2. BREACH OF CONTRACT
• When a party breaks the contract by refusing to perform his promise
the breach of contract takes place.
3. MODES OF REMEDIES FOR BREACH OF CONTRACT
Following remedies
are available to the
aggrieved party
against the guilty
party.
Suit for Rescission Suit for Damages
Suit upon Quantum
Meruit- ( payment in
proportion to the
work done or
reasonable value of
work done)
Suit for Specific
Performance
Suit for Injunction
4. (1) Suit for Rescission
Rescission means cancellation of a contract.
one of the parties breaks the contract, the other
party is released from his obligation under the
contract. If the aggrieved party wants to sue the
guilty party for damages for breach of the
contract, he must sue for rescission of the
When the court grants rescission, the aggrieved
party is free from his obligations and becomes
entitled to compensation. (Sec. 75)
Example : A contracts to supply cement to
B on 15 April. B agrees to pay the price on receipt
of goods. A does not supply on due date. B is
discharge from liability to pay. B can rescind and
claim damages.
5. REMEDIES FOR BREACH
• 1) Restitution
• Return of benefits received by one party from the other under void
contract.
• When the contract becomes void it needs not to be performed by either
party.
• 2) Damages
• Monetary compensation is allowed for loss suffered by aggrieved party .
• Object is not punishing the party at fault but to compensate the
aggrieved party.
6. • (2) Suit for damages
The aggrieved party may sue for damages.
Damages are a monetary compensation
to the injured party for the loss suffered by him
as a result of the breach of contract. In case of
breach of contract, the aggrieved party can
claim the following damages.
• (Sec. 19)
7. KINDS OF
DAMAGES
(a) Ordinary Damages
These are also called general damages. When a contract is broken, the
party can recover ordinary damages from the guilty party. Ordinary
are usually assessed on the basis of actual loss. In a contract of sale of
damages payable are the difference between the contract price and the
market price at the date of breach. (Sec. 73)
Example :A contracts to pay 1 lac to B on 1st Jan. A does not pay on that day. B,
as a result is totally ruined. A is liable to pay B only principal sum and interest
on it.
8. • (b) Special Damages
These damages arise under some special circumstances. These damages
include indirect loss which may arise due to breech of contract.
must be aware of the loss which may arise from the breach of contract.
notice to this effect must have been given to the other party:
otherwise he is not responsible for special damages. Subsequent
knowledge of special circumstances will not create special liability on
guilty party. (Sec. 21)
Example : A contracts C to buy 1 ton of iron for Rs. 80,000. A also
contracts to sell B, 1 ton iron for Rs. 1 lac. A informs C about the
purpose of contract. C fails to supply, As a result, A cannot supply to B. C
liable for loss of profit which A would have earned form B.
9. (c) Exemplary Damages
These damages are awarded to punish the guilty party for the breach of
contract. The breach of contract results in monetary loss to the
party and causes disappointment. Exemplary damages have no place in
law of contract and are not recoverable. These are awarded in the
following cases
10. Exemplary Damages
• A) In case of breach of a contract to marry, the amount of damages
depend upon the extent of injury to the feelings of the party.
• B) In case of dishonor of a cheque by a banker when there are
funds to the credit of the customer. The rule is, the smaller the cheque
dishonored, the greater the damage.
11. • (d) Liquidated Damages
• When parties to a contract fix the amount of damages for the breach
contract at the time of formation of contract, such damages are called
liquidated damages. Where a sum is agreed in the contract to be paid
by the defaulting party, in case of breach of contract, the court will
the reasonable damages, not exceeding the amount already agreed. If
the actual loss is more than the agreed amount, damages will be
payable to the agreed amount. (Sec. 74)
• Example :A contracts to pay Rs. 20,000 as damages to B. if he
fails to pay him Rs. 5 lac on a given day. A fails to pay on that
B cant recover damages not exceeding Rs. 20,000.
12. • (e) Nominal Damages
• These are neither awarded to compensate the aggrieved party nor to
punish the guilty party. When the aggrieved party suffers no loss, the
court may award nominal damages in recognition of his right. The
has discretion in this case. The court may refuse to award damages.
• Example : A promises to sell cement to B for Rs. 200 per bag. A
does not supply. At the time of breach, the market rate of
cement is the same. B is entitled to nominal damages.
13. (3) SUIT UPON QUANTUM MERUIT
• The term quantum meruit means payment in proportion to the work
done or reasonable value of work done. Where a person has done
some work under a contract and the other party cancels the contract
or an event happens, which makes the performance of the contract
impossible; such party can claim remuneration for the work already
done. The right to claim for quantum meruit arises when the original
contract is discharged. If the original contract exists, the party may sue
for quantum meruit. The aggrieved party may sue in the following
cases:
14. SUIT UPON QUANTUM MERUIT
(a) When an agreement becomes subsequently void.
(b) When there is a promise to render services but no agreement
about remuneration.
(c) Where something is done without any intention to do so
gratuitously.
(d) When the contract is divisible.
(e) When the completion of the contract is prevented by the other
party.
15. EXAMPLE :
• (a) B contracts to build a 3-story house for A. When one story is
complete, A stops B’s work. B can get compensation for work done.
• (b) C was employed MD in a company. After 3 months it was found
that the directors were not authorized to appoint him. C sued for
remuneration. Held, C could recover for the work done. (Craven Ellis vs.
Canon Ltd.)
16. (4) SUIT FOR SPECIFIC PERFORMANCE
• Specific performance means the actual carrying out of the contract by
a party. In some cases where the damages are not an adequate
remedy the court may direct the guilty party to fulfil the contract. The
aggrieved party can sue for specific performance in the following
cases:
• Suit for Specific Performance
• (a) Where compensation in money is not an adequate remedy.
• (b) Where it is difficult to calculate the actual damages.
• (c) Where compensation in money cannot be obtained.
17. • Specific performance is not granted in the following cases:
• (a) Where damages are an adequate remedy.
• (b) Where the court cannot supervise the execution of the contract,
e.g, a construction contract.
• (c) Where one of the parties is a minor
• d) Where contract is of personal nature
18. • Example :
• (a) A agrees to sell his plot to C, who agrees to buy to erect a mill.
commits breach. On the suit of C, A is directed by the court to perform
the contract.
• (b) A agrees to sell B his painting, but commits breach, B cannot
for damages. A shall be ordered to make specific performance to B.
19. (5) SUIT FOR INJUNCTION
• Injunction is an order of a court restraining a person from doing something
which he promised not to do. It is a preventive relief. If is a discretionary
remedy of the court. It is appropriate in cases of anticipatory breach of
contract.
• Example :
• (a) W agreed to sing at Lu’s theatre and for no one else. Afterwards W
contracted Z to sing at another theatre and refused to sing for Lu. Held, W
could be restrained by injunction from singing for Z. (Lumly vs. Wagner)
• (b) G agreed to take the supply of electricity only from M company. G
was, restrained by an injunction from buying electricity from any other
company. (Metropolitan Electric Supply Co. vs Ginder).
