Remedies for breach of contract

Introduction

Breach of contract means “violating any terms and conditions that can bind a contract”. If 2 parties are involved in a situation where a contract is required and in case one party cannot fulfill those requirements, it is known as a breach of contract.

Types of breaches

Actual
Anticipatory

Remedies for breach of contract

Suit for Damages
Suit for Quantum meruit
Suit for injunction
Suit for Recission
Suit for Performance

Suit for Damages

Section 73 of the Indian Contract Act, 1872 defines payment of damages according to the Hardley v/s Baxendale case rule aggrieved party is entitled.

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.

Damages can be mainly 5 types

(a) Ordinary damages/Nominal damages: occur when the damages occur naturally through the breach.

Case law Hardley v/s Baxendale, 1854

A carried on an extensive business as a miller.
A’s mill was stopped by a breakage of the crankshaft
A delivered the shaft to B, a common carrier, to carry it to the manufacturers to copy it and make a new one.
A did not know that a delay from B would result in a loss of profits.
Due to neglect on the part of B the delay of the shaft was delayed in transit beyond a reasonable time thus A got an extra loss of profit
A suit against B, It was held that B was not liable for the loss of profit during the period of delay as B.

(b) Liquidates damages & Penalties: some parties to a contract, during preparation of the contract agree to the amount of compensation payable in the event of a breach of contract.

The amount of compensation payable, which have been agreed beforehand, either liquidated damages or penalty.

The intention of parties is so important for liquidated damages and penalties, the same was said in the below case

Law v/s Redditch Local Board

The intention is to assess the damages for breach of the contract, it is “liquidated damages”.
If the intention is to secure the performance of the contract by fine is called “Penalty”.

Case law Dunlop Pneumatic Tyre Co. v/s New Garage & Motor Co.

Plaintiff manufactures motor car tyres and tubes and sells these goods to the defendant.
There is a contract between the plaintiff and defendant i.e. if the defendant sells goods below the list price then pay €5 by way of liquidated damages for every tyre, tube, etc.
But the defendant sold goods below the listed price,
It was held by the House of Lords that the sum of compensation was a genuine pre-estimate of damages therefore the €5 is liquidated damages.

Case law Ford Motor Co. v/s Armstrong

Plaintiff has manufacturing company car and car parts.
The defendant was a retail dealer of the plaintiff’s company, he agreed not to sell any car or car parts below the company’s listed price.
If the defendant breaches, he has to pay €250 for every car or car part.
It was held that the amount fixed for the breach was arbitrary, such high damages even for a trifling breach were called Penalty.

Difference between Liquidated damages and Penalty

Liquidated damages	Penalty
Usually agreed at the time of formation of contract	Usually imposed by law for actual damages suffered by non-breaching party
Compensation to be paid genuine pre-estimated prospective damages	Compensation agreed to be an event of a breach of contract is excessive & disproportionate
Enforceable in court as long as determined reasonable	Penalties may be unenforceable or void if they are deemed excessive
Generally designed to provide compensation for the non-breaching party’s actual losses	Penalties can exceed the actual damages suffered by the non-breaching party
Focus on the principle of compensatory justice	Focus on the principle of retributive justice
Generally applicable in civil law jurisdictions	Penalties can be found in both civil law and common law jurisdictions

(c) Special damages: The concerned party must prove that it loses according to the contract and claim damages

(d) Nominal damages: In the absence of any concrete material to show the extent of damages suffered by the plaintiff, the maxim of nominal damages UBI JUS IBI REMEDIUM means where there is a right there is a remedy.

Case law Ashby v/s White

Plaintiff was a qualified voter at a parliamentary election.
Defendant, returning officer wrongfully refuse to take plaintiff’s vote.
The candidate for whom he wanted to vote won the election despite that,
It was held that No loss was suffered by such a refusal, even though the defendant was liable.

(e) Vindictive damages: Breach addresses the mental and emotional suffering of the concerned party. Generally, legal procedures such as court may take care of these cases.

Suit for Quantum Meruit

Ordinarily, if a person has agreed to do some work but only a part is done in that situation generally, he cannot claim anything for what he has done, but the law recognizes an important exception to this rule by way of an action for Quantum Meruit.

Principle of quantum meruit

The principle of quantum meruit is often applied where for some technical reason a contract is held to be invalid.

The provisions of section 70 of the Indian Contract Act, 1872 are based on the doctrine of quantum meruit but the provisions are more liberal. Principle of quantum meruit wider.

Essentials for quantum meruit

One of the parties makes a breach of contract or prevents the performance by the other side.
The party injured by the breach of the contract, who has already performed a part of it.

Case law Cravan-Ellis v/s Cannon Ltd

Plaintiff appointed managing director of a company, paid certain remuneration for his services.
But the agreement of his appointment was void because of the requirement of his articles of association.
Company directors failed to take the qualification shares within the prescribed time limit,
Plaintiff continued to render the services to the company, actually he couldn’t get anything.
But still entitled to recover for the services.

Suit for Injunction

The court gives the restraining order which is known as an injunction. The main purpose of granting an injunction is to prevent future possible injury. According to Section 36 of SRA,1963 is given at the court’s discretion by injunction temporary or perpetual. Preventive relief is an order or command of the court preventing a party from doing something he is legally obliged to do.

Types of Injunctions: Injunctions are mainly two types but are classified into 4 categories.

Temporary Injunctions [ Section 37(1)] of Specific Relief Act, 1963
Perpetual Injunctions [ Section 37(2)] of Specific Relief Act, 1963
Prohibitory Injunctions [ Section 38] of Specific Relief Act, 1963
Mandatory Injunctions [ Section 39] of Specific Relief Act, 1963

Suit for Recission

If one of the involved parties breaches the contract, another party can choose to disobey the conditions given in the contract. Generally, Recission of the contract means cancellation of the contract. According to section 62 in the Indian Contract Act,1872 original contract rescinds or alters then parties substitute a new contract.

Suit for Performance

When the court gives a particular remedy for breach of contract to both the parties involved so that they can perform the activities according to the contract.