remedies Saroj ghimire, advocate ll.m.uk, ll.m.india BREACH AND REMEDIES
The question of remedies does not
become important until it is first determined that the contract was broken.
How to determine that there is breach of
contract? Definition of Breach:
A breach is the failure to act or perform a
promise in the matter called for by the contract. When the contract calls for performance, such as the painting of the owner's house, the failure to paint or not to paint properly is a breach of contract. Where a promisor has neither performed his contract nor performed fully or not excused from performance by mutual consent, he is said to be in breach of contract Section 82 In case any party to a contract does not meet liability under the contract, or gives a notice to the other party that he/she will not perform the work to be performed under the contract, or in case his/her action or conduct shows that he/she is incapable of performing the work under the contract, he shall be deemed to have breached the contract. Thus a breach of contract occurs when a party to a contract thereto renounces his liability under it, or by his own act makes it impossible that he should perform his obligations under it or totally or partially fails to perform such obligations. The failure to perform or renunciation may take place when the time of performance has arrived or even before that. Thus breach is of two types: Actual breach Anticipatory English Law Where the contract provides that performance to be made within the time and date stipulated, the time is considered to be the essence of the contract even a delay of ten minutes cannot prevent the contract being rescinded or cancelled. Union Eagle Ltd vs. Golden Achievement Ltd. The purchaser enter into written contract with the respondent seller to buy a flat and deposited 10% of the price. The contract provided that the sale and purchase transaction to be completed before 5:00 Pm on 30th September, 1991 and the time being the essence in every respect of the contract, if the purchaser failed to comply with any of the terms and conditions the deposit is absolutely liable to be forfeited. The purchaser was 10 minutes late in tendering the purchase money and other documents. The respondent rejecting the price money rescinded the contract forfeited the deposit money which the Privy Council (Court) found to be reasonable. Actual Breach Not performing contract at the time of performance Anticipatory Breach An anticipatory breach of contract is a breach of contract occurring before the time fixed for performance has arrived. A party to a contract communicates to the other party, before the due date of performance, his intention not to perform it. For example, A contracts with B to supply 10 bags of wheat for Rs 15000 on first March. On 15th Feb. A inform B that he will not be able to supply the wheat. A party by his own voluntary act disables himself from performing the contract. For example, A contracts to sell a particular horse to another on Ist of June and before that date he sells the horse to somebody else. in case his/her action or conduct shows that he/she is incapable of performing the work under the contract, he shall be deemed to have breached the contract. Hochestor v De La Tour Hochestor was courier. He was engaged by the De law Tour to accompany him on a tour to commence on june 1, 1852. Nearly a month before this date the De La Tour wrote to Hochestor that he had changed his mind, and declined his service. Hochestor sued him for breach of contract and claimed for damages? However, De La Tour argued that there could be no breach of the agreement before the day when the performance was due? Held There was anticipatory breach. Hochestor could sue for damages immediately and need not to wait for the performance date. The option is at the aggrieved party to sue at once or wait for performance. Once, he realised of anticipatory breach, he need not require to wait until the date of performance has arrived. No satisfactory performance Rights of the sufferor in case of breach [Section 82] In case the contract is breached or In case the conduct justifies that the contract is breached or in case his/her action or conduct shows that he/she has not basically compiled with the contract The other party shall not be compelled to perform the contract, and may cancel the contract by furnishing a notice thereof to the other party. Remedies for Breach of Contract: Self help remedy Damages Specific performance Injunction Quantum meriut Damages A breach of contract entitles the non breaching party to sue for money damages. Damages are designed to compensate the non breaching party for the loss of the bargain. Often, courts say that innocent parties are to be placed in the position they would have occupied had the contract been fully performed How much damages? Section 83 In case a contract has been breached, the aggrieved party may realize from the party who has broken the contract, the actual loss or damage suffered by him/her as a result of such breach of contract (actual loss) or the loss or damage, which the contracting parties had anticipated at the time of signing the contract. (anticipatory loss) Nature of damages 1. liquidated damages 2. Unliquidated damages Liquidated damages In case the contract provides that any specific amount or compensation shall be paid in the event of breach of contract, the aggrieved party may recover from the other party a reasonable amount not exceeding that amount. [83(2)] Unliquidated Damages, Section 83(3) In case the amount of compensation is not mentioned, the party making a claim for such compensation may realize a reasonable amount in consideration of the direct and actual loss or damage that has resulted form the breach of contract, or in consideration of the breach of contract, or in consideration of compensation. No compensation may be recovered for any indirect or imaginary loss or damage. Damages may not be available if damages claimed are too remote: Hadley v Baxandles
The injured party did not do any thing to
avoid damage.
If the sufferor has contributed to the loss.
Appropriateness of damages Purpose is to compensate the injured party for loss arising from breach. Damages are compensatory not penal. Even when there is no loss, nominal damages are given recognising breach of contract. Damages may be recovered for pre contract expenditure. Damages can also be awarded in mental pain or suffering. Aim To put the injured party in the financial position which he or she would have enjoyed if contract had been performed. Specific performance Section 86 Damages are discretionary. The court has choice whether or not to award. In specific performance, the Court orders a party to perform his or her cpntractual obligations. They are rarely granted. Not granted when…… (a) the amount paid in cash as compensation for breach of contract is adequate; (b) the court can not supervise whether or not the work to be performed under the contract has been actually performed; When………… (c) the contract has been signed for providing services relating to personal expertise, skill or knowledge; (d) the situation is -such that the contract can not be executed as stipulated; (e) the party violating the contract him/herself demands that the contract be executed as stipulated. Injunction or other order of the court In case it becomes impossible to execute the contract because any party about to take any action or behave in a manner contrary to the nature of the contract, the party aggrieved by such action or conduct may file a complaint with the Appellate Court to stay such action or conduct. In case a complaint is filed in the Appellate Court, the Appellate court may issue an appropriate order to any party to immediately stop his/her specific action or conduct with a provision to settle the dispute resulting from that contract according to the contract or prevailing law. Warner Bros v Nelson The Film star, Bette Davis, breached her contract, under which she had argued not to act on stage or screen for anybody except Warner Bros for one year, by agreeing to make a film with UK Company. Held: An injunction would be granted to restrain Bette Davis from making film for rival company. The contract restrained her from acting for any one other than warner, but did not prevent her from earning her living in other ways. The injunction did not force her to perform the contract if she was prepared to earn her living in a less profitable way Quantum meriut In case a contract has been signed for completing any work within a specific period, and in case provision has been made for payment of compensation for failure to complete that work within the specific period, the party paying compensation may request for extension of the period for completing the contract in proportion to the amount paid by him/her as compensation. Return of benefit/ reasonable amount In case a contract is terminated with the mutual consent of both parties or it is no longer necessary to perform the contract ,or in case the contract is made void under the law or becomes void or cancelled and in such situation where one party has already received some amount in cash or in kind or any other benefit from the other party as per the contract, the cash or goods which have to be refunded after adjusting the accounts. In case any service or benefit other than cash or goods has been provided, the beneficiary must pay a reasonable amount to the other party in consideration thereof. Right to recover a reasonable amount The aggrieved party may claim payment in proportion to the work performed or the amount paid by him/her in cash or in kind in any of the following circumstances; (a) In case the contract is terminated due to the mistake of the other party at a time when he/she has already completed the work to be performed under the contract or was performing it; (b) In case the other party utilizes any service or commodity that has been given to him/her without the clear intention of giving it free of cost.