SPECIAL

DAMAGES WITH
CASE LAWS
ROHIT SINGH

Special damages
Special damages are those which aries on the
account of the unusual circumstances affecting the
plaintiff. They are not recoverable unless the special
BHU LAW SCHOOL circumstances were brought to the knowledge of the
defendant so that the possibility of the special loss was in
SUBMITTED BY ROHIT the contemplation of the parties .
SINGH

SUBMITTED TO D.K
No recovery of special Damages when
MISHRA Special Circumstances not known
ROLL.NO-43

CLASS BA.LLB 3RD SEM

 ACKNOWLEDGEMENT

Every work accomplished is a pleasure-a sense of satisfaction. However, a number of people also
motivate, criticize and appreciate a work with their objective ideas and opinions hence, I would
like to use this opportunity to thank all, who have directly or indirectly helped me to accomplish
this project.

Firstly, I would like to thank professor Dr. Sibaram Tripathy, for giving me this golden
opportunity to do this wonderful project and for helpful comments that greatly improved my
project on the topic:Special damages with case law Study, which also helped me in doing a
lot of research and I came to know about so many new things. I am extremely grateful to him for
providing such a nice support and guidance.

The study has indeed helped me to explore more knowledgeable avenues related to my topic and
I am sure it will help me in future.

I would also like to thank my parents and friends who helped me a lot in finalizing this project
and fortunate enough to get constant encouragement, support and lastly, I cant ignore the
Library staffs which helped me in successfully completing my project work.
 INDEX

I. OVERVIEW

II. BREACH OF CONTRACT?

III. AFTER BREACH OF CONTRACT?

IV. REMEDIES FOR BREACH WITH CASES

DAMAGES

SPECIAL DAMAGES

V. BIBLIOGRAPHY
 OVERVIEW
Indian Contract Act, 1872 determines the circumstances in which promises made by the parties
to a contract shall be legally binding on them and according to various sections enumerated in
this act it deals with the enforcement of therights and duties on the parties in India.The
objective of the Contract Act is to ensure that the rights and obligations arising out of a contract
are honored and that legal remedies are made available to an aggrieved party against the party
failing to honor his part of agreement.

The topic of our project SPECIAL DAMAGES only be understood properly if we know terms like
Contract, Breach and damages which are to be understood with accordance of the Indian
Contract Act. As, we all enter into a number of contracts everyday knowingly or unknowingly.
Whether that be purchasing a watch to owning a Motor car all comes under the ambit of
contractual law and are made in the form of a contract and each of such contract creates some
rights and duties on the contracting parties and when any of contracting party fails to perform
some or all of its obligations under thecontract, it is called as Breach of Contract. As we all know
that if someone has done wrong then always there is either some kind of penalty or punishment
given to him whether by society norms like by parents or by legal mechanism as by laws and in
India this comes under the contract act, which provides remedies for such breach of contract,
which finally acts as relief to the aggrieved party and as breach of contract is a type of civil wrong
so only remedies are provided as Damages, Quantum Meruit, Specific Performance, Injunction
and Recession ,which are all civil in nature.

In this project firstly we will define about What is Breach of Contract? and then we will
continue to What are various Remedies available for such breach of contract with landmark
and latest case laws?. So, by this topic we will cover an important part of Contract Law
regarding remedies which are essentialfor every one because if there is a contract, there is
sometime necessarily a breach and these remedies helps us in recovering our loss or going to
such situation as present before making of contract. We are going to discuss all these things in
detailed manner in this project which not only help making a better contract but also creating
awareness in the society and will solveour day to day problem based on contract law.
 WHAT IS BREACH OF CONTRACT?

A contract as defined under Section 2(h) of the Indian Contract Act, 1872 is defined asan
agreement enforceable by law.
So, An agreement cannot become a contract unless it can be enforceable by law and to be
enforceable by law, a contract must contain all the essential elements of a valid contract defined
in Section 10, which says, "All agreements are contracts, if they are made by the free consent of
the parties, competent to contract, for a lawful consideration, with a lawful object and are not
expressly declared by the Act to be void.

This defines a valid contact but what about the breach of contract and what happens after
breach. As we know that nothing is perfect so disputes no would surely arise because happening
of delays, cropping up of financial problems, and other unexpected events which can occur to
hinder or even prevent a successful contract from being carried out and this results into breach
of contract. A breach of contract occurs when a party thereto without lawful excuse doesnt fulfill
his contractual obligation or by his own act makes it impossible that he should perform his
obligation under it but a proper explanation of breach of contract is given below.

Breach of contract is a legal cause of action in which a binding agreement or bargained-for

exchange is not honored by one or more of the parties to the contract by non-performance or
interference with the other party's performance. If the party does not fulfill his contractual
promise, or has given information to the other party that he will not perform his duty as
mentioned in the contract or if by his action and conduct he seems to be unable to perform the
contract, he is said to breach the contract.A breach of contract is where a party to a contract fails
to perform, precisely and exactly, his obligations under the contract. This can take various forms
for example, the failure to supply goods or perform a service as agreed. A contract being a
correlative set of rights and obligations for the parties would be of no value, if there were no
remedies to enforce the rights arising there under.

Where the promisor neither performs his contract nor does he tender performance, or where the
performance is defective, there is a breach of contract.

IF one of two parties to a contract breaks the obligation Breach ofwhich the contract imposes, a
new obligation will in everycase arise, a right of action conferred upon the party injuredby the
breach. Besides this, there are circumstances under which the breach will discharge the injured
party from suchperformance as may still be due from him.
But, though every breach of the contractual obligation Its result,confers a right of action upon
the injured party, it is not every breach that will discharge him from doing what he has
undertaken to do under the contract. The contract may be broken wholly or in part; and if in
part, the breach may or a dismaynot be sufficiently important to operate as a discharge;or, if it
be so, the injured party may choose not to regard itas a breach, but may continue to carry out
the contract,reserving to himself the right to bring action for suchdamages as he may have
sustained. It is often very difficultto ascertain whether or not a breach of one of the terms ofa
contract discharges the party who suffers by it.

By discharge we must understand, not merely the rightto bring an action upon the contract
because the other partyhas not fulfilled its terms, but the right to consider oneselfexonerated
from any further performance under the contract,the right to treat the legal relations arising
fromthe contract as having come to an end, and given place toa new obligation, a right of action.

Now, the breach of contract may be

(i) actual or,

(ii) anticipatory.

The Actual breach may take place either at the time the performance is due, or when actually
performing the contract in which other party to contract obtains a right of action against the one
who breached the contract and,

The Anticipatory breach may take place in which a breach occurs before the stipulated time for
the performance has arrived. This may also take place in two ways, by the promisor doing an act
which makes the performance of his promise impossible or by the promisor in some other way
showing his intention not to perform it. Breach of contract may occur, before the time for
performance is due. This may happen where one of the parties definitely renounces the contract
and shows his intention not to perform it or does some act which makes performance
impossible. The other party, on such a breach being committed, has a right of action for
damages which is a remedy for breach. He may either sue for breach of contract immediately
after repudiation or wait till the actual date when performance is due and then sue for breach of
contract with damages.

The case below define the anticipatory breach of contract as follows:

In Hochester v.s De La Tour (1853), A hired B in April to act as a courier

commencing employment from 1st June, but wrote to B in May repudiating the
agreement, this repudiation is the breach of contract and to this B sued A for breach
immediately after repudiation. A contended that there could not be breach of contract
before June 1. It was held, B was immediately entitled to sue and need not wait till the
1st June, for his right of action to accrue.

Under Section 65 of the Indian Contract Act (ICA), 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 ICA, 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 of 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 thereunder, from another party to such
contract, restore such benefit so far as may be, to the person from whom it was received.

The law on this issue is dealt with in two statues viz., The Specific Relief Act, 1963 and The
Indian Contract Act, 1872.
 What Happens After a Contract is Breached?
When a breach of contract happens or when a breach is alleged, one or both of the parties may
wish to have the contract enforced on its terms, or may try to recover for any financial harm
caused by the alleged breach.

If a dispute over a contract arises and informal attempts at resolution fail, the most common
method used to resolve contract disputes and enforce contracts is through lawsuits and the court
system. But, Courts and formal lawsuits are not the only option for people and businesses
involved in contract disputes. The parties can agree to have a mediator review a contract
dispute, or may agree to binding arbitration of a contract dispute.These out-of-court options are
two methods of "alternative dispute resolution." No matter what avenue is chosen to remedy a
breach of contract, the non-breaching party will most likely be entitled to some kind of remedy
under the law.
 WHAT ARE THE REMEDIES FOR BREACH OF
CONTRACT?

When an individual or business breaches a contract, the other party to the agreement is entitled
to relief or a "remedy" under the law.The Latin maxim Ubi jus, ibi remedium which
meanswhere there is a right, there is a remedy also denotes this remedy. This maxim is true as
certain remedies are given for breach of contract under the Indian Contract Act, 1872.

If the contract be discharged by the breach, the person injured acquires or may acquire, as we
have seen, three distinct rights: (i) a right to be exonerated from further performance; (2) a
right, if he has done anything under the contract, to sue upon a quantum meruit, a cause of
action distinct from that arising out of the original contract, and based upon a new contract
originating in the conduct of the parties; (3) a right of action upon the contract, or term of the
contract, broken.

But we have done with breach of contract as effecting a discharge. We may now consider
generally what are the remedies open to a person who is injured by the breach of a contract
made with him, whether or not that breach discharges him from further performance. The
remedies are of two kinds: he may seek to obtain damages for the loss he has Damages,
sustained; or he may seek to obtain a decree for Specific performance, or an injunction, to
enforce the promised acts or forbearances of the other party.

The remedies for breach of contract are as follows:

Damages or compensation

Specific performance

Injunction

Quantum meruit
 Damages:
The word damages means monetary compensation for the loss suffered.This remedy is most
often used for a breach of contract. It is the remedy of damages in whichpayment in one form or
another is made by the breaching party to the non-breaching party. In this the aggrieved party
may seek compensation from the party who breaches the contract. When the aggrieved party
claims damages as a consequence of breach, the court takes into account the provisions of law in
this regard and the circumstances attached to the contract. This is monetary compensation for
loss, damage or injury suffered which aims to put the parties in the position they would have
been in, if the breach had not taken place. In the event of a breach where there is no actual loss,
damages may still be claimed, however at a lower value.

TheSection 73 of the Indian Contract Act, lays down the basic guidelinesas:
Compensation for loss or damage caused by breach of contract: When a contract has been
broken, the party who suffers by such breach is entitled to receive, form the party who has
broken the contract, compensation for any loss of 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
taken 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 observed: "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, 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.

Same as in the case ofVictoria Laundry(Windsor Ltd.) v. Newman Industries Ltd.

(1949) 2 K.B. 528, 537, the plaintiffs agreed tobuy a large boiler from the defendant by a fixed
date but the seller delayed delivery. Theplaintiffs sued for damages and for loss of profits on the
grounds of (1) the large number of customers they could have taken had the boiler been installed
and (2) the amount they could have earned under a special dying contract. The defendant knew
that the plaintiffs were launderers who wanted the boiler for immediate use. The Court of
Appeal held that under the circumstances the defendant as a reasonable man could have
foreseen some loss of profit though not the loss under the special contract of dying of which he
had noknowledge.

In addition, it was also clarified that mere knowledge was not enough. It should have been
brought to the knowledge of the defendant that he accepts the contractwith that knowledge.

The latest case on compensation as a remedy for breach of contract is Sant Lal Singh & Ors
vs Dr. Laxmi Narain Singh & OrsAIR (2015), in this case the defendants were the members
of joint Hindu Family governed by Mitakchara School of Hindu Law and entered into contract
with plaintiff for sale of land but after taking advance it didnt proceed for sale of land and
breached the contract and as such the plaintiff brought a suit. The court in this suit ordered the
respondents plaintiffs to pay to the appellants defendants sum as compensation.

Keeping in view the provisions of section 73 of ICA and the court judgments, the aggrieved party
would be entitled to one of the following types of damages, depending upon the circumstances of
the case:

General or ordinary damages: Damages arising naturally and directly out of the
breach in the usual course of the things.

Special damages: Compensation for the special losses caused to the aggrieved party by
the special circumstances attached to the contract.

Exemplary damages: Damages for the mental or emotional suffering also caused by
the breach.

Nominal damages consist of a small token award, 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 contract.

Liquidated damages are specific damages that were previously identified by the parties
in the contract itself, in the event that the contract is breached. Liquidated damages
should be a reasonable estimate of actual damages that might result from a breach.

Compensatory damages aim to put the non-breaching party in the position that they
had been if the breach had not occurred.

Punitive damages are meant to punish a guilty party in order to prevent that party or
others from engaging in similar conduct in the future.

But, where the contract itself addresses the issue of consequences of a breach and stipulated a
penalty, section 74 of the Indian Contract Act will come into play. When such a contract has
been broken, if a sum is named in the contract as the amount to be paid in case of such breach,
the party complaining of breach is entitled, to receive from the party who has broken the
contract a reasonable compensation not exceeding the amount so named.
The term Rescission of the Contractcomes under the damages as in general, rescission of
the contract is accompanied by a suit for damages. In this when one party to the contract
breaches the contract, the other party need not perform his part of the obligations. The
aggrieved party may rescind the contract. In such cases, the aggrieved party can either rescind
the contract or file a suit for damages.
Special damages

Special damages are those which aries on the

account of the unusual circumstances affecting the
plaintiff. They are not recoverable unless the special
circumstances were brought to the knowledge of the
defendant so that the possibility of the special loss was in
the contemplation of the parties .

No recovery of special Damages when Special

Circumstances not known
In Simpson v. London & North Western Raileay Co., the plaintiff, who was a
manufacturer , used to send sample of his goods for the exhibition to various
agricultural shows. Once he gave some samples of his product to the agent of the
defendant railway company for carriage to Newcastle, for an exhibition.This fact
was within the knowledge of the defendants agent . The consignment not stated
Must be at Newcastle Monday certain. Due to the negligence of defendant , the
goods reached the destination only after the exhibition was over.The plaintiff
brought an action to claim compensation for the loss of profit owing to the non-
arrival of the goods at the show.It was held that since the defendant companys
agent was having the knowledge of the circumstances that the goods were being
sent for the Newcastle show, they were liable for the loss consequent on the late
arrival of the goods at the destination .
In the Dominion V. All India Reporter Ltd. ( AIR 1952, Nag 32.) , the plaintiff, All
India Reporter Ltd., sent a consignment of 3 volumes of Indian Digest through the
defendant railway. Due to the defendant's negligence, the same were lost in
transit. The plaintiff brought an action against the defendant to recover the value
of the whole set( 8 volumes) of the Indian Digest on the plea that the loss of 3
volumes had rendered the whole set useless. It was found that at the time of
consignment, it was not brought to the knowledge of the defendant Railway that
those three volumes constituted a part of one full set and their loss would render
the whole set entirely useless. It was held that the plaintiff was entitled to claim
the cost of three volumes only because that is the loss which is deemed to arise
naturally in the usual course of things. Since the fact that the 3 volumes would
render the whole serr useless was not brought to the knowledge of the defendant
, the value of the whole set could not be claimed.
In Smeed V. Foord ( 1859), the defendant promised to deliver a threshing
machine to the plaintiff for the known purpose of threshing wheat in the field.
The defendant failed to supply the machine. Another machine not being available,
the plaintiff was obliged to carry the wheat and stack it. While the wheat was
stacked, it was damaged by rainfall. After being threshed, wheat had to be kiln
dried. In the meanwhile,the price of wheat had fallen, it fetched less price than
the one which would have been recieved if this delay had not been there. It was
held that it could be foreseen that if the machine was not supplied, the wheat
would have to be stacked and it could get damaged by rainfall, and the plaintiff
was held entitled to recover the expenses of stacking the wheat. No
compensation was, however, allowed for loss arising from the fall in the market
price, on the ground that neither that was the natural result of the breach of
contract, nor the same was in the contemplation of parties at the time of making
the contract.
In Diamond V. Campbell-Jones (1961), the defendants contracted to sell certain
leasehold premisesto the plaintiff for $ 6,000 . The plaintiff intended to make
profits by converting the ground floor into offices and four upper floors into
maisonettes. The defendants having made a breach of contract, the palintiff sued
them to recover damages for the loss of profits which he could earn by suing the
premises according to his intended use. It was held that the plaintiff could claim
only the difference between the market price and contract price of those
premises on the date of the breach of contract and not the damages claimed by
him because the defendants did not have the knowledge about the use to which
the plaintiff wanted to put the premises to.
 BIBLIOGRAPHY

Beatson, J (2010): Anson's Law of Contract, Oxford University

Press,
India Singh, Avtar: Law of Contract and Specific Relief
Bangia, RK (2013) - Law of Contract and Specific Relief, 6th ed
M. P. Furmston, Geoffrey Chevalier Cheshire, Cecil Herbert
Stuart Fifoot (2007): Cheshire, Fifoot and Furmston's Law of
Contract. Oxford University Press
Wikipedia, free Encyclopedia
Britannica ,encyclopedia.