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REMEDIES FOR BREACH OF CONTRACT

REMEDIES FOR BREACH OF CONTRACT. BREACH OF CONTRACT

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REMEDIES FOR BREACH OF CONTRACT

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  1. REMEDIES FOR BREACH OF CONTRACT

  2. BREACH OF CONTRACT • ‘Breach of contract by a party thereto is also a method of discharge of a contract, because ‘breach’ also brings to an end the obligations created by a contract on the part of each of the parties. The aggrieved partycan sue for damages for breach of contract. Breach of contract may be of two kinds: • 1. Anticipatory breach: An anticipatory breach of contract is a breach of contract occurring before the time fixed for performance has arrived. It may take place in two ways: (a) Expressly by words spoken or written. (b) Impliedly by the conduct of one of the parties. • Effect of an anticipatory breach: • When there is an anticipatory breach of contract, the promisee is excused from performance or from further performance. Further, it gives an option to the promisee (i.e., the aggrieved party) whereby: • (i) He may either treat the contract as rescinded and sue the other party for damages for breach of contract immediately without waiting until the due date of performance, or • (ii) He may elect not to rescind but to treat the contract as still operative, and wait for the time of performance and then hold the other party responsible for the consequences of non- performance.

  3. 2. Actual breach: Actual breach may also discharge a contract. It occurs when a party fails to perform his obligation upon the date fixed for performance by the contract. • Whenever there is breach of a contract, the injured party becomes entitled to any one or more of the following remedies against the guilty party: • 1. Rescission of the contract • 2. Suit for damages • 3, Suit upon quantum meruit • 4. Suit for specific performance of the contract • 5. Suit for an injunction • 6. Restitution

  4. I.) RESCISSION OF THE CONTRACT: When there is a breach of contract by one party, the other party may rescind the contract and need not perform his part of obligations under the contract. When the court grants rescission, the aggrieved party is freed from all his obligations under the contract; and becomes entitled to compensation for any damage which he has sustained through the no fulfilment of the contract (Sec. 75). II.) SUIT FOR DAMAGES: Damages are a monetary compensation allowed to the injured party for the loss or injury suffered by him as a result of the breach of contract. By awarding damages the court aims to put the injured party into the position in which he would have been, had there been performance and not breach, and not to punish the defaulter party.

  5. DIFFERENT KINDS OF DAMAGES: • Damages may be of four kinds: 1. Ordinary Damages. When a contract has been broken, the injured party can, as a rule, always recover from the guilty party ordinary or general damages. These are such damages as may fairly and reasonably be considered as arising naturally and directly in the usual course of things from the breach of contract itself. 2. Special Damages. Special damages are those which arise on account of the special or unusual circumstances affecting the plaintiff, in other words, they are such remote losses which are not the natural and probable consequence of the breach of contract. It is important that such damages must be in contemplation of the parties at the time when the contract is entered into. Subsequent knowledge of the special circumstances will not create any special liability on the guilty party

  6. 3. Exemplary or Vindictive Damages. • These are such damages which are awarded with a view to punishing the guilty party for the breach and not by way of compensation for the loss suffered by the aggrieved party. • The cardinal principle of the law of damages for a breach of contract is to compensate the injured party for the loss suffered and not to punish the guilty party. There are, however, two exceptions to this rule: • (a) Breach of a contract to marry. In this case the amount of the damages will depend upon the extent of injury to the party’s feelings. One may be ruined, other may not mind so much. • (b) Dishonour of a cheque by a banker when there are sufficient funds to the credit of the customer. In this case the rule of ascertaining damages is, ‘the smaller the cheque, the greater the damage’. Of course, the actual amount of damages will differ according to the status of the party. 4. Nominal Damages. Nominal damages are those which are awarded only for the name sake. These are neither awarded by way of compensation to the aggrieved party nor by way of punishment to the guilty party. These are awarded to establish the right to decree for breach of contract when the injured party has not actually suffered any real damage and consist of a very small sum of money, say, a rupee or two.

  7. LIQUIDATED DAMAGES AND PENALTY ‘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. ‘Penalty’ means a sum fixed up in advance, which is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. III.) SUIT UPON QUANTUM MERUIT The phrase quantum meruit literally means ‘as much as is earned’ or ‘in proportion to the work done.’ A right to sue upon quantum meruit usually 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.

  8. IV.) SUIT FOR SPECIFIC PERFORMANCE Specific performance means the actual carrying out of the contract as agreed. Under certain circumstances an aggrieved party may file a suit for specific performance. A decree for specific performance is not granted for contracts of every description. It is only where it is just and equitable so to do, i.e., where the legal remedy is inadequate or defective, that the courts issue a decree for specific perorfamce. V.) SUIT FOR AN INJUNCTION ‘Injunction’ is an order of a court restraining a person from doing a particular act. It is a mode of securing the specific performance of the negative terms. ofthe contract. Thus ‘injunction’ is a preventive relief. It is particularly appropriate in cases of ‘anticipatory breach of contract’ where damages would not be an adequate relief.

  9. VI.) RESTITUTION It means return of the benefit received by one party to the contract from the other party under a void contract. When the contract becomes void any person who has received any advantage is bound to restore it or to make compensation for it to the person from whom he received it.

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