JAMIA MILLIA

ISLAMIA

ASSIGNMENT ON CONTRACT
LAW

REMEDIES FOR BREACH OF

CONTRACT
2014-2015

LAW
PREPARED BY:- SUSHANT NAIN (SEC-A)
1ST YEAR (FACULTY OF LAW)
SUBMITTED TO:- DR. EQBAL HUSSAIN
CONTENTS

1) Breach of Contract
i. Renunciation
ii. Breach of Condition
iii. Fundamental Breach
2) Introduction to remedies
3) Damages
i. Nature of Loss
ii. Remoteness of loss
iii. The measure of damages
4) Equitable Remedies
i. Specific Performance
ii. Injuction
 ACKNOWLEDGEMENT

The success and finishing of this project

required a lot of guidance & assistance
from many people such as my family
members and friends.

I respect & thank my teacher for giving

the opportunity to work on this project.

I am thankful & fortunate to get

constant encouragement , support &
guidance from everyone.
Breach of Contract & Remedies

1 Breach of contract

Nature of breach

A breach of contract occurs 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.

Breach of contract may be either actual

or anticipatory.

Actual breach occurs where one party

refuses to form his side of the bargain on
the due date or performs incompletely.
For example: Poussard v Spiers and
Bettini v Gye.

Anticipatory breach occurs where one

party announces, in advance of the due
date for performance, that he intends not
to perform his side of the bargain. The
innocent party may sue for damages
immediately the breach is announced.
Hochster v De La Tour is an example.
 Effects of breach

A breach of contract, no matter what form it

may take, always entitles the innocent party
to maintain an action for damages, but the
rule established by a long line of authorities
is that the right of a party to treat a contract
as discharged arises only in three
situations.

The breaches which give the innocent

party the option of terminating the
contract are:

(a) Renunciation

Renunciation occurs where a party

refuses to perform his obligations under
the contract. It may be either express or
implied. Hochster v De La Tour is a
case law example of express
renunciation.

Renunciation is implied where the

reasonable inference from the
defendant’s conduct is that he no longer
intends to perform his side of the
contract. For example: Omnium
D’Enterprises v Sutherland.
(b) Breach of condition

The second repudiatory breach occurs

where the party in default has committed a
breach of condition. Thus, for example, in
Poussard v Spiers the employer had a right
to terminate the soprano’s employment
when she failed to arrive for performances.

(c) Fundamental breach

The third repudiatory breach is where the

party in breach has committed a serious (or
fundamental) breach of an innominate term
or totally fails to perform the contract.

A repudiatory breach does not automatically

bring the contract to an end. The innocent
party has two options:
He may treat the contract as discharged
and bring an action for damages for breach
of contract immediately. This is what
occurred in, for example, Hochster v De La
Tour.
He may elect to treat the contract as still
valid, complete his side of the bargain and
then sue for payment by the other side.
For example, White and Carter Ltd v
McGregor
2 Introduction to remedies

Damages is the basic remedy available

for a breach of contract. It is a common
law remedy that can be claimed as of
right by the innocent party.

The object of damages is usually to

put the injured party into the same
financial position he would have been
in had the contract been properly
performed.

Sometimes damages are not an

adequate remedy and this is where the
equitable remedies (such as specific
performance and injunction) may be
awarded.

3 Damages
3.1 Nature:

The major remedy available at common

law for breach of contract is an award of
damages. This is a monetary sum fixed
by the court to compensate the injured
party.
In order to recover substantial damages
the innocent party must show that he has
suffered actual loss; if there is no actual
loss he will only be entitled to nominal
damages in recognition of the fact that he
has a valid cause of action.

In making an award of damages, the

court has two major considerations:

Remoteness – for what consequences of

the breach is the defendant legally
responsible?

The measure of damages – the principles

upon which the loss or damage is
evaluated or quantified in monetary
terms.

The second consideration is quite distinct

from the first, and can be decided by the
court only after the first has been
determined.
3.2 Remoteness of loss

The rule governing remoteness of loss in

contract was established in Hadley v
Baxendale. The court established the
principle that where one party is in
breach of contract, the other should
receive damages which can fairly and
reasonably be considered to arise
naturally from the breach of contract itself
(‘in the normal course of things’), or
which may reasonably be assumed to
have been within the contemplation of the
parties at the time they made the contract
as being the probable result of a breach.

Thus, there are two types of loss for

which damages may be recovered:

1. what arises naturally; and

2. what the parties could foresee when the

contract was made as the likely result of
breach.

As a consequence of the first limb of the

rule in Hadley v Baxendale, the party in
breach is deemed to expect the normal
consequences of the breach, whether he
actually expected them or not.
Under the second limb of the rule, the party
in breach can only be held liable for
abnormal consequences where he has
actual knowledge that the abnormal
consequences might follow or where he
reasonably ought to know that the abnormal
consequences might follow – Victoria
Laundry v Newman Industries.

3.3 The measure (or quantum) of

damages

In assessing the amount of damages

payable, the courts use the following
principles:

The amount of damages is to

compensate the claimant for his loss
not to punish the defendant.

Damages are compensatory – not

restitutionary.

The most usual basis of compensatory

damages is to put the innocent party into
the same financial position he would have
been in had the contract been properly
performed. This is sometimes called the
‘expectation loss’ basis. In Victoria
Laundry v Newman Industries, for example,
Victoria Laundry were claiming for the
profits they would have made had the boiler
been installed on the contractually agreed
date.

Sometimes a claimant may prefer to

frame his claim in the alternative on the
‘reliance loss’ basis and thereby recover
expenses incurred in anticipation of
performance and wasted as a result of
the breach – Anglia Television v Reed.

In a contract for the sale of goods, the

statutory (Sale of Goods Act 1979)
measure of damages is the difference
between the market price at the date of
the breach and the contract price, so that
only nominal damages will be awarded to
a claimant buyer or claimant seller if the
price at the date of breach was
respectively less or more than the
contract price.

In fixing the amount of damages, the

courts will usually deduct the tax (if any)
which would have been payable by the
claimant if the contract had not been
broken. Thus if damages are awarded for
 loss of earnings, they will normally be by
reference to net, not gross, pay. Difficulty
in assessing the amount of damages
does not prevent the injured party from
receiving them: Chaplin v Hicks.

In general, damages are not awarded for

non-pecuniary loss such as mental
distress and loss of enjoyment.
Exceptionally, however, damages are
awarded for such losses where the
contract’s purpose is to promote
happiness or enjoyment, as is the
situation with contracts for holidays –
Jarvis v Swan Tours.

The innocent party must take reasonable

steps to mitigate (minimise) his loss, for
example, by trying to find an alternative
method of performance of the contract:
Brace v Calder.

3.4 Liquidated damages clauses

and penalty clauses
If a contract includes a provision that, on
a breach of contract, damages of a
certain amount or calculable at a certain
rate will be payable, the courts will
normally accept the relevant figure as a
measure of damages. Such clauses are
called liquidated damages clauses.

The courts will uphold a liquidated

damages clause even if that means that
the injured party receives less (or more
as the case may be) than his actual loss
arising on the breach. This is because
the clause setting out the damages
constitutes one of the agreed contractual
terms – Cellulose Acetate Silk Co Ltd v
Widnes Foundry Ltd.

However, a court will ignore a figure for

damages put in a contract if it is classed
as a penalty clause – that is, a sum which
is not a genuine pre-estimate of the
expected loss on breach.

This could be the case where:

1. The prescribed sum is extravagant in

comparison with the maximum loss that
could follow from a breach.

2. The contract provides for payment of a

certain sum but a larger sum is
stipulated to be payable on a breach.
3. The same sum is fixed as being
payable for several breaches which
would be likely to cause varying
amounts of damage.

All of the above cases would be regarded

as penalties, even though the clause
might be described in the contract as a
liquidated damages clause. The court will
not enforce payment of a penalty, and if
the contract is broken only the actual loss
suffered may be recovered (Ford Motor
Co (England) Ltd v Armstrong).
4 Equitable remedies

4.1 Specific performance

This is an order of the court requiring

performance of a positive contractual
obligation.
Specific performance is not available in
the following circumstances:

Damages provide an adequate remedy.

Where the order could cause undue

hardship.

Where the contract is of such a nature

that constant supervision by the court
would be required, eg, Ryan v Mutual
Tontine Association.

Where an order of specific performance

would be possible against one party to
the contract, but not the other.

Where the party seeking the order has

acted unfairly or unconscionably. He is
barred by the maxim ‘He who comes
to Equity must come with clean
hands’.
Where the order is not sought promptly the
claimant will be barred by the maxims
‘Delay defeats the Equities’ and ‘Equity
assists the vigilant but not the indolent’.

In general the court will only grant specific

performance where it would be just and
equitable to do so.

4.2 Injunction
An injunction is an order of the court
requiring a person to perform a negative
obligation.

Injunctions fall into two broad categories:

Prohibitory injunction, which is an order that

something must not be done.

Mandatory injunction, which is an order that

something must be done, for example to pull
down a wall which has been erected in breach
of contract.

Like specific performance it is an equitable

remedy and the court exercises its discretion
according to the same principles as with
specific performance, eg, Page One Records
Ltd v Britton and Warner Brothers v
Nelson.