breach of contracts

8/7/2019 Breach of Contracts

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� A invites B to see a picture with him. Baccepts the offer. A purchase a ticket

for B and waits for him outside the

cinema hall. B does not turn up has A

any cause of action against B.



� A agrees with B to murder C for Rs.

10,000. Is this a valid contract?



� X undertakes to put life into the dead

wife of Y and takes his fees Rs 5,000 inadvance. X fails to do so. Y claims Rs

5,000. Is Y¶s claim valid?



� RECIPROCAL PROMISESREGARDING IMPOSSIBLE ACTS

[Sec. 56]

� The person who received any

advantage under a void agreement, is

bound to return such profits and pay

damages [Sec. 65]



BREACH OF

CONTRACTS&

ITS REMEDIES



� A enters into a contract with B andpromises him to deliver goods of Rs.

10,000 up to 10th march,2005 and B

promises to make the payment on due

date. But on specified date A refuses todeliver goods to B. Here it will be said A

has done breach of contract , he will be

called defaulter and B will be calledaggrieved party.



Breach of Contact may arisein two ways:-



� Actual Breach of Contract occurs in the

following two ways:

± On Due Date of Performance

± During the Course of Performance: If any

party has performed a part of the contract and

then refuses or fails to perform the remaining

part of the contract, it is called an actual

breach of contract during the course of

performance.

� Anticipatory breach of contract occurs when

party declares his intention of not performing the

contract before the performance is due.



REMEDIES TO AGGRIEVED

PARTY

RESCISSION/CANCELLATION

CLAIM FORDAMAGES

CLAIM FORQUANTUM

MERIT

CLAIM FORSPECIFIC

PERFORMANCE

CLAIM FORINJUNCTION



RESCISSION/

CANCELLATION

� A contracts to supply 100 kg of tea

leaves for Rs 8,000 to B on 15 April. If A

does not supply the tea leaves on the

appointed day, B need not pay the

price.

� B may treat the contract as rescindedand may sit quietly at home. B may also

file a suit for rescission and claim

damages.



Exceptions to the right:

� When aggrieved party gives its express

confirmation to the contract.

� When due to the change of

circumstances the parties cannot fulfill

the original contract.



Claim for Damages [Sec.73]

� Damages are monetary compensation

allowed to the injured party for the loss

suffered by him as a result of the breach

of contract.

� ³If actual loss is not proved, nodamages will be awarded.



� CASE� Simpson vs. London North Railway

Company.



2. No compensation is to be givengenerally for any indirect loss.

-Case of Headley vs. Bexendale.

3. Efforts to use the resources for minimizing the loss.

4. When Penalty is pre decided.



TYPES OF DAMAGESORDINARY DAMAGES

SPECIAL DAMAGES

EXEMPLARY/ VINDICTIVE

NOMINAL DAMAGES

LIQUIDATED DAMAGES & PENALITY



� Special Damage: The profit the other party might have earned if the contract

had been fulfilled. It must be in the

knowledge of both the parties that some

special damage may occur due to

breach of contract.



� Exemplary/Vindictive damages: Alsoknown as Punitive Damages. These are

such damages which are awarded with

a view to punishing the guilty party for

the breach and not by way of compensation for the loss suffered by

the aggrieved party

� Breach of a contract to marry: Thesentiments so injured cannot be

measured in terms of money.



� Nominal Damages: where in a contract

of sale of goods, if the contract price

and the market price is almost the same

at the date of breach at the contract,

then the aggrieved party is entitled onlyto nominal damages.



� Liquidated Damages and Penalty:

± µLiquidated damages¶ means a sum fixed

up in advance, which is a fair and genuine

pre estimate of the actual loss that is likely

to result from the breach.

± Penalty is a payment of money fixed

without any regard to the actual loss.

� A contracts with B to pay Rs 1,000 if he fails

to pay B Rs500 on a given day. A fails to payB Rs 500 on that day. B is entitled to recover

from A such compensation, not exceeding Rs

1,000.



BASIS OF

DIFFERENCE

LIQUIDATED

DAMAGES

PENALITY

Object Protect the aggrieved

party from loss

Warn the parties

against breaking the

contracts.

Estimate Estimated amount of

Actual loss is there

Not Actual amount,

always kept high.

Right of court Court cannot reduce

the amount of damages

Court can bring it to

justified level by

reducing it.



� Aggrieved party can recover only actual

loss.

� Special damages should be in the

knowledge of both the parties.

� The fact that damages are difficult toaccess does not prevent the injured party

from recovering them.

� When no real loss occurs only nominal

damages are awarded.

� If amount of damage is fixed in advance

only that amount would be paid.

� It is the duty of injured party to minimize



CLAIM FOR QUANTUM

MERIT

� ³as much as is earned´ or ³in proportion

to the work done.´

� It usually arises when a person does

some act for another, there is a breach

of contract by other party, or thecontract is discovered void or becomes

void.



� A, engages B, a contractor, to build a

three storied house. After a part isconstructed A prevents B from working

any more. B, the contractor, is entitled

to get reasonable compensation for work done under the doctrine of

quantum meruit.



� A contracts with B to repair his¶ house at a

piece rate. After a part of the repairs werecarried out, the house is destroyed by

lightning. Although the contract becomes

void and stands discharged because of

destruction of the house, A can claimpayment for the work done on µquantum

meruit¶.

� If a lump sum is to be paid for the repair job as a whole, then A cannot claim

quantum meruit because no money is due

till the whole job is done.



CLAIM FOR SPECIFIC

PERFORMANCE

� Where damages are not adequate

remedy.

� When you cannot ascertain the actual

damage.



� X is in search of a house in the

particular area for a long time. After

making hard efforts he founds a house

according to his requirements and he

decides for its purchase. Y is the owner of the house. Y agrees to sell it. But

after entering into a contract, later on Y

refuses to sell his house. In this

situation, monetary compensation

cannot help the aggrieved party.



Claim for injunction

� µInjunction¶ is an order of a court

restraining a person from doing

particular act.

� where the party is doing something

which he promised not to do.

� µinjunction¶ is a preventive relief. It is

particularly appropriate in cases of

anticipatory breach of contract where

damages would not be an adequate

relief.



� A, agreed to sing at B¶s theatre for three

months from 1st April and to sing for no

one else during that period.

Subsequently she contracted to sing at

C¶s theatre and refused to sing at B¶stheatre. On a suit by B, the court

granted an injunction restraining A from

singing elsewhere and awardeddamages to B to compensate him for

the loss caused by A¶s refusal.



PRACTICAL PROBLEMS



� A contracts to pay a sum of money to B

on a specified day. A does not pay the

amount on that day. B in consequence

of not receiving the money on that day,

is unable to pay his debts and, is totallyruined. B claims heavy damages.

Advise A.



� A is liable to pay interest only from the

specified day upto the date of payment.

In other words B can; claim only

ordinary damages. B cannot claim

heavy damages unless A had notice of the special circumstances resulting in

the special loss at the time of entering

into the contract.



� A agreed to build a house for B by 31st

March, 1976. A further agreed to pay Rs

500 per month as damages in case of

delay beyond the agreed date. A was

late by four months. B sued A for Rs4,500, the actual loss caused to him as

a result of the delay. What damages will

you award, and why?



� B is entitled to recover Rs 2,000 only,

because when a sum is named in - the

contract as the amount to be paid in

case of breach, the court will allow only

reasonable compensation so as tocover the actual loss sustained, within

the limits stated in the contract.



� A employs B as manager of his factory

for a term of three years at a monthly

salary of Rs 3,000. Without any lapse

on the part of B, A dismisses him after

two years of service. B could not get analternate job elsewhere and files a suit

for damages for breach of contract

against A. Will he succeed? If yes,assess the amount of damages

recoverable by him.



� Yes, B will succeed. If it cannot be

proved that B has failed in his duty tominimize the loss subsequent upon the

breach, B. will be entitled to full salary

for the whole of the unexpired period of service i.e., one year. Hence the

amount of damages recoverable by B

amounts to Rs 36,000.

breach of contracts

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