REMEDIES FOR BREACH OF CONTRACT 1 REMEDIES FOR

REMEDIES FOR BREACH OF CONTRACT 1

REMEDIES FOR BREACH OF CONTRACT When one of the parties to the contract makes a breach of the contract the following remedies are available to the other party. 1. Damages : Remedy by 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 it due to the breach o 9 f contract, from the party who caused the breach. Section 73 to section 75 incorporate provisions in this regard. 2

REMEDIES FOR BREACH OF CONTRACT 2. 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. 3. Specific Performance and Injunction : Sometimes a party to the contract instead of recovering damages for the breach may have recourse to 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 have been contained in the Specific Relief Act, 1963. 3

DAMAGES Section 73 makes the following provisions regarding the might of the injured party to recover compensation for the loss or damage which is caused to him by the breach of contract. Section 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 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. 4

DAMAGES 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 failure to discharge it is entitled to receive the same compensation from the party in default, as if such person has contracted to discharge it and had broken his contract. Explanation : - In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by nonperformance of the contract must be taken into account. ” 5

DAMAGES a) b) c) The section has been explained with the help of the following illustrations : A contracts to sell and deliver 50 maunds of saltpetre to B , at 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. 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 first January. A contracts to repair B’s house in a certain manner, receives payments 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. 6

DAMAGES In an action for damages for the breach of contract there arise two kinds of problems : 1. Firstly, it has to be determined whether them loss suffered by the p 0 laintiff is the proximate consequence of the breach of contract by the defendant. The person making the breach of contract is liable only for the proximate consequences of the breach of contract. He is not liable for damage which is remotely connected with the breach of contract. In other words, the first problem is the problem of “Remoteness of Damage. ” 2. It is found that the particular damage is the proximate result of the breach of contract rather than too remote, the next question arises is : How much compensation is to be paid for the same? This involves determining the quantum of compensation. This, in other words, is the problem of “Measure of Damages. ” 7

REMOTENESS OF DAMAGE The following statement of Alderson B, in case of Hadley Vs. Baxendale (1854) is considered to be the basis of the law to determine whether the damage is the proximate or remote consequence or breach of contract : “Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may be fairly and reasonably be considered either arising naturally, i. e. , according to the usual course of things, from such breach of contract itself, or such as may reasonable be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it”. 8

REMOTENESS OF DAMAGE The rule in Hadley Vs. Baxendale consists of two parts. On the breach of a contract such damages can be recovered, (1) as may fairy and reasonably be considered arising naturally, i. e. , according to the usual course of things from such breach, OR (2) as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract. In either case it is necessary that the resulting damage is the probable result of the breach of contract. The principle stated in the two branches of the rule is virtually the rule of “reasonable foresight. ” The liability of the party making the breach of contract depends on the knowledge, imputed or actual, of the loss likely to arise in case of breach of contact. The first branch of the rule allows damages for the loss arising naturally, i. e. in the usual course of things from the breach. The parties are deemed to know about the likelihood of such loss. The second branch of the rule deals with the recovery of more loss which results from the special circumstances of the case. Such loss is recoverable, if the possibility of such loss was actually within the knowledge of the parties, particularly the party who makes a breach of the contract, at the time of making the contract. 9

MEASURE OF DAMAGE After it has been established that a certain consequence of the breach of contract is proximate and not remote and the plaintiff deserves to be compensated for the same, the next question which arises is : What is the measure of damages for the same, or in other words the problem is of the assessment of compensation for the breach of contract. Damages are compensatory in nature. The object of awarding damages to the aggrieved party is to put in the same position in which he would have been if the contract had been performed. 10

MEASURE OF DAMAGE In a contract of sale of goods the measure of damages is the difference between the contract price and the market price on the date of the breach of contract. For instance, A agrees to supply B a radio set on January for Rs. 1, 000. If A fails to supply the radio set and the market price of the radio set on that date is Rs. 1, 200, B will be entitled to recover from A Rs. 200 as damages. The reason is that the loss suffered by the buyer is Rs. 200 because due to the rise in the market price of the radio set he will have to pay that much extra if he purchases the radio set from the market. Similarly, if the buyer (B) refuses to take the radio set on the due Date, the seller will also be entitled to recover the difference between the contract price and the market price on 1 st January. For instance the market price of the radio set on that date is Rs. 800, A’s loss is Rs. 200 in respect of the transaction, because from another customer A can get only Rs. 800 whereas B had promised to pay Rs. 1, 000 for the same. A can recover Rs. 200 from B. . 11

MEASURE OF DAMAGE The rule in this regard was stated in Borrow Vs. Arnaud (1844) in the following words. “ Where a contract to deliver goods at a certain price is broken the proper measure of damages in general is the difference between the contract price and the market price of such goods at the time when the contract is broken, because the purchaser having the money in his hands, may go into the market and buy. So, if a contract to accept and pay for the goods is broken, the same rule may be properly applied, for the seller may take his goods into the market and obtain the current price for them. ” 12

QUANTUM MERUIT Ordinarily if a person having agreed to do some work or render some service has done only a part of what he was required to do, he cannot claim anything for what he has done. When a person agrees to complete some work for a lump sum non-completion of the work does not entitle him to any remuneration even for the part of the work done. But the law recognises an important exception to this rule by way of an action for ‘Quantum Meruit’ Under this section if A and B have entered into a contract, and A, who has already performed a part of the contract, is then prevented by B from performing the rest of his obligation under the contract, A can recover from B reasonable remuneration for what ever he has already done. 13

QUANTUM MERUIT It may be noted that this action is not an action for compensation for breach of contract by the other side. It is an action which is alternative to an action for the breach of contract. This action in essence is one of restitution, putting the party injured by the breach of contract in a position in which he would have been had the not been entered into. It merely entitles the injured party to be compensated for whatever work he may have already done, or whatever expense he may have incurred. In the words of Alderson, B, Where one party has absolutely refused to perform, or has rendered himself incapable of performing, his part of the contract, he puts it in the power of the other party either to sue for the breach of it or to rescind the contract and sue on a quantum meruit for the work actually done. ” 14

QUANTUM MERUIT The essentials of an action of quantum meruit are as follows : 1. One of the parties makes a breach of contract, or prevents the performance a part of it by the other side. 2. The party injured by the breach of the contract, who has already performed a part of it, elects to be discharged from further performance of the contract and brings an action for whatever he has already done. For instance, if A agrees to deliver B 500 bags of wheat and when A has already delivered 100 bags B refuses to accept any further supply, A can recover from B the value of wheat which he has already delivered. 15

QUANTUM MERUIT In De Bernardy Vs. Harding, (1853) the defendant, who was to erect and le seats to view the funeral of the Duke of Wellington, appointed the plaintiff as his agent to advertise and sell tickets for the seats. The plaintiff was to be paid commission on the tickets sold by him. The plaintiff incurred some expense in advertising for the tickets but before any tickets were actually sold by him his authority to sell tickets was wrongfully revoked by the defendant. It was held that the plaintiff was entitled to recover the expenses already incurred by him under an action for quantum meruit. 16