remedies for breach of contract

REMEDIES FOR BREACH OF CONTRACT

Table of Contents

REMEDIES FOR BREACH OF CONTRACT

A contract is a legal document that binds all the parties to perform as it is enforceable by law. If any of party refuses to perform his obligation on his part, then it is known as Breach of the contract. As the contract is entered into for the benefit of both the parties. So the breach of the contract results in damage or loss on the other party. So the Remedies for breach of contract are provided. These remedies are as follows:

RESCISSION OR CANCELLATION OF THE CONTRACT

This remedy is to cancel the contract between the parties. When one of the parties to contract does not perform the obligations of his part, then the other party may rescind the contract.

According to Section 39 of the Indian Contract Act, 1872

“When a party to a contract has refused to perform his promise in its entirety, the promise may put an end to the contract.”

According to section 64 of the Indian Contract Act, 1872

“When the party treats the contract as rescinded, he also makes himself liable to restore any benefits he has received under the contract to party from whom such benefits were received.”

According to Section 75 of the Indian Contract Act, 1872

“Where the party rightfully rescinded the contract, he is entitled to compensation for damages suffered due to the breach of the contract.”

CASE: RASH BEHARI SHAHA VS. NRITTYA GOPAL NUNDY (1906)

A agreed to purchase from B 300 tons of sugar under two contracts delivered on different dates. A failed to make delivery as per the first contract. B claimed to rescind both the contracts. Held, that as there was no refusal on the part of the A to perform his promise in its entirety; B was not entitled to rescind the contract.

Example: X, an advocate promises to plead Y’s case in the court if Y pays him Rs. 2,000 before the date of the hearing. Y has not paid Rs. 2,000 before the date of the hearing. So X can rescind the contract as Y has not performed the obligation of his part. So X has every right to refuse to plead for Y’s case in the court of the law.

Situations in which this remedy is available:

  • If the contract is executor contract on the part of both the parties.
  • If there is bilateral contract and one party decides not to perform his part, then another may also refuse to perform the obligations of the contract.

 Cases in which this remedy is not available:

  • Where the party entitled to rescission has expressly or impliedly ratified the contract.
  • Where the parties cannot be placed in the same position as they were before the breach of the contract and is due to change in the circumstances.
  • Where the third party has acquired right in the subject matter in the good faith and for the value during the subsistence of the contract.
  • Where the part of the contract sought to be rescinded is not separable from the rest of the contract.

SUIT FOR QUANTUM MERUIT

‘Quantum Meruit’ means ‘As much as earned’ or ‘In proportion to work done’. This remedy is available if one party has performed the part of the contract and it is discharged due to the default of the other party. This remedy can be claimed without claiming for damages or along with claim for damages.

Circumstances in which party may claim payment on Quantum Meruit:

  • Where the contract is divisible and the promisor is stopped by the promisee from making further performance of the contract. If the contract is not divisible, the party making part performance cannot claim the value of his work.
  • When a part performance is made under a void contract.
  • Where there is lump sum or divisible contract which is completely performed but with certain defects, the party making the performance can recover the lump sum less a deduction for the defects.

CASE: PLANCHE VS. COLBURN (1831)

P was engaged by C to write a book to be published in instalments in a weekly magazine. After publication of three instalments, the magazine was abandoned. Held, P could recover on quantum meruit for the instalments completed.

CASE: SUMPTER VS. HEDGES (1898)

The plaintiff, a builder agreed with H to erect a house for 565 euros. He did work to the value of 333 Euros and then abandoned the contract. H thereupon completed the construction himself. Held, the plaintiff was not entitled to recover anything because the contract was not divisible. His plea that the defendant has accepted the benefit of part performance was rejected as the defendant has no option but to accept the work.

CASE: CRAVEN ELLIS VS. CANONS LTD. (1936)

The plaintiff was appointed as the managing director of a company. The appointment was made by the other directors who were qualified, as they had not taken the qualification shares but the plaintiff continued to act as the managing director and sued the company for remuneration on quantum meruit. Held, he was entitled to reasonable remuneration on a quantum meruit.

SUIT FOR SPECIFIC PERFORMANCE OF THE CONTRACT

Specific performance means actual carrying out the contract as agreed. The court may the direct the party liable for the breach to perform his performance specifically as mentioned in the contract. This remedy is discretionary and provided in very rare cases.

This remedy is provided in the following cases:

  • This remedy is provided where the monetary compensation is not adequate remedy for the breach of the contract.
  • Where there are no proper standards for ascertaining the actual damage caused by the non-performance of the contract.
  • Where the subject matter of the contract is rare or unique.

The injured party may file the suit for this kind of damage if there is the contract regarding the land, building and rare articles etc. Similarly it is granted in the case of allotment of shares in a particular company.

This remedy is not provided in the following cases:

  • Where the monetary compensation is adequate remedy.
  • Where the promisor is a minor.
  • Where the contract is of personal nature. Example: the contract to marry etc.
  • Where the court cannot supervise the performance of the contract i.e. building contract.

CASE: JAWAHAR SAO VS. STRIGHANA (1961)

A contracted to sell certain goods to B. These goods were ordinary in nature and not unique. On the due date A refused to resell the goods to B. B filed the suit against A for specific performance. It was held that B could not claim specific performance.

Example: B was the famous painter in the town.  A contracted with him to paint his picture. Later, B refused to make the contract. Held, A can claim for the specific performance.

SUIT FOR INJUNCTION

Injunction is the negative order of the court. It is the order of the court for restraining the person to do some act, which he has promised not to do under the contract. Sometimes a promise may contain two parts, one positive and another negative. If he commits breach of his promise, the promise may get an order issued by the court restraining him from doing what he has promised not to do.

According to Section 42 of Specified Relief Act, 1963

“Injunction is a mode of securing specific performance of the negative terms of a contract.”

The court will grant injunction in the following cases:

  • Where the promisor undertakes not to do something i.e. not to carry on certain trade.
  • Which is negative in substance not in form.

CASE: WARNER BROTHERS VS. NELSON (1937)

The defendant of a film star, agreed to act exclusively for the plaintiff not to work for any other party for a year. But before the expiry of the one year, the defendant actor also contract with another party to work. The court issued injunction restraining from her acting for the other party during the contract period.

CASE: LUMELY VS. WANGER (1852)

W, agreed to sing at L’s theatre and during a certain period to sing nowhere else. Afterwards W made contract with Z to sing at another theatre and refused to perform the contract with the L. It was held that W could be restrained by injunction from singing for Z.

CASE: METROPOLITAN ELECTRIC SUPPLY CO. VS. GINDER (1901)

G agreed to take all the electric energy required by his premises from M. it was held that this was in substance an agreement not to take energy from any other person and it could be enforced by injunction.

SUIT FOR RESTITUTION

This remedy is based on the principle of equity and justice. Restitution means the act of restoration. If a person has received the unjust benefit at the expense of other party; that person is bound to restore the same to the person from whom he has received it.

This remedy is provided in the following cases:

  • (Under section 64): Where the contract is voidable at the option of one party.
  • (Under Section 65): When the agreement is discovered to be void.
  • (Under Section 65): When a contract becomes subsequently void.

SUIT FOR DAMAGES

Damages means the monetary compensation to the aggrieved party for any loss caused to him by the breach of the contract. The intention of the law in awarding the damages is not to punish the party, who has committed the breach of the contract. The main purpose of awarding damages is to put the aggrieved party in as good a position as he would have been if there is no breach of the contract.

According to Section 73 of the Indian Contract Act

“When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party liable for breach, compensation for any loss caused to him thereby.”

The damages awarded are of the following types:

  • Ordinary damages.
  • Special damages.
  • Vindictive or exemplary damages.
  • Nominal damages

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