent during imprisonment. Married woman can contract separate property not husbands. Insolvent can contract after discharge, otherwise suffers from several disqualifications. Joint Stock Company & Corporations powers of contract limited by Memorandum no personal contracts.

Free Consent
Consent: Two or more persons are said to consent when they agree upon the same thing in the same sense. Consent involves identity of minds or consensus ad-idem. Consent is said to be free when not caused by 1. Coercion 2. Undue Influence 3. Fraud 4. Misrepresentation 5. Mistake

Coercion
Coercion is the committing or threatening to commit, any act forbidden by the Indian Penal Code, or

the unlawful detaining or threatening to detain, any property, to the prejudice of any person whatever,
with the intention of causing any person to enter into an agreement. A contract brought about by coercion is voidable at the option of the party whose consent was so caused.

Whether threat to commit suicide is coersion?


CHIKKAM AMMIRAJU vs. CHIKKAM SESHAMMA In this case, Chikkam Ammiraju induced his wife Chikkam Seshamma and his son, to execute a release deed in favour of his brother in respect of certain properties which they claimed as their own. Whether this amounted to coercion?

Judgment by Madras High Court.


The transaction is set aside on the grounds of coercion. Though threat to commit suicide is not punishable under the IPC, it must be deemed to be forbidden by that Code, as an attempt to commit suicide was punishable. The term an act forbidden by the IPC is a wider term than punishable by the IPC. Simply because a man escapes punishment, it does not follow that the act is not forbidden by the IPC. A Lunatic or minor may not be punished; it does not follow that their criminal acts are not forbidden by the IPC.

Undue Influence

A contract is said to be induced by undue influence where,

(i)
(ii)

The relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other, and He uses the position to obtain an unfair advantage over the other.

When consent is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so causedIf the party entitled to avoid it has received any benefit, upon such terms and conditions as the court may deem just.

Undue influence
Undue influence implies mental and moral coercion so as to make the consent of one of the parties to the contract unfree.

Presumption of Undue Influence


Father and son Doctor and patient Solicitor and client Guardian and Ward Trustee and Beneficiary Spiritual Guru and Disciple Old illiterate person Pardanishin woman

No presumption of Undue Influence


Husband and wife Mother and daughter Grandson and Grandfather Landlord and Tenant Creditor and Debtor Master and Servant

When the consent is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as the court may deem just

Fraud
Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive or to induce another party thereto or his agent, to enter into the contract: 1. The suggestion, as a fact of that which is not true by one who does not believe it to be true. 2. The active concealment of a fact by a person who has knowledge or belief of the fact. 3. A promise made without any intention of performing it. 4. Any other act fitted to deceive. 5. Any such act or omission as the law specifically declares to be fraudulent.

Can Silence be fraudulent?


1. As a Rule No. 2. Silence is fraudulent if the parties stand in a) fiduciary relationship uberrimae fidei b) contracts of insurance c) contract of marriage engagement d) contract of family settlement c) share allotment contracts prospectus. 3. Where silence itself amounts to speech.

Effect of Fraud:
A party who has been induced to enter into a Contract by fraud, has the following remedies: 1. He can rescind the contract. 2. He can ask for restitution and insist that the contract shall be performed.

Misrepresentation
(a) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true. (b) Any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him; or (c) Causing, however, innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.

Essentials of Misrepresentation:
i) There should be misrepresentation made innocently, without any desire to deceive the other party, with an honest belief as to its truth, made expressly or impliedly; ii) Representation must relate to facts material to the contract; iii) Representation must be or must have become untrue; iv) Representation must have been instrumental in inducing the other party to enter into a contract.

Remedies in case of Misrepresentation:


The aggrieved party has two options: 1. He can rescind the contract. 2. He may affirm the contract and

insist on its performance


3. No Damages. Misrepresentation does not entitle the aggrieved party to claim damages.

Distinction between Fraud and Misrepresentation


FRAUD 1. Intention to deceive, Deliberate and willful MISREPRESENTATION 1. Innocent. No intention to deceive. 2. Right only to avoid contract. No suit for damages. 3. If party had means of finding truth with ordinary diligence, cannot avoid contract.

2. Civil wrong party entitled to claim damages.


3. Contract is voidable even if party had means of finding truth with ordinary diligence.

Mistake
Erroneous belief concerning something. 1. Mistake of Law (a) Mistake of Law of the country (b) Mistake of foreign law. Ignorantia juris non-excusat Ignorance of law is no excuse. a contract is not voidable because it was caused by mistake as to any law in force in India

Mistake of Foreign Law is treated on the same footing as mistake of fact.

2. Mistake of Fact a) Bilateral Mistake b) Unilateral Mistake


Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.

Mistake as to the identity of the subject matter:


Reffles Vs. Wichelaus There was a contract for sale of cotton arriving by s.s.Peerless. There were two ships of the same name sailing at that time. Both parties had different ships in their mind while entering into the contract. Held: there was no contract no consensus-ad-idem.

Mistake as to the quantity of the subject matter:


HENKEL VS. POPE: Send three rifles Send the rifles. Held: There was no contract as there was no consent. It made no difference even if the mistake or negligence is caused by a third party.

Said Vs. Butt (critic of the theatre) Cundy Vs. Lindsay (Blenkarn (Fraud), Blenkiron & Co. p.85

Consideration Unlawful in Part


When an agreement contains several distinct promises to do things legal and also other things illegal, and the legal part cannot be separated from the illegal part (i.e. the consideration for different promises is a single sum of money), the whole agreement is illegal and void.

Where there is a reciprocal promise to do things legal and also other things illegal, and the legal part can be separated from the illegal part (i.e. there is a separate consideration for different promises), the legal part is a contract and the illegal part is a void agreement.

Illegal Agreements
Parties to an illegal agreement cannot get any help from a court of law. No polluted hand shall touch the pure fountain of justice.

Void Agreements
Agreements are void if made 1. by a minor or a person of unsound mind 2. by a bilateral mistake of fact material to the agreement. 3. the consideration or object is unlawful. 4. part consideration is unlawful, and the legal and illegal parts are inseparable. 5. without consideration.

Expressly Declared Void Agreements


1. Agreements in restraint of marriage 2. Agreements in restraint of trade 3. Agreements in restraint of legal proceedings 4. Agreements the meaning of which is uncertain. 5. Agreements by way of wager 6. Agreements contingent of impossible events. 7. Agreements to do impossible acts.

No restitution of the benefit received is allowed in the case of expressly declared void agreements.

Cases decided as being against Public Policy:


1. Trading with an alien enemy. 2. Agreements to promote hostile action in a friendly State. 3. Agreements interfering with course of justice.

4. Agreements in restraint of legal proceedings.


5. Agreements for stifling criminal prosecution. 6. Agreements tending to an abuse of legal process.

7. Agreements to oust the jurisdiction of courts.


8. Agreements to vary periods of limitation. 9. Agreements for the sale or to influence of public offices/ titles/honours. 10. Agreements to influence election to public offices. 11. Agreements tending to create interest opposed to duty.

12. Agreements tending to create monopolies.

Cases declared against Public Policy (Contd.)


13. Agreement in restraint of parental rights. 14. Agreements restricting personal liberty. 15. Agreements in restraint of marriage. 16. Marriage brokerage agreements. 17. Agreements interfering with marital duties. 18. Agreement in fraud of creditors. 19. Agreements to defraud revenue authorities. 20. Agreements in restraint of profession. 21. Agreements in restraint of trade.

Performance of Contracts
General Rule: A person cannot acquire rights under a contract to which he is not a party.

By whom contracts must be performed


1. By the promisor himself. 2. By the promisor or his agent. 3. By the legal representatives. 4. Performance by a third person.

Assignment of Contracts
1. Contracts involving skill cannot be assigned.

2. Obligations cannot be assigned except with the consent of the promisee, in which case it becomes novation substitution of liabilities.
3. Rights and benefits are assignable except Contracts of personal nature, involving skill. An actionable claim can be assigned but must be an instrument in writing. 4. Assignment by operation of law By death or insolvency. On death to legal representatives In insolvency, to Official Assignee or receiver.

Remedies for Breach of Contract


1. Rescission of the contract. 2. Suit for damages. 3. Suit upon quantum meruit. 4. Suit for specific performance. 5. Suit for injunction.

Suit for damages


Different kinds of Damages: 1. Ordinary, General or Compensatory damages 2. Special damages 3. Exemplary, Punitive or Vindictive damages

4. Nominal damages.

Rules regarding the Measure of Damages


1. Damages are compensation for loss Not punishment of the guilty. 2. Injured party to be put in the same position as though contract was performed. 3. Only the actual loss arising out of breach. 4. Special or remote damages are allowed only if it was in the knowledge of both the parties. 5. Difficulty of assessment of damages does not prevent their recovery.

Rules for measure of damages (contd.)


6. If no real loss arises from breach, only nominal damages awarded. 7. If sum payable in case of breach is fixed in advance, reasonable compensation not exceeding such amount is allowed. 8. Exemplary damages allowed only for breach of marriage contract and banks wrongful refusal to honor customers Cheque. 9. Injured partys duty to minimise damage. 10.Costs of decree allowed to injured party.