Remedies for Breach of Contract

Introduction:

The Latin maxim “Ubi jus ibi remedium” signifies that “where there is right, there is remedy”. This maxim is given power in the constitution of India under Article 32.

A contract, which is a wellspring of correlative sets of rights and obligations for the parties, would be null if those rights were not implemented. A contract is an agreement between two or more parties that is legally binding. The contract is defined as “a legally enforceable arrangement” in Section 2(h) of the Indian Contract Act of 1872[1]. Section 10 of the Indian Contract Act lays out the conditions for a legally binding contract.[2]

Since contract law is substantive law, it cannot include all possible reliefs and remedies. With this in mind, the Specific Relief Act, 1963 (hereinafter referred to as “the Act”), based on the principles of equity, justice, and good conscience, broadens the scope of seeking relief in the Civil Courts and provides for a slew of reliefs and remedies when a legal right is violated. Although the act does not have any rights in and of itself, it does require them to be pleaded in front of a judge.

Breach of Contract:

In general, a breach is the failure to conduct an act that is necessary for the fulfillment of a pledge, arrangement, or contract. A breach, according to the Oxford dictionary, is a failure to do anything that is required by statute. Anything in this context refers to any action or omission that violates a contract.[3] A breach of contract occurs when one or both parties refuse to fulfill their contractual obligations. The other party suffers a loss as a result of the non-performance. Breach of contract, according to Black’s law dictionary, is when a party fails to fulfill the terms of a contract.[4]

According to the Indian Contract Act, 1872, a contract is legally binding, and a breach of contract is a violation of the legally required legal obligation.[5] If one of the parties fails to fulfil the contract’s obligations in such a breach, the other must terminate the contract. A contract violation may occur in its entirety or in part. The person who breaks the contract is only responsible for the portion of the contract that they did not fulfill. A remedy is a legal mechanism for repositioning the aggrieved party in the role they were in prior to the breach of contract or in the position they would be after the contract’s results.

Remedies for Breach of Contract:

The party committing breach of contract is called the “guilty party” and the other party is called the injured or aggrieved party. In case of breach of contract, the aggrieved party would have one or more, but not all, of the following remedies against the guilty party:

i) Recession of Contract:

When one of the parties breaches a contract, the other party must declare the contract invalid or revoke it. When a contract is canceled, the involved party is immediately released from all contractual obligations. Rescission is a legal concept that refers to the cancellation, destruction, repeal, or unwinding of a transaction. Rescission of Contract is a relief provided by the Act to an individual who has been subjected to a contract enforced by deception or illegality.

According to Section 64 of the Act, the party who rescinds the voidable contract must, if he has received any benefit from the other party, return that benefit to the individual from whom it was received.[6] Furthermore, the individual who properly revokes the contract is entitled to compensation for any damages he suffered as a result of the non-fulfillment of the terms of the contract.

Coercion, misrepresentation, deception, or improper influence is used to gain a party’s consent to the contract. The right to rescission has been interpreted by Indian courts in such a way that it provides relief to both the parties, i.e. the one who wishes to revoke the contract and the other who may be affected by such rescission, based on the theory of equity.

When entering into a contract, one party can reserve the right to rescind or terminate the contract if a specific incident or a breach of contract occurs. If the court is satisfied that the party seeking rescission has fulfilled his part of the contract, the court may revoke the contract at its discretion. It is important to note that in situations where a party has the ability to rescind a contract, the court’s assistance is unnecessary because it merely declares the parties’ precursory rights rather than establishing a right in their favour.

The Hon’ble Supreme Court held in Sardar Mohan Singh v. Mangailal[7] that the Court does not lose its authority or become functus officio after granting a decree of particular results. Unless the sale deed is completed in the execution of the judgment, the trial court retains its power and authority to deal with the decree of particular results. It also noted that the court has the authority to extend the period for compliance with the decree for particular performance’s conditions.

ii) Damages for the Loss Suffered:

The word “damages” refers to monetary compensation paid by the defaulting party to the injured party for the loss incurred as a result of the breach of contract. As a result, the party who has been wronged could file a lawsuit for damages against the party who has broken the contract.

The party that is in violation is responsible for compensating the aggrieved party. The primary goal in granting damages is to place the injured party in the same role he would have been in if the promised performance had been delivered. As a result, the aggrieved party can only recover the real damages. Only when the injured party’s feelings are taken into account will exemplary damages be awarded.

Types of Damages:

When an aggrieved party seeks damages as a result of a breach of contract, the court considers the applicable legal terms as well as the contract’s circumstances. The amount of damages awarded will be determined by the form of loss suffered by the aggrieved party as a result of the breach. The court must first determine the damages that had occurred before determining their monetary value. Section 73 of the Indian Contract Act lays out the fundamentals for identifying losses. The injured party is to be placed in the same role he would have been in if the deal had been fulfilled as the basis for determining damages. In the case of State of Kerala v. K. Bhaskaran[8], the government breached a Works Contract, and the contractor sued. The court decided that a 10% benefit is usually included in the contract calculation, and the contractor was entitled to arbitration on that basis.[9] Explanation of Section 73 states that the person who suffers the effects of a breach of contract must take all reasonable measures to minimize the damage, and if the injured party fails to do so, he will not be entitled to compensation.[10]

Based on the terms of this section and the court’s judgments, the aggrieved party may be entitled to either of the following forms of damages, depending on the circumstances:

  1. General or Ordinary Damages: There are damages that can be seen as occurring naturally and directly as a result of a break in the normal course of events. They’d be inevitable and the natural result of the breach. General or ordinary damages are the compensation for certain injuries. The right to damages of an aggrieved party extends most naturally to direct or general losses. Indirect or distant injuries cannot be compensated.
  2. Special Damages: These awards will be reimbursement for the aggrieved party’s special injuries incurred by the contract’s special situation. A party may place details about the special circumstance affecting him in front of the other party at the time of contracting, warning him that if the contract is not done properly, he may incur certain types of losses as a result of those special circumstances. If the other party continues to make the deal, it means he has agreed to be liable for any special damages incurred as a result of his failure to fulfil his obligations.
  3. Exemplary or Vindictive Damages: The court can also seek damages for mental or emotional distress caused by the breach. Exemplary or vindictive damages are the terms used to describe these types of damages. Damages are only awarded for financial harm incurred by a breach of contract, which can be accepted as a general concept.

In Addies vs. Gramophone Company Ltd[11], the court noted that in three cases, the aggrieved party’s emotional anguish and distress can also be considered. There are the following:

  • Unjustified cheque dishonour,
  • Breach of marriage promise, and
  • Failure of real estate vendor to render title
  1. Nominal Damages: When there is just a technical breach of civil rights, the aggrieved party is paid nominal damages. There is no significant loss in this case. The cost of these losses is negligible. They are awarded solely to affirm a party’s right to seek damages for a breach of contract. Damages aren’t always enough to compensate for a breach of contract. In such cases, the Court can, at the request of the non-breaching party, order the party in breach to fulfill his commitment in accordance with the contract’s terms. This is referred to as contract specific results.

iii) Suit for Specific Performance:

Specific performance of contracts has been made a law rather than an exception following the Specific Relief (Amendment) Act of 2018. The basic performance of contracts is addressed in Sections 9 to 25 of the Specific Relief Act. Section 10 outlines the circumstances under which a contract’s particular performance will be implemented. Specific performance in any contract can be implemented in two situations, according to this provision:

  • When there is no standard for calculating actual damages in the event of either party’s breach of contract; and second when there is no standard for calculating actual damages in the event of any party’s breach of contract.
  • When monetary compensation is insufficient to provide appropriate relief to the injured person. A breach of contract to move immovable property or other property that is not an ordinary article of trade, has special value, or is not readily available in the market is an example of this.

Section 14 also sets out the exhaustive rules for contracts that aren’t expressly enforceable. The following are some important examples of such contracts:

  • When monetary compensation is insufficient, the contract is terminated.
  • Contracts that are contingent on the parties’ personal credentials or will, such as contracts for a singer or dancer to appear on stage.
  • Contracts involving the ongoing execution of a task that courts are unable to supervise.
  • Contracts that send disagreements to arbitration.

iv) Suit on Quantum Meruit:

The phrase “Quantum Meruit” literally translates to “as much as earned.” It refers to payment based on the amount of work completed in a legal context. This principle allows for the payment of compensation to an individual who has provided goods or services to the other party under a contract that could not be completely performed due to certain circumstances.

This rule has two main components:

  • One of the parties breaches the contract or prevents the other from doing it.
  • The person who has already performed a portion of the contract and has been harmed by the violation chooses to be released from further execution of the contract and brings an action to recover the value of the work he has already completed.[12]

If the party has not sustained any loss or injury, no fee will be charged. As a result, the infliction of damages is a prerequisite for the application of the quantum meruit law. There was a contract in Kamit v. Central Dairy Farm[13] for the respondent to supply 3000 live sheep and goats at a rate of Rs. 786/- per quintal. The plaintiff had put up Rs. 2,60,000 as security for the contract’s good results, but he was unable to fulfill his obligations. It was believed that the protection had been forfeited. The court decided that the respondent should not forfeit the protection sum because he had not suffered any real damages.

v) Injunction:

An injunction is a judicial order that prevents anyone from doing something. The grounds for an injunction are found in Sections 36 to 42 of the Specific Relief Act of 1963. It is usually classified as particular performance, but in this case, a party is prohibited from performing an act in lieu of fulfilling an obligation. A prohibitive writ is a court order that forbids a party from doing anything. A temporary injunction is one form of injunction, but it may also be a mandatory or indefinite injunction.

In the case of M. Gurudas and Ors.[14], it was asserted that certain factors must be considered before applying for an injunction. It must be determined whether there is a prima facie case and whether the claimant party has suffered irreparable damage.

Conclusion:

In trade, industry, and day-to-day operations, a contract is essential. The Indian Contract Act, 1872, contains contract clauses that make it simple to execute these contracts, and in the event of a violation, the injured party may choose from a variety of options depending on the facts of the case. The primary goal of these therapies is to restore the injured party to his previous role. The motivation for establishing provisions for the remedies for breach of contract is to ensure sufficient relief by granting damages, quantum meruit, specific performance, recession of contract and the injunction.

[1] Indian Contract Act, 1872, Section 2(h)

[2] Indian Contract Act, 1872, Section 10

[3] The Oxford Dictionary

[4] The Black Law’s Dictionary

[5] Supra Note 1

[6] Indian Contract Act, 1872, Section 64

[7] 1997 (9) SCC 217

[8] AIR 1985 KERELA 49

[9] R.K. Bangia, Indian Contract Act, pg. 296, Allahabad Law Agency

[10] Indian Contract Act, Section 73

[11] 1909 SC 488

[12] Id. at page 309-10

[13] AIR 2008 All. 33

[14] AIR 2006 SC 3275

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Radhika Maheshwari

I am Radhika Maheshwari, BALLB student (4th year) in Faculty of Law, Aligarh Muslim University, Aligarh. I am born and brought up in Aligarh and completed my High School education from Radiant Stars English School with 10 CGPA and my +2 education from Girls School, AMU and scored 82%. I am also a "C" certificate holder in NCC and is currently working with an NGO "Zomato Feeding India, Aligarh". My hobbies include singing, dancing, reading novels, etc. In my college life, I have done a few internships, online courses and took part in some competitions. My strength is in my nature- I like to take up challenges and accept both success and failure in a balanced way, loves to do team work and am always eager to learn something new. Right now, my goal is to build my career in judiciary.