Damages for Breach of Contract

A contract is not a property. It is a promise supported by some consideration upon which either the remedy of specific performance or that of damages is available. The party who is injured by the breach of contract may bring an action for damages in the court. “Damages” means compensation for the loss suffered by the injured party. Burden of damage lies on the injured party to prove his loss. Every action for damages gives rise to two problems:

  • Remoteness of damage
  • Measure of damage

Remoteness of damage

Every breach of contract upsets many settled expectations of the injured party. They may feel the consequences in a variety of ways and for a long period. For instance, a person contracts a shopkeeper to supply pure mustard oil, but he sends impure stuffs, which is a breach. The oil is seized by an inspector and destroyed. The shopkeeper is arrested, prosecuted and convicted for the breach. He suffers from loss of oil, loss of profit he gained on selling it and the loss of social prestige and of business reputation, and also lot of time and money wasted on defence and the mental agony and torture of the prosecution.

Thus, the consequences of a breach may be endless, but there must be an end to liability. The defendant cannot be liable for all those follows from his breach. There must be a limit to liability and beyond that limit the damage is said to be too remote or irrecoverable.

Types of Damages

  • General damages: General damages are those which arise naturally in usual course of things from the breach itself. Here defendant is liable for all that which naturally happens in the usual course of things after the breach.
  • Special damages: Special damages are those damages arises on account of 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 parties.

Some other damages that occur from breach of contract are:

  • Compensatory damages
  • Liquidated damages
  • Nominal damages
  • Specific performance
  • Rescission
  • Reliance damages
  • Quantum meruit damages

Compensatory damages means that the court grants the offended party so that he/she will be within the position that the contract would have put him/her in in the event that it had been maintained appropriately. This court grant covers the following:

  • Any lost profits
  • The cost of substitute performance

Lost profits are known as the gains that were anticipated to happen from the completion of the contract. In other words, the lost profits would be the esteem gotten from the contracted administrations less the fetched of the benefit. This calculation is called the desire damages.

Consequential damages are granted by the court for anomalous misfortunes that were known and anticipated to happen upon a breach of contract. These harms might be recaptured in circumstances where the person or gather that committed the breach was cautioned or ought to have known that the other party would confront losses.

In case harms are recorded within the contract as a result of a disappointment to complete one’s commitments, they are considered sold harms. Now and then, parties select to consolidate exchanged harms when harms caused by a breach of contract are vague. For this reason, they select to incorporate harms that would be caused by a breach within the contract. The court will either maintain the harms indicated within the contract or rebuff the defendant.

When a little grant is given by the court to the harmed party due to a breach of contract that did not fiscally harm the offended party, the harms are considered ostensible. In a few cases, since reformatory harms can as it were be granted when the respondent is found obligated, an grant for ostensible harms can lead to the uncovering of corrective harms as well.

Measure of Damages

Once it is determined that whether general or special damages have to be recovered, they have to be evaluated in terms of money. This is the problem of measure of damages and is governed by some fundamental principles.

  • Claim for damages is not debt: A claim for damages arising out of breach of contract, whether for general or liquidated damages, remains only a claim until it is adjudicated by the court and becomes a debt only after the court awards it. Till then the basis of the claim alone, the claimant is not entitled to present a winding up petition of the the defendant company on the ground of its inability to pay debts.

Damages that are Non-Recoverable

Although a money damage award is the foremost well-known award given from a breach of contract, it comes with numerous impediments. For this reason, it is imperative that the offended party be mindful of these restrictions, knowing that he or she may not recuperate all of his or her losses.

For illustration, numerous misfortunes or costs caused by a breach of contract are considered non-recoverable harms or, to put it basically, harms that the blameless party will not get granted cash for.

References:

  • Contract & Specific Relief – Avtar Singh
  • Upcounsel.com

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