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Where a contract is broken, the injured party has several courses of action open to/
him. The appropriate remedy in any case Will depend upon the subject-matter of the
contract and the nature of the breach.
(i) Remedies for Breach of Contract
In case of breach of contract, the injured party may:
(a) Rescind the contract and refuse further performance of the contract;
(b) Sue for damages;
(c) Sue for specific performance;
(d) Sue for an injunction to restrain the breach of a negative term; and
(e) Sue on quantum meruit
When a party to a contract has broken the contract, the other party may treat the contract
as rescinded and he is absolved from all his obligations under the contract. Under Section
65, when a party treats the contract as rescinded, he makes himself liable to restore any
benefits he has received under the contract to the party from whom such benefits were
received. Under Section 75 of the Indian Contract Act, if a person rightfully rescinds a
contract he is entitled to a compensation for any damage which he has sustained through
the non-fulfillment of the contract by the other party. Section 64 deals with consequences
of rescission voidable contracts, i.e., where there is flaw in the consent of one party to the
contract. Under this Section when a person at whose option a contract is voidable rescinds,
the other party thereto need not perform any promise therein contained in which he is the
promisor. The party rescinding a voidable contract shall, if he has received any benefit
there under, from another party to such contract, restore such benefit so far as may be, to
the person from whom it was received.

(ii) Damages for Breach of Contract

Under Section 73 of the Indian Contract Act, when a contract has been broken, a
party who suffers by such breach is entitled to receive, from the party who has broken
the contract, compensation for any loss or damage, caused to him thereby, which
naturally arose in the usual course of things from such breach or which the parties
knew, when they made the contract to be likely to result from the breach of it. Such
compensation is not to be given for any remote and indirect loss or damage sustained
by reason of the breach.
The foundation of the claim for damages rests in the celebrated case of Hadley v.
Baxendale. The facts of the case were:
There was a breakdown of a shaft in A's mill. He delivered the shaft to B, a common
carrier to be token to a manufacturer to copy and make a new one. A did not make
known to B that delay would result in loss of profits. By some neglect on the part of B,
the delivery of the shaft was delayed in transit beyond a reasonable time. As a result the

mill was idle for a longer period than it would otherwise have been, had there been no
such delay. It was held, B was not liable for the loss of profits during the period of delay
as the circumstances communicated to A did not show that the delay in the delivery of
the shaft would entail loss of profits to the mill. In the course of the judgment it was
"Where two parties have made a contract which one of them has broken, the damages
which the other party ought to receive in respect of such breach of contract should be such as
may fairly and reasonably be considered either arising naturally, Le., according to the usual
course of things from such breach of contract itself, or such as may reasonably be supposed to
have been in the contemplation of both parties at the time they made the contract as the

probable result of the breach of it. Now, if the special circumstances under which the
contract was actually made were communicated by the plaintiffs to the defendants and
thus known to both the parties the damages resulting from the breach of such a contract
which they would reasonably contemplate, would be the amount of injury which would
ordinarily follow from a breach of contract under these special circumstances so known
and communicated. But, on other hand, if these special circumstances were wholly
unknown to the party breaking the contract, he at the most could only be supposed to
have had in his contemplation, the amount of injury which would arise generally and in
the great multitude of cases not affected by any special circumstances from such
breach of contract. For, had the special circumstances been. known, the parties might
have specially provided for the breach 6f contract by special terms as to damages in
that case and of this advantage it would be very unjust. to deprive them."
Liquidated and Unliquidated damages: Where the contracting parties agree in
advance the amount payable in the event of breach, the sum payable is called
liquidated damages.
Where the amount of compensation claimed for a breach of contract is left to be
assessed by the Court, damages claimed are called unliquidated damages.
Unliquidated Damages
Those are of the following kinds:
(a) General or ordinary damages, (b) Special damages (c) Exemplary or punitive,
damages, and (d) Nominal damages
Ordinary Damages
These are restricted to pecuniary compensation to put the injured party in the
position he would have been had the contract been performed. It is the estimated
amount of loss actually incurred. Thus, it applies only to the proximate consequences of
the breach of the contract and the remote consequences are not generally regarded.
For example, in a contract for the sale of goods, the damages payable would be the
difference between the contract price and the price at which the goods are available on

the date of the breach.

Special Damages
Special damages are those resulting from a breach of contract under some peculiar
circumstances. If at the time of entering into the contract the party has notice of special
circumstances which makes special loss the likely result of the breach in the ordinary
course of things, then upon his-breaking the contract and the special loss following this
breach, he will be required to make good the special loss. For example, A delivered
goods to the Railway Administration to be carried to a place where an exhibition was
being held and told the goods clerk that if the goods did not reach the destination on the
stipulated date he would suffer a special loss. The goods reached late. He was entitled
to claim special damages
Exemplary Damages
These damages are awarded to punish the defendant and are not, as a rule,
granted in case of breach of contract. In two cases, however, the court may award such
damages, viz.
(i) breach of promise to marry; and
(ii) wrongful dishonour of a customer's cheque by the banker.
In a breach of promise to marry, the amount of the damages will depend upon the
extent of injury to the party's feelings. In the banker's case, the smaller the amount of
the cheque dishonoured, larger will be damages as the credit of the customer would be
injured in a far greater measure, if a cheque for a small amount is wrongfully
Nominal Damages
Nominal damages consist of a small token award, e.g., a rupee of even 25 paise,
where there has been an infringement of contractual rights, but no actual loss has been
suffered. These damages are awarded to establish the right to decree for breach of
Liquidated Damages and Penalty
Where the contracting parties fix at the time of contract the amount of damages that
would be payable in case of breach, in English law, the question may arise whether the
term amounts to "liquidated damages" or a "penalty"? The Courts in England usually
give effect to liquidated damages, but they always relieve against penalty.
The test of the two is that where the amount fixed is a genuine pre-estimate of the
loss in case of breach; it is liquidated damages and will be allowed. If the amount fixed
is without any regard to probable loss, but is intended to frighten the party and to
prevent him from committing breach, it is a penalty and will not be allowed.
In Indian law, there is no such difference between liquidated damages and penaltySection 74 provides for "reasonable compensation" up to the stipulated amount whether

it is by way of liquidated damages or penalty. For example, A borrows Rs. 500 from B
and promises to pay Rs. 1,000 if he fails to repay Rs. 500 on the stipulated date, On A's
failure to repay on the given date, B is entitled to recover from such compensation, not
exceeding Rs. 1,000 as the Court may consider reasonable. (Union of India v. Raman
Iron Foundry, AIR 1974 SC 1265).
(iii)Specific Performance
It means the actual carrying out by the parties of their contract, and in proper cases
the Court will insist upon the parties carrying out this agreement. Where a party fails to
perform the contract, the Court may, at its discretion, order the defendant to carry out
his undertaking according to the terms of the contract. A decree for specific
performance may be granted in addition to or instead of damages.
Specific performance is usually granted in contracts connected with land, e.g.,
purchase of a particular plot or house, or to take debentures in a company. In case of a
sale of goods, it will only be granted if the goods are unique and cannot be purchased
in the market, e.g., a particular race horse, or one of special value to the party suing by
reason of personal or family association, e.g., an heirloom.
Specific performance will not be ordered:
(a) where monetary compensation is an adequate remedy;
(b) where the Court cannot supervise the execution of the contract, e.g., a building
(c)where the contract is for personal service; and
(d) where one of the parties is a minor.
(iv) Injunction
An injunction is an order of a Court restraining a person from doing a particular act.
It is a mode of securing the specific performance of a negative term of the contract, (Le.
where he is doing something which he promises not to do); the Court may in its
discretion issue an order to the defendant restraining him from doing what he promised
not to do. Injunction may be prohibitory or mandatory. In prohibitory it is the order of the
Court restraining the commission of a wrongful act whereas in mandatory, it restrains
continuance of wrongful commission.
In Lumley v. Wagner (1852) 90 R.R. 125. W agreed to sing at L's theatre and
nowhere else W, in breach of contract with L entered into a contract to sing for Z. Held,
although W could not be compelled to sing at L's theatre, yet she could be restrained by
injunction from singing for Z.