IQRA NATIONAL CHAPTER 4

BREACH OF CONTRACT
UNIVERSITY
Business & Labor Law
TABLE OF CONTENTS

1) Suit for Rescission: ....................................................................................................................................................2

2) Suit for Damages .......................................................................................................................................................2
a) Ordinary Damages: ................................................................................................................................................ 3
b) Special Damages: ................................................................................................................................................... 3
c) Exemplary Damages:..............................................................................................................................................3
d) Liquidated Damages: .............................................................................................................................................3
e) Nominal Damages:................................................................................................................................................. 3
3) Suit upon Quantum Meruit: .....................................................................................................................................4
4) Suit for Specific Performance: ..................................................................................................................................4
5) Suit for Injunction: ....................................................................................................................................................4

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 BREACH OF CONTRACT
Remedy means the course of action available to an aggrieved party for the enforcement of rights under
a contract. When a party breaks the contract by refusing to perform his promise, the breach of contract
takes place. The following remedies are available to the aggrieved party against the guilty party in case
of breach of contract:

1) Suit for Rescission

2) Suit for Damages

3) Suit upon Quantum Meruit

4) Suit for specific performance

5) Suit for Injunction

1) SUIT FOR RESCISSION:

A sight not to perform obligation when one party break the contract the other party is release from his
obligation under the contract. If the aggrieve party want to sue the guilty party for the damages the
breach of contract must sue for the rescission. When the court grants rescission, the aggrieved party is
free from his obligations and become entitled to compensation.

Example:
st
Lucky cement contracts to supply cement to NLC on 1 November, 2015. NLC agrees to pay the price on receipt of
cement. Lucky cement does not supply on due date. In such cases NLC is discharge from liability to pay and can
claim damages from lucky cement.

2) SUIT FOR DAMAGES

The aggrieved party may sue for damages in case of a breach of contract. Damages are a monetary
compensation allowed to the aggrieved party for the loss suffered by hum as a result of the breach of
contact.

Types of Damages:

a) Ordinary Damages

b) Special Damages

c) Exemplary Damages

d) Liquidated Damages

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e) Nominal Damages

A) ORDINARY DAMAGES:
Ordinary damages are also called general damages. When a contact is broken, the aggrieved party can
recover ordinary damages form the guilty party and evaluate this on the basis of loss actual. Example
sale of goods, the damages payable are the difference between the contract price and market price.

Example:

Mr. Ali contracts to pay Rs: 200,000/- to Mr. Bilal on 1st December. Mr. Ali could not pay on that day. As a result,
Mr. Bilal is totally ruined. Mr. Ali is liable to pay Mr. Bilal only the principal sum and interest on it.

B) SPECIAL DAMAGES:
Special Damages arises under some special circumstance. These damages include indirect loss which
may arise due to breach of contract. The notice to this effect must have been given to the other party
otherwise he is not responsible for his special damages. Subsequent knowledge of special circumstances
will not create special liability on guilty party.

C) EXEMPLARY DAMAGES:
Exemplary Damages are awarded to punish the guilty party for the breach of contract. The breach of
contract results in a monitory loss to the aggrieved party and causes disappointment. There are in the
following cases:

In case of breach of contract to marry, the amount of damage depend upon the extent of injury
to the feelings of the party.
In case of dishonor of cheque by a bank when there are sufficient funds to the credit of the
customer. According to rule, the smaller the cheque dishonored, the greater the damage.

D) LIQUIDATED DAMAGES:
When parties to a contract fix the amount of damages for breach of contract at the time of formation or
contract, such damages are called liquidated damages. In such case the court will allow reasonable
damages not exceeding the amount already agreed.

Example:

Mr. Asad contracts to pay Rs: 20,000/- to Mr. Fawad as damages. If he fails to pay Rs: 500,000/- on a given day.
Mr. Asad fails to pay on that day. Mr. Fawad can recover damages not exceeding Rs: 20,000/-.

E) NOMINAL DAMAGES:
Nominal damages are neither awarded to compensate the aggrieved party nor to punish the guilty
party. When the aggrieved party suffers no loss, the court may award nominal damages in recognition of
his right or the court may refuse to award damages.

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Example:

Allied Cement Company promises to sell cement to Builder for Rs: 400 per bag. Allied Cement Company does not
supply. At the time of breach, the market rate of cement is the same. Builder is entitled to nominal damages.

3) SUIT UPON QUANTUM MERUIT:

The term quantum meruit means payment in proportion to the work done or reasonable value of work
done. When a person has done some work under a contract and the other arty terminate the contract
or an event happens which makes the performance of contract impossible. The right to claim for
quantum meruit arises when the original contract is discharged.

Example:

Eden Construction Company (a builder) contracts to build a three story building for INU. When one story is
completed INU stops Eden builder from work. Eden builder can get compensation for work done.

4) SUIT FOR SPECIFIC PERFORMANCE:

It means the actual carrying out of the contract by a party. In some cases where damages are not a
sufficient remedy the court may direct the guilty party to fulfil the contract.

Example: Zaidi agrees to sell his painting to Mr. Ajmal, who wants to erect a factory but he commits breach. Mr.
Ajmal cannot sue for damages. Zaidi painter shall be ordered to make specific performance to Mr. Ajmal.

5) SUIT FOR INJUNCTION:

It means to demand a courts stay order. In this a court may issue an order prohibiting him (guilty party)
from doing so.

Example:

Shaheen Chemist agrees to take the supply of Indian medicine from Ranveer Pharmacy located in India. Shaheen
chemist was restricted by injunction from buying Indian medicine.