breach of contracts
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8/7/2019 Breach of Contracts
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� A invites B to see a picture with him. Baccepts the offer. A purchase a ticket
for B and waits for him outside the
cinema hall. B does not turn up has A
any cause of action against B.
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� A agrees with B to murder C for Rs.
10,000. Is this a valid contract?
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� X undertakes to put life into the dead
wife of Y and takes his fees Rs 5,000 inadvance. X fails to do so. Y claims Rs
5,000. Is Y¶s claim valid?
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� RECIPROCAL PROMISESREGARDING IMPOSSIBLE ACTS
[Sec. 56]
� The person who received any
advantage under a void agreement, is
bound to return such profits and pay
damages [Sec. 65]
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BREACH OF
CONTRACTS&
ITS REMEDIES
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� A enters into a contract with B andpromises him to deliver goods of Rs.
10,000 up to 10th march,2005 and B
promises to make the payment on due
date. But on specified date A refuses todeliver goods to B. Here it will be said A
has done breach of contract , he will be
called defaulter and B will be calledaggrieved party.
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Breach of Contact may arisein two ways:-
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� Actual Breach of Contract occurs in the
following two ways:
± On Due Date of Performance
± During the Course of Performance: If any
party has performed a part of the contract and
then refuses or fails to perform the remaining
part of the contract, it is called an actual
breach of contract during the course of
performance.
� Anticipatory breach of contract occurs when
party declares his intention of not performing the
contract before the performance is due.
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REMEDIES TO AGGRIEVED
PARTY
RESCISSION/CANCELLATION
CLAIM FORDAMAGES
CLAIM FORQUANTUM
MERIT
CLAIM FORSPECIFIC
PERFORMANCE
CLAIM FORINJUNCTION
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RESCISSION/
CANCELLATION
� A contracts to supply 100 kg of tea
leaves for Rs 8,000 to B on 15 April. If A
does not supply the tea leaves on the
appointed day, B need not pay the
price.
� B may treat the contract as rescindedand may sit quietly at home. B may also
file a suit for rescission and claim
damages.
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Exceptions to the right:
� When aggrieved party gives its express
confirmation to the contract.
� When due to the change of
circumstances the parties cannot fulfill
the original contract.
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Claim for Damages [Sec.73]
� Damages are monetary compensation
allowed to the injured party for the loss
suffered by him as a result of the breach
of contract.
� ³If actual loss is not proved, nodamages will be awarded.
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� CASE� Simpson vs. London North Railway
Company.
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2. No compensation is to be givengenerally for any indirect loss.
-Case of Headley vs. Bexendale.
3. Efforts to use the resources for minimizing the loss.
4. When Penalty is pre decided.
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TYPES OF DAMAGESORDINARY DAMAGES
SPECIAL DAMAGES
EXEMPLARY/ VINDICTIVE
NOMINAL DAMAGES
LIQUIDATED DAMAGES & PENALITY
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� Special Damage: The profit the other party might have earned if the contract
had been fulfilled. It must be in the
knowledge of both the parties that some
special damage may occur due to
breach of contract.
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� Exemplary/Vindictive damages: Alsoknown as Punitive Damages. These are
such damages which are awarded with
a view to punishing the guilty party for
the breach and not by way of compensation for the loss suffered by
the aggrieved party
� Breach of a contract to marry: Thesentiments so injured cannot be
measured in terms of money.
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� Nominal Damages: where in a contract
of sale of goods, if the contract price
and the market price is almost the same
at the date of breach at the contract,
then the aggrieved party is entitled onlyto nominal damages.
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� Liquidated Damages and Penalty:
± µLiquidated damages¶ means a sum fixed
up in advance, which is a fair and genuine
pre estimate of the actual loss that is likely
to result from the breach.
± Penalty is a payment of money fixed
without any regard to the actual loss.
� A contracts with B to pay Rs 1,000 if he fails
to pay B Rs500 on a given day. A fails to payB Rs 500 on that day. B is entitled to recover
from A such compensation, not exceeding Rs
1,000.
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BASIS OF
DIFFERENCE
LIQUIDATED
DAMAGES
PENALITY
Object Protect the aggrieved
party from loss
Warn the parties
against breaking the
contracts.
Estimate Estimated amount of
Actual loss is there
Not Actual amount,
always kept high.
Right of court Court cannot reduce
the amount of damages
Court can bring it to
justified level by
reducing it.
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� Aggrieved party can recover only actual
loss.
� Special damages should be in the
knowledge of both the parties.
� The fact that damages are difficult toaccess does not prevent the injured party
from recovering them.
� When no real loss occurs only nominal
damages are awarded.
� If amount of damage is fixed in advance
only that amount would be paid.
� It is the duty of injured party to minimize
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CLAIM FOR QUANTUM
MERIT
� ³as much as is earned´ or ³in proportion
to the work done.´
� It usually arises when a person does
some act for another, there is a breach
of contract by other party, or thecontract is discovered void or becomes
void.
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� A, engages B, a contractor, to build a
three storied house. After a part isconstructed A prevents B from working
any more. B, the contractor, is entitled
to get reasonable compensation for work done under the doctrine of
quantum meruit.
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� A contracts with B to repair his¶ house at a
piece rate. After a part of the repairs werecarried out, the house is destroyed by
lightning. Although the contract becomes
void and stands discharged because of
destruction of the house, A can claimpayment for the work done on µquantum
meruit¶.
� If a lump sum is to be paid for the repair job as a whole, then A cannot claim
quantum meruit because no money is due
till the whole job is done.
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CLAIM FOR SPECIFIC
PERFORMANCE
� Where damages are not adequate
remedy.
� When you cannot ascertain the actual
damage.
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� X is in search of a house in the
particular area for a long time. After
making hard efforts he founds a house
according to his requirements and he
decides for its purchase. Y is the owner of the house. Y agrees to sell it. But
after entering into a contract, later on Y
refuses to sell his house. In this
situation, monetary compensation
cannot help the aggrieved party.
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Claim for injunction
� µInjunction¶ is an order of a court
restraining a person from doing
particular act.
� where the party is doing something
which he promised not to do.
� µinjunction¶ is a preventive relief. It is
particularly appropriate in cases of
anticipatory breach of contract where
damages would not be an adequate
relief.
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� A, agreed to sing at B¶s theatre for three
months from 1st April and to sing for no
one else during that period.
Subsequently she contracted to sing at
C¶s theatre and refused to sing at B¶stheatre. On a suit by B, the court
granted an injunction restraining A from
singing elsewhere and awardeddamages to B to compensate him for
the loss caused by A¶s refusal.
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PRACTICAL PROBLEMS
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� A contracts to pay a sum of money to B
on a specified day. A does not pay the
amount on that day. B in consequence
of not receiving the money on that day,
is unable to pay his debts and, is totallyruined. B claims heavy damages.
Advise A.
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� A is liable to pay interest only from the
specified day upto the date of payment.
In other words B can; claim only
ordinary damages. B cannot claim
heavy damages unless A had notice of the special circumstances resulting in
the special loss at the time of entering
into the contract.
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� A agreed to build a house for B by 31st
March, 1976. A further agreed to pay Rs
500 per month as damages in case of
delay beyond the agreed date. A was
late by four months. B sued A for Rs4,500, the actual loss caused to him as
a result of the delay. What damages will
you award, and why?
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� B is entitled to recover Rs 2,000 only,
because when a sum is named in - the
contract as the amount to be paid in
case of breach, the court will allow only
reasonable compensation so as tocover the actual loss sustained, within
the limits stated in the contract.
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� A employs B as manager of his factory
for a term of three years at a monthly
salary of Rs 3,000. Without any lapse
on the part of B, A dismisses him after
two years of service. B could not get analternate job elsewhere and files a suit
for damages for breach of contract
against A. Will he succeed? If yes,assess the amount of damages
recoverable by him.
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� Yes, B will succeed. If it cannot be
proved that B has failed in his duty tominimize the loss subsequent upon the
breach, B. will be entitled to full salary
for the whole of the unexpired period of service i.e., one year. Hence the
amount of damages recoverable by B
amounts to Rs 36,000.
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