REMEDIES FOR BREACH OF CONTRACT

The law provides the remedies to remove the pains of the aggrieved party.

Anson points out the remedies for the breach of contract may be classified under the following 3 heads:

• Damages
• Quantum Meruit, and
• Specific Performance and Injunction.

But when a contract is breached, there are specific remedies to it. Broadly speaking,
there are main six remedies available.

1. Rescission: Rescission allows the non-breaching party to essentially be released from

performance obligations. Recession is a remedy for a breach of contract because it makes clear
that the party is relieved of his duties due to the failure of the other party to perform. For
example, imagine that you contract to provide catering services for an event. The contract
requires the other party to pay half the contract price by a certain date, but they never pay.
Since, payment goes to the heart of contract, you would be justified in rescinding the contract
and refusing to provide the catering services.
2. Restitution: It means return of the benefit received by one party to the contract from the
other party under a void contract. Sec 65 provides that when an agreement is discovered to be
void or when a contract becomes void any person who has received any advantage under such
agreement or contract is bound to restore it or to make compensation for it to the person from
whom he received it.
Example: A pays B Rs.1000 in consideration of B’s promising to marry C, A’s daughter. C is dead
at the time of promise. The agreement is void but B must repay A Rs.1000.
3. Specific Performance: In some cases, the appropriate remedy for a breach of contract is to
correct the breach by forcing the breaching party to complete the terms of the agreement.
Specific performance is an appropriate remedy in situations where monetary damages could not
possibly make the non-breaching party whole for the losses. For example, if there was a contract
created for a buyer to purchase a very rare piece of art, the buyer could not simply find the art
elsewhere. The only remedy that would help the buyer in this circumstance is for the court to
require the sale to go through so the buyer got the unique one-of-a-kind painting that he
contracted for.
4. Injunction: It is a negative order by the court that restrains a party from doing something.
Injunctions are either 1) prohibitory or 2) mandatory
A prohibitory injunction may be granted to restrain the breach of a negative contract. A
mandatory injunction compels the positive performance of an act.
The leading case is:
Warner Bros. Vs. Nelson
A film actress agreed to act exclusively for Warner Bros for a year, and for no other producer.
During the year, she contracted to act for another producer. It was held that she could be
restrained by injunction from doing so.
5. Quantum Meruit: Quantum Meruit literally means ‘as much as earned.’ When one party, at
the request of another does something or supplies some goods to the other part, and if the
compensation for such goods or services has not been defined at the time of the contract, then
the law decides what should an adequate compensation for such goods or services, is called
quantum meruit. How much or what would be such compensation depends upon the
circumstances of the case.
Example: A promises to construct a house for B for Rs.50,000. After A has started construction,
but before its completion. B abrogates the contract and stops A form work. In such situation A
can sue for an adequate compensation for the work that he has already done and can also sue
for damages.
6. Damages: Damages are a monetary compensation allowed to the aggrieved party by law for
the loss or injury suffered by him for the breach of a contract. The purpose here is to help the
party who has suffered a loss to retain the position it had before the loss was imposed upon the
party by the breach of contract.
Example: A promises to deliver 100 cycle tyres at Rs.50 each to B on 1st May,2020, but doesnot
perform his promise on that date. In such circumstances if the price of a cycle tyre on 1st may is
Rs.55 per tyre, then B is entitled to claim damages at Rs.5 per tyre from A, and can sue for such
damages.
Damages are of four kinds:
1. General or ordinary damages: When a contract is broken, the natural and direct loss
suffered by the aggrieved party is called “general damage”, and the aggrieved party can
claim such damage.
Example: A makes a contract to procure 50 bags of wheat from B at Rs.200 per bag. On the
day of delivery B fails to deliver and A has to procure the wheat from the open market
where he has to pay Rs.400 per bag (i.e., Rs.200 more than what he would have paid to B for
the quantity of wheat). The loss of Rs.200 is a general loss and A is entitled to claim the
same from B.
2. Special damages: A loss that arises out of special circumstances prevailing at the time of
breach of contract is called special damages, and includes damages other than those arising
from the breach of contract. The following are the situations in which the aggrieved party is
entitled to such damages:
a) Special damages can be claimed only if there is a special loss to the aggrieved party.
b) Both the parties to the contract are in the know of the special circumstances leading to
such loss
c) The contract envisages the payment of special damages.

Example: B contracts with a railway company to transport folder to a destination where a

Cattle fair is going to held. He also informs the rail company that the fodder is meant for
cattle fair. If the fodder does not reach in time, there will be a special loss to B. If the
delivery is delayed, B is entitled not only to loss he suffers because of late delivery but can
also claim profit he would have made by selling the fodder in the cattle fair.
 3. Vindictive or exemplary damages: Sometimes the breach of a contract may result in the
loss of credibility of a party and may hurt the party’s reputation. The party’s goodwill is
damaged and there is an emotional shock.
• In such circumstances, if the court feels that ordinary damages are not enough
compensation for the loss of reputation or emotional damage suffered by the
aggrieved party, the court may impose exemplary damages on the defaulter.
• The objective of exemplary or vindictive damages is not only to compensate the
aggrieved party, it is also to punish the defaulter.
The leading case is:
Jefferson vs. Paskell
The justice opined that breach of a marriage contract not only implies that loss of
money spent on making arrangements for the marriage, but it also hurts the
emotions of a girl who is looking forward to meet her husband and stay with him.
Besides, there is a social damage to the girl’s reputation. Therefore, ordinary
damages are not an adequate compensation for such loss.

4. Nominal Damages: When the aggrieved party has not in fact suffered any loss by reason
of the breach of contract, the damages recoverable by him are nominal, i.e., very small.
Such damages is a warning to the defaulting party that it has committed a breach of
contract.

Example: A makes a contract to procure 50 bags of wheat form B at Rs.200 per bag. On the day of
delivery B fails to deliver and A has to procure the wheat from another supplier at same price i.e., Rs.200
per bag. Now B has not suffered any loss but in order to maintain discipline in business industry, Court
can ask B for the payment of nominal damages so that the person cannot make breach the contract very
easily.

Liquidated Damages and penalty: When the parties to a contract agree, at the time of
making the contract, that in the event of a breach of the contract, the party responsible for
the breach would pay a specified sum as damages to the other party. Such payment may
amount to either liquidated damages or penalty.

Liquidated Damages
It is an estimation of amount by both the parties that is payable by the defaulting party to
the aggrieved party at the breach of a contract.
The court cannot increase or decrease the amount of such damages.

Penalty
The penalty is the amount that is not related to the damages likely to be caused to the
aggrieved party in case of a breach, but is disproportionately more and is fixed by both the
parties with a view to ensure the performance of the contract.
The court reserves the right to reduce of amount of penalty if it feels it is unreasonable.
• The amount of penalty is a warning of serious consequences of a breach while
liquidated damages are an estimation of the likely loss.
 • The Indian law makes no distinction between liquidated damages and penalty.
According to Section 74, the law permits only a reasonable compensation which
can, in no case exceed the amount mentioned in the contract.

Difference between Liquidated Damages and Penalty

Basis of Difference Liquidated Damages Penalty
The object is to save the The object is to force the
1. Object aggrieved party from loss in case of a promisor to perform his
breach of contract. promise under the contract.

The amount is almost equal to the The amount is much more

2. Amount expected loss to the than the expected loss to the
aggrieved party. aggrieved party.

The court does not have the right to The court has the right to
3. Right of Court
reduce the amount. reduce the amount.