Page 33 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes 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:

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 retains 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.

Examples: (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
is the difference between the market price on the date of the breach and the contract price, i.e.,
` 200. (ii) A contracts to buy B’s ship for ` 2, 00,000 but breaks his promise. A must pay to B by
way of compensation the excess, if any, of the contract price over the price which B can obtain for
the ship at the time of the breach of promise.
The ordinary damages cannot be claimed for any remote or indirect loss or damages by reason
of the breach. The ordinary damages shall be available for any loss which arises naturally in
the usual course of things. A railway passenger’s wife caught cold and fell ill due to her being
asked to get down at a place other than the railway station. In a suit by the plaintiff against
the railway company, held that damages for the personal inconvenience of the plaintiff alone
could be granted, but not for the sickness of the plaintiff’s wife, because it was a very remote
consequence.

What is the most common remedy for breach of contracts?
The usual remedy for breach of contracts is suit for damages. The main kinds of damages
awarded in a contract suit are ordinary damages. This is the amount of money it would take to
put the aggrieved party in as good a position as if there had not been a breach of contract. The
idea is to compensate the aggrieved party for the loss he has suffered as a result of the breach of
the contract.

Special Damages

These damages are claimed in case of loss of profit, etc. When there are certain special or
extraordinary circumstances present and their existence is communicated to the promisor, the
non-performance of the promise entitles the promisor to not only the ordinary damages but
also damages that may result there from. The communication of the special circumstances is a
prerequisite to the claim for special damages.

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