Remedies for Breach of Contract_Notes

7/29/2019 Remedies for Breach of Contract_Notes

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Remedies for breach of contract

Remedy is the means given by law for the enforcement of a right when contract is broken, theinjured party has following remedies:

1. Rescission: when contract broken by one party, the other may treat contract as rescinded refuse further performance injured party absolved of all his obligations under the contract however liable to restore any benefits he has received under the contract also entitled to

compensation for any damages sustained by him.

Example: A promises to supply goods to B by a specified date - B agrees to pay the price after

receipt of the goods A fails to supply the goods by the specified date B is discharged from

liability to pay the price.

The Court may grant rescission

(i)where contract is voidable at the option of the plaintiff, or

(ii)

where the contract is unlawful for causes not apparent on its face and defendant is more toblame than the plaintiff.

The Court may refuse to grant rescission in following cases :

(i)where plaintiff has expressly or impliedly ratified the contract, or

(ii)where owing to changed circumstances (not due to any act of defendant), parties cannot berestored to their original positions, or

(iii)where third parties have acquired rights in the subject matter of the contract in good faith and

for value, or(iv)Where only a part of contract is sought to be rescinded and such part is not severable from

the rest of the contract.

2. Damagesmonetary/pecuniary compensation allowed to injured party by Court for loss orinjury suffered by him - injured party entitled to

(a)damages which arise in usual course of things for such breach ordinary damages.(b)Damages which the parties knew, at the time of entering into contract, to be likely to result

from the breachspecial damages.

(c)Damages for breach of quasi contract same as for any other contract.

However, damages not given for any indirect or remote loss or damage.

Hadley V Baxendale As mill stopped by breakdown of a shaft A delivered shaft to B, acommon carrier, to be taken to manufacturer for repairs A did not inform B that delay would

cause loss in profitsdue to Bs negligence, delivery of shaft delayed beyond reasonable time

Held, B not liable for loss of profits during the period of delay as B was not intimated that delay

in delivery of the shaft would entail loss of profits.

Rules relating to damages -

Ordinary damagesarises naturally and directly from breach in usual course of things.


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In contract for sale of goods, measure of damages on breach is the difference between the

contract price and the market price on the date of the breach where goods specially made to

order and not marketable, the price of the goods is the measure of damages.

Example: A contracts to buy rice from B at Rs.950 per quintalno time fixed for deliverylater

A informs that he will not buy from B market price on that day was Rs.930 per quintal Bentitled to receive compensation from A at the rate of Rs.20 per quintal.

Example: A contracts to pay a sum of money to B on a specified day A does not pay on

specified dayas a consequence, B is unable to repay his debts and is totally ruinedA is notliable to make good to B anything more than principal sum he contract to pay together with

interest up to day of payment.

If promisee neglects or refuses to afford the promisor reasonable facilities for performance of hispromise, promisor is excused from performance.

Special damages : such damages may reasonably be supposed to have been in contemplationof both parties as probable result of the breachhowever, cannot be claimed as matter of right.

Simpson v London & N.W. Rail. Co.S sent specimen of his goods for exhibition at agricultural

showafter show, he entrusted his goods to an agent of railway company for carriage to another

show grounds at New Castle on consignment he wrote must be at New Castle Mondaycertain due to negligence of railway company, goods arrived late for the show Held, S could

claim damages for loss of profit at show.

Madras Rail Co. V Govinda Rau - G, a tailor, delivered a sewing machine and some cloth to

railway company to be delivered at a place where a festival was to be held expected

exceptional profits at festival did not bring it to notice of railway company goods delivered

after conclusion of festivalHeld, G could not recover the loss of profit.

Vindictive or exemplary damages vindictive/punitive by nature normally awarded in

breach of promise to marry and wrongful dishonour or cheque by banker.

Nominal damageswhere injured party has not suffered any loss due to breach, only nominal

damages are awardedonly to acknowledge that the plaintiff has proved his case and won.

Brace V CalderA firm consisting of four partners employed B for a period of 2 years after

six months, two partners retiredcontinuing partners refused to employ BHeld, he was only

entitled to nominal damages as he had suffered no loss.

Damages for loss of reputationnormally not recoverableexception, wrongful dishonour of

customers cheque by banker in spite of sufficient funds to the credit of the customergeneral

rule is: smaller the amount of the cheque dishonoured, the larger is the amount of damagesawardedif customer is not a tradesman, he can recover nominal damages only.

Damages for physical inconvenience and discomfort measure of damage not affected by themotive or the manner of breach.


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Addis V Gramophone Co. Ltd.A wrongfully dismissed in harsh and humiliating manner by G

from employment Held, A could recover wages for the period of notice and the commission

which he would have earned during that period but not entitled to anything for his injuredfeelings or for the loss sustained from the fact that his dismissal made it more difficult for him to

obtain employment.

Hobbs V London & S.W. Rail Co.H, alongwith his wife and children, took ticket for midnighttrain for particular place where he lived wrongfully transported to a wrong placehad to walk

several miles on a drizzling wet night his wife caught coldHeld, H entitled to recover 8 to

compensate him for inconvenience but nothing for medical expenses of his wife as her catchingcold was too remote a consequence.

Mitigation of damages: injured party duty bound to take all reasonable steps to mitigate the

loss caused by the breach cannot claim damages for loss which reasonably could have beenavoided.

Difficulty of assessmentno bar to recovery of damagesCourt to estimate the loss and may

take into account a contingency.Chaplin V. Hi cks- H advertised a beauty competitionreaders of certain newspapers to select

50 ladies then H was to select 12 out of those 50 selected 12 to be provided theatrical

engagements C was one of the 50 selected however, C was not present at the time of final

selection due to Hs breach of contract Held, C was entitled to damages although it wasdifficult to assess them. Cost of decree aggrieved party entitled to the cost of getting the decree, in addition to

damagesallowed at discretion of the Court.Damages agreed upon in advance in case of breach if contract contains a stipulation that a

certain sum to be paid by way of penalty for failure to perform the obligations - aggrieved party

entitled to receive a reasonable compensation not exceeding the amount so named.

May be liquidated damages or a penalty liquidated damages represent a sum (fixed or to beascertained) which is fair and genuine pre-estimate of the probable loss caused by breach

penalty is disproportionate to the damage and is fixed only with a view to secure performance of

the contract.Dunlop Pneumatic Tyre Co. Ltd. Vs. Selfridge & Co. Ltd.S bought tyres from Dunlop Rubber

Co.sold them to D, a sub-dealerD agreed not to sell below Dunlop Rubbers list price to

pay Dunlop Rubber 5 for every tyre undersold - D undersold two tyresDunlop Rubber suedfor breachHeld, the sum fixed was a genuine pre-estimate of damage and not a breach.

Payment of intereststipulation regarding payment of interest in case of default not in the

nature of penaltyallowed if reasonablehigher rate of interest may be allowed from the date

of default if not penal in nature higher rate never allowed from the date of the contract compound interest at the same rate as simple interest may be allowed as not penal in nature

where lower rate is charged if certain conditions satisfied, failure to fulfil the conditions may

entail payment of higher (i.e. normal) rate of interest.

3. QuantumMeruitmeans as much as earned or as much as merited arises when contract

partly performed by one party and then becomes discharged due to breach by other party party

who has performed the work can claim remuneration for the work done it is claim on quasi-contractual obligation


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Arises in following cases

(i) when agreement discovered to be void person who has received advantage under the

contract is bound to restore it or to make compensation for it.

Craven-Ellis V. Cannon Ltd. CE employed as managing director in a company after three

months, found that directors were not qualified to appoint him Held, CE could recover

remuneration for the services rendered by him on quantum meruit.(ii)When something done without intention to do so gratuitously.(iii) When there is express or implied contract to render service, but no agreement as to

remuneration

Upton Rural District Council v Powell- Ps farm did not come under the free service zone of thefire department - fire at Ps farm P called up U pton Fire Brigade which arrived and put out the

fire Held, there was implied agreement between P and fire brigade for the service of the

brigade - P was liable to pay reasonable remuneration for the service rendered.

(iv)When completion of contract prevented by the act of the other partyPlanche V. Colburn - C engaged P to write book on ancient armoury to be published in

instalments in periodical called The Juvenile Library for fee of 100 after few issues,

publication of periodical stoppedHeld, P could recover on quantum meruitfor the work doneby him.

De Bernady V HardingP wrongfully revoked his agent As authority before A could complete

his dutiesHeld, A could recover quantum meruitfor the work done by him and the expenses

incurred by him in course of his duties.(v) When contract is divisible where party not in default has enjoyed the benefit of part

performance, the party in default can sue on quantum meruit

(vi)When indivisible contract performed completely but badlyHoenig V. Issacs A agreed to decorate Bs flat for a lump sum of quantum 750 certain

requirements laid down A completed the work but B complained of faulty workmanship it

cost B 204 to remedy that defectHeld, A could recover from B 750 less 204.

4. Specific Performancein cases where damages are not adequate remedy, Court may direct forspecific performance also enforced where no standard for ascertaining the actual damage

caused.

5. Injunctionwhere a party is in breach of a negative term of contract, Court may restrain himfrom doing what he promised not to do.

Lumley Vs. Wagner- W agreed to sing at Ls theatre agreed not to sing anywhere else during

that periodlater, W made contract with Z to sing at another theatre and refused to perform thecontract with L Held, W could be restrained by injunction from singing by injunction from

singing for Z.

Documents

Remedies for Breach of Contract_Notes