Transcript REMEDIES FOR BREACH OF CONTRACT

REMEDIES FOR BREACH OF
CONTRACT
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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 o9f contract, from the party who
caused the breach. Section 73 to section 75
incorporate provisions in this regard.
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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.
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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.
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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.”
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DAMAGES
The section has been explained with the help of the following
illustrations :
a) 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.
b) 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.
c) 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.
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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 p0laintiff 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.”
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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”.
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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.
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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.
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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 1st 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..
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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.”
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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.
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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.”
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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.
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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.
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