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Unit 7: Remedies for Breach of Contract

an agency for alternative dispute resolution; (iv) the other party may sue for damages; or (v) the Notes
other party may sue for other remedies.
As soon as either party commits a breach of the contract, the other party becomes entitled to
certain reliefs. These remedies are available under the Indian Contract Act, 1872, as also under

the Specific Relief Act, 1963. There are three remedies under the Specific Relief Act, 1963: (i) a

decree for specific performance (S.10); (ii) an injunction (S.38-41); (iii) a suit on quantum meruit
(S.30).
Remedies under the Indian Contract Act, 1872 are: (i) rescission of the contract (S.39) and,
(ii) damages for the loss sustained or suffered.
7.1.1 Rescission of the Contract

When a breach of contract is committed by one party, the other party may treat the contract as
rescinded. In such a case the aggrieved party is freed from all his obligations under the contract.
Thus, where A promises B to supply one bag of rice on a certain date and B promises to pay the
price on receipt of the bag. A does not deliver the bag of rice on the appointed day, B need not
pay the price. A person who rightfully rescinds the contract is entitled to compensation for any
damage which he has sustained through the non-fulfillment of the contract.

7.1.2 Damages (S.75)

Another relief or remedy available to the promisee in the event of a breach of promise by the
promisor is to claim damages or loss arising to him therefrom. Damages under S.75 are awarded
according to certain rules as laid down in Ss. 73-74. Section 73 contains three important rules:
(i) Compensation as general damages will be awarded only for those losses that directly and
naturally result from the breach of the contract. (ii) Compensation for losses indirectly caused
by breach may be paid as special damages if the party in breach had knowledge that such losses
would also follow from such act of breach. (iii) The aggrieved party is required to take reasonable
steps to keep his losses to the minimum. It is the duty of the injured party to minimise loss.
(British Westinghouse & Co. v Underground Electric etc. Co. (1915) A.C.673). He cannot claim to be
compensated by the party in default for loss which is really not due to the breach but due to his
own neglect to minimise loss after the breach.
Thus, the loss or damages caused to the aggrieved party must be such that either (i) it arose
naturally or (ii) the parties knew, when they made the contract, was likely to arise. In other
words, such compensation cannot be claimed for any remote or indirect loss or damage sustained
by reason of the breach of the contract.
Section 74 provides that if the parties agree in their contract that whoever commits a breach shall
pay an agreed amount as compensation, the court has the power to award a reasonable amount
only, subject to such agreed amount.

Different Types of Damages

There are four types of damages (1) Ordinary. These damages are those which naturally arise in
the usual course of things from such breach. The measure of ordinary damages is the difference
between the contract price and the market price at the date of the breach. If the seller retain the
goods after the breach, he cannot recover from the buyer any further loss if the market falls, nor
is he liable to have the damages reduced if the market rises.

Example: (i) A contracts to deliver 10 bags of rice at ` 500 a bag on a future date. On the
due date he refuses to deliver. The price on that day is ` 520 per bag. The measure of damages

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