BUS204 (Sec 3) Class 11

23 July
Topic

01 Breach of Contract

02 Remedies for breach of contract

03 Damages

04 Specific Performance of Contract

05 Injunction

06 Recission of Contract

07 Rectification of Contract
Remedies for
breach
 (1) Damages
When a contract is (2) Quantum meruit
broken the party who
suffers on account of it
has one or other of the (3) Specific performance
following remedies:
(4) Injunction

(5) Cancellation of the instrument and

(6) Rectification of the instrument.

 1) Damages
• Monetary compensation
• It is the universal remedy for the breach of a contract.
• It can be claimed in every case.
• Damages may be nominal or substantial.
 A nominal damages is generally granted by
way of vindication of a right.

Nominal
Damages Thus, A makes a contract with B. The
contract is afterwards broken by A, but B
suffers no damage on account of the
breach, still he is entitled to some
damages, however trifling, it may be by way
of vindication of his right.
 Substantial damages, on the other hand, is
measured by the loss actually suffered by the
party.

Such loss must naturally arise in the usual

Substantial course of things from such breach, or which
the parties knew, when they made the contract,
Damages to be likely to result from the breach of it.

It follows, therefore, that a party is not liable for

loss which is too remote, i.e., which is not the
natural and probable consequence of the
breach of the contract.
 1. Compensation is not recoverable for any
remote or indirect loss or damage

2. Remoteness of damages may be

Principles determined on following factors:

concerning (i) whether the damage is the necessary

damages: consequence of the breach;

(ii) whether it is the probable consequence;

(iii) whether the damage was contemplated

when the contract was made.
 3. Where the contract specifies the amount
of damages payable in case of breach of
contract, the said amount should be paid
by the party guilty of the breach irrespective
Principles of whether loss has been or has not been
actually caused.
concerning
damages: If the sum fixed represents a genuine pre-
estimate of the probable damages that is
likely to result from the breach, it is called
as liquidated damages.
A stipulation for increased damages from
the date of default, is a kind of punishment.
 4. Where the damages are not specified in the contract, the
damages are to be estimated on following principles:

(i) The damages are compensatory and not of penal nature. The
principle is to compensate the loss actually incurred and not
punish a wrong doer.

Principles (ii) Where the party has suffered no loss on account of the
breach, the court may still award him nominal damages in
concerning recognition of his right.

damages: (iii) Ordinary, damages for mental pain and suffering caused by
the breach are not allowed.

(iv) In estimating the loss or damage arising from a breach of

contract, the means which existed of remedying the
inconvenience caused by non-performance of the contract, must
be taken into account. Thus, the injured party must take all
reasonable steps to minimise the loss. If he fails to take
precautionary steps, he cannot recover the enhanced loss from
the guilty party.
 5. Exemplary (penal) damages may be awarded in
certain cases to preserve certain highly special
obligations like the ‘unjustified dishonour of a
cheque’ by a bank.

Principles
concerning 6. Earnest money is part of the purchase price when
the transaction goes forward; it is forfeited when the
damages: transaction falls through by reason of the fault or
failure of the vendee. However, forfeiture will not be
justified, when consequence of the breach no legal
injury at all has resulted. This is so because
compensation can only be awarded for loss which
naturally arose or was in the contemplation of the
parties. Thus, proof of some loss is necessary, though
it will not be necessary to prove the extent of it.
 Principles concerning damages:

• 7. Where the amount of compensation

payable is fixed by an Act, the compensation
shall be payable as per the law in force at the
time of the breach. (Sec. 124)
 When a party has done some work under a contract
and the contract is brought to an end by repudiation
of the other, the party who has performed the work
may sue either for damages for breach of the
contract or for quantum meruit, i.e., for the value of
so much as he has already done.
2. Quantum
meruit Thus, A places an order with B for the supply of 100
chairs to be delivered by installments. B delivers 20
chairs when A informs him that he will require no
more. In this case A’s repudiation discharges B from
the obligation to supply the remaining chairs. He
can sue A for the breach of the contract or for the
value of 20 chairs already supplied.
(3) Specific Performance:
• When damage is not an adequate remedy the Court may by its
discretion grant the specific performance of the contract, i.e.,
compel a party to do what he promised to do.
• But unlike damage, specific performance cannot be claimed as a
matter of right.
• However, unless and until the contrary is proved, the Court shall
presume that the breach of a contract to transfer immovable
property cannot be adequately relieved by compensation in
money, and that the breach of a contract to transfer movable
property can be thus relieved. (Sec. 12 Specific Relief Act, 1877).
 (a) When the act agreed to be done is in the
performance, wholly or partly, of trust.
In the following cases
the Court may, at its
discretion, enforce a
contract specifically - Thus, If a holds certain stock of goods in trust
for B and wrongfully disposes of the stock of
goods then the law creates an obligation on A
to restore the same quantity of stock of goods
to B. Otherwise, B may enforce specific
performance of this obligation.
 (b) Where there exists no standard for
ascertaining the actual damage caused by
the non-performance of the act agreed to
Contract be done.
Specifically
performed A agrees to sell two rare China vases to B, B
may compel A to perform the contract
specifically, because there is no standard
for ascertaining the actual damage which
would be caused by the non-performance
of the promise.
Contract • (c) When the act agreed to be done is such
Specifically that pecuniary compensation for its non-
performed performance would not afford adequate
relief, e.g., contract to sell a piece of land.
 (d) When it is probable that pecuniary compensation
cannot be got for the non-performance of the act agreed
Contract to be done.

Specifically
performed Thus if A transfers without endorsement, but for valuable
consideration, a promisory note to B. A becomes
insolvent, and C is appointed his assignee. B may compel
C to endorse the note, for C has succeeded to A’s
liabilities, and a decree for pecuniary compensation for
not endorsing the note would be fruitless. (Sec. 12 Cl. a,
b, c & d of the Specific Relief Act, 1877).
The following contracts cannot be
specifically enforced :
• (a) A contract for the non-performance of which
compensation in money is an adequate relief.
• (b) A contract which runs into such minute or numerous
details, or which is so dependent on the personal
qualification, or volition of the parties that the Court
cannot enforce specific performance of its material terms.
• (c) A contract which is uncertain.
• (d) A contract which is revocable.
The following contracts cannot be
specifically enforced :
• (e) a contract made by trustees either in excess of their powers or
in breach of their trust
• (f) a contract made by or on behalf of a corporation or public
company created for special purposes, or by the promoters of
such company, which is in excess of its powers (Sec. 21 of
Specific Relief Act, 1877)
• (g) A contract the performance of which involves continuous duty
extending over a longer period than three years from its date.
• (h) A contract of which a material part of the subject has ceased to
exist.
 Injunction like specific performance is also a
discretionary remedy of the Court.

An injunction may be temporary or perpetual.

(4) Injunction : It is generally granted to prevent the breach of an

obligation arising out of a contract.

Where a contract comprises an affirmative agreement,

to do a certain act coupled with a negative agreement,
express or implied, not do a certain act, the Court may
enforce the negative part.
Example
• A singer agreed to sign at B’s theatre and during certain period to
sign nowhere else. Afterwards she made a contract with Z to sing
at his theatre and refused to perform her contract with B. The
singer cannot be compelled to sing at B’s theatre, but she may be
restrained from singing at Z’s (Lumley V. Wagner). Again, A
contracts to sell to B the good-will of a business. A then sets up a
similar business close by B’s shop and solicits his old customers
to deal with him. This is contrary to his implied contract, and B
may obtain an injunction to restrain A from soliciting the
customers, and from doing any act whereby their good-will may
be withdrawn from B. (See Sec. 57, Specific relief Act, 1877).
(5) Rescission of the Instrument:
• Any person interested in a contract in writing may sue to have it
rescinded and such rescission may be adjudged by the Court in
any of the following cases :
• (a) where the contract is violable or terminable by the plaintiff
• (b) where the contract is unlawful for causes not apparent on its
face and the defendant is more to blame than the plaintiff
• (c) where a decree for specific performance of a contract of sale
or of a contract to take lease has been made and the purchaser or
lessee makes default in payment of the purchase-money or other
sums which the court has ordered him to pay (Secs.27 and 28,
Specific Relief Act, 1877).
(6) Rectification of the Instrument :
• When through fraud or mutual mistake of the parties a contract or other
instrument in writing does not truly express their intention, either party
or his representative in interest may institute a suit to have the
instrument rectified; and the fraud or mistake is clearly proved and the
real intention of the parties ascertained, the Court may, at its
discretion, rectify the instrument so as to express that intention, so far
as this can be done without prejudice to rights acquired by third
persons in good faith and for value [Sec. 26(2),Specific Relief Act,
1877].
• A contract in writing may first be rectified, and then if the party claiming
rectification has so prayed may be specifically enforced [Sec.26(3),
Specific Relief Act, 1877].
Any Question
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