INTRODUCTION
BREACH OF CONTRACT
• A contract is a legally binding promise made
between two parties. Each party to a contract promises to perform a certain
duty, or pay a certain amount for a specified item or service.
• The purpose of a contract being
legally binding is so each party will have legal recourse in the event of a
breach.
• A breach of contract occurs when
the promise of the contract is not kept, because one party has failed to fulfill
their agreed upon obligations, according to the terms of the contract.
• Breaching can occur when one
party fails to deliver in the appropriate time frame, does not meet the terms
of the agreement, or fails perform at all.
1) RECESSION:
•
When one party
to a contract refuse or fails to perform i.e. commits a breach of contract, the
aggrieved party can assume the contract to terminate, rescind the contract and
is exempted from further performance.
2. CLAIM FOR SPECIFIC
PERFORMANCE OF THE CONTRACT:
•
In certain
cases, when the damages are not adequate remedy, the court may direct the party
in breach for specific performance of the contract and the promise is carried
out as per terms of the contract.
The Court may grant specific performance
in the following cases:-
(i) When the act
agreed to be done is such that compensation in money for its non-performance is
not an adequate relief;
(ii) When it is probable that compensation in money
cannot be got for the non-performance of the act agreed to be done;
(iii) When there exists no standard for
ascertaining the actual damage caused by
the non-performance of the act agreed to be done.
3. CLAIM FOR QUANTUM
MERIT:
•
Quantum Meruit
literally means ‘as much as earned’ and implies payment to a party of as much
money as the party would have earned, had there been no breach of contract.
• When one party,
at the request of another does something or supplies some goods to other party,
and if the compensation for such goods or service has not been defined at the
time of the contract , then the law decides what should be an adequate
compensation for such goods or service, which is called ‘Quantum Meruit’
4) CLAIM FOR DAMAGES:
•
Damages are a
monetary compensation awarded by the court to the injured party, for the loss
or injury suffered by him. When one party breaches the contract, the other
party can claim damages under the contract.
• The object of
awarding the damages is to put the injured party into the position, in which he
would have been, had there been performance and not breach of the contract.
• Sec. 73 of the Indian Contract Act, 1872 deals with
“compensation for loss or damages caused to a party by breach of contract.”
TYPES OF DAMAGES
1) General
Damages.
2) Special
Damages.
3) Exemplary
Damages.
4) Nominal
Damages.
5) Liquidated
Damages.
6) Interest as
Damages.
1) GENERAL 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 damages.
•
For example: A makes a contract to procure 50 bags of wheat form
B. 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 200 more than what he would have
paid to B for the quantity of wheat. The loss of rs200 is a general loss and A
is entitled to claim the same from B.
2)
SPECIAL DAMAGES:
• A party to a
contract might receive a notice of special circumstances affecting the
contract. In such cases, if he breaches the contract, then he is liable for the
ordinary damages plus the special damages.
Example
• Peter hired the
services of John, a goods transporter, to deliver a machine to his factory
urgently. He also informed John that his business has stopped for want of the
machine. However, John delayed the delivery of the machine by an unreasonable
amount of time. Peter missed out on a huge order since he didn’t have the
machine with him.
• In this case,
Peter can claim compensation from John. The compensation amount will include
the amount of profit he could have made by running his factory during the
period of delay.
3) NOMINAL DAMAGES
• If a party to a
contract files a suit for losses but proves that while there has been a breach
of contract, he has not suffered any real losses, then compensation for nominal
damages is awarded.
• This is done to establish the right to a
decree for a breach of contract. Also, the amount can be as low as Re 1.
4) DAMAGES FOR
DETERIORATION CAUSED BY DELAY
• In cases where
goods are being transported by a carrier and he delays the delivery of goods
causing them to deteriorate, the affected party can file a suit for damages for
deterioration by the delay.
• Deterioration can mean physical damage to the
goods and/or loss of a special opportunity for sale.
5)
LIQUIDATED DAMAGES AND PENALTY:
• Liquidated
damages At the of making a contract, if the parties agree to it, fix an amount
which is a fair and genuine reassessment of the probable loss that might ensue
as a result of the breach, such amount is called liquidated amount.
• PENALTY
when, at the time of making contract a sum which is disproportionate to the
damage likely to be caused by the breach of contract is fixed by the parties to
be paid to the aggrieved party in case of breach such sum is called penalty.
6)
INTEREST AS DAMAGES:
• When a party to
a contract does not make a payment on the stipulated date, is the party liable
to pay damages in the form of interest on the amount? This is an important
issue in the case of a breach of contract.
• Normally in the case of breach of contract the
offending party is liable to pay interest in the following situations:
a) When the date of payment is not fixed.
b) Interest from the date of
default.
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