REMEDIES FOR BREACH OF CONTRACT

1.Rescission of a contract:
If a contract is not proving to be beneficial depending on the situation, one has
the option to rescind the contract. The word “rescission” is derived from the Latin
term rescind ere, which means to cut or tear open. The right of rescission is
available under Section 19 of the Indian Contract Act.

The option of Rescission is available to a party as a remedy whose consent, whilst

entering the contract, has been invalidated due to following:

 Misrepresentation / false statement of fact made by the other party whilst

execution of the contract
 A party is mistaken in the terms of the contract and the other party was
aware of the mistake
 A party was unduly influenced by another to enter into the contract (which
is considered under Section 19A of the Act).
 Non-disclosure with respect to insurance contracts

The above could be the main grounds for rescission of the contract. A party to a
contract is entitled to rescind the contract in the circumstances given in Sections
39, 53, 55, 64 & 65 of the Indian Contracts Act.

 Section 39: Applies for Contracts where the performance period or time has
not yet arrived
 Section 53: Applies to the liability of party preventing an event, thereby
affecting the performance or the fulfilment of the contract
  Section 55: Applies where the party, who has promised to do a certain thing
at a specified time, fails to do it on or before time
 Section 64: Applies for a voidable contract
 Section 65: Deals with the principle of restitution in integrum (a Latin term).
Meaning restoration to original condition i.e. in situations where the
benefit is received and the contract was later found to be void. It is
‘compensatory in principle’ and prevents ‘unjust enrichment’

Rescission of a contract by agreement:

Where the parties may agree to the total release of their obligations under the
contract or may enter a new contract having different obligations or parties.
There could be a partial discharge by way of variation/waiver in terms or
obligations of the existing contract.

Rescission of agreement can either be express or implied. It is implied wherein

there is an alteration of prevailing terms and substituted by new terms. Or there
can be novation i.e. the substitution of a new contract in place of old one.

Compensation:
Section 75 of the Act applies to compensation in case of rescission in a contract. It
prescribes compensation in case of rightfully rescinded contract. The section
reads as follows:

“Section 75. Party rightfully rescinding the contract, entitled to compensation- A

person who rightfully rescinds a contract is entitled to compensation for any
damage which he has sustained through the non-fulfillment of the contract.”
Steps for Recession:
Basically, a notice is presented by the aggrieved party, addressed to the opposite
party stating the reasons for recession. In that notice, the party declares its
intention to rescind the contract and also asks that money be refunded or
compensation be paid. The notice results in unilateral rescission.

 Sections 27 to 30 of Specific Relief Act, 1963 deal with the rescission of a

contract. It is a type of legal redressed.
 Section 27 deals with a situation where the rescission may be adjudged or
refused,
 Section 28 deals with rescission in cases of contracts for the sale or lease of
immovable property, Section 29 deals with an alternative prayer for
rescission and
 Section 30 the court may require the rescinding party to do equity.

2.SUITS OF DAMAGES:
Sections 73-75 of the Indian Contract Act, 1872, define remedy by way of
damages as the entitlement of the suffering party to recover compensation for
losses suffered due to non-performance of the contract. The damages can be of
the following types:

ORDINARY DAMAGES:
On the breach of a contract, the suffering party may incur some damages arising
naturally, in the usual course of events. Even if the suffering party knew about the
likely damages if the contract was breached, he can claim compensation for such
losses.
Example:

Yuvraj agrees to sell and deliver 10 bags of potatoes to Dhaya for Rs 5,000 after
two months. On the date of delivery, the price of potatoes increases and yuvraj
refuses to perform his promise. Dhaya purchases 10 bags of potatoes for Rs
5,500. He can receive Rs 500 from yuvraj as ordinary damages arising directly
from the breach.

SPECIAL DAMAGES:
A party to a contract might receive a notice of special circumstances affecting the
contract. In such cases, if he breaches the contract, then he is liable for the
ordinary damages plus the special damages.

Example:

Yuvraj hired the services of Dhaya, a goods transporter, to deliver a machine to

his factory urgently. He also informed Dhaya that his business has stopped for
want of the machine. However, Dhaya delayed the delivery of the machine by an
unreasonable amount of time. Yuvraj missed out on a huge order since he didn’t
have the machine with him.

In this case, Yuvraj can claim compensation from Dhaya. The compensation
amount will include the amount of profit he could have made by running his
factory during the period of delay. However, he cannot claim the profits that he
would have made if he got the contract since Dhaya was not made aware of the
same.

VINDICTIVE/PUNITIVE/EXEMPLARY DAMAGES:

There are two scenarios for awarding vindictive or exemplary damages:

 Breach of a promise to marry because it causes injury to his/her feelings

  Wrongful dishonour of cheque by a banker because it causes loss of
reputation and credibility.

In case of a wrongful dishonour of cheque from a businessman, the compensation

will include exemplary damages even if he has not suffered any financial loss.
However, a non-trader is not awarded heavy compensation unless the damages
are alleged and proved as special damages.

Example:

Yuvraj is a farmer. He issues a cheque for procuring seeds for his next crop. He
has sufficient funds in his account but the bank erroneously dishonours the
cheque. Yuvraj files a suit claiming compensation for damages to his reputation.
The Court awards a nominal amount as damages since Yuvraj is not a trader.

NOMINAL DAMAGES:
If a party to a contract files a suit for losses but proves that while there has been a
breach of contract, he has not suffered any real losses, then compensation for
nominal damages is awarded. This is done to establish the right to a decree for a
breach of contract. Also, the amount can be as low as Re 1.

3.SUIT UPON QUANTOM MERITS:

The Latin term quantum merit translates to “as much as he has earned”, and
refers to the actual value of the service rendered. In generally it is nothing but the
person who is under the contract, if he is not able to fulfill his duty because of any
situation, by law he has able to recover his remuneration of his such part of work
he has already done.
DEFINITION:
According to the INDIAN CONTRACT ACT under the section 70, the reasonable
sum of money to be paid for services rendered or work done when the amount
due is not stipulated in a legally enforceable contract.
 The principle of law provides for payment of compensation under certain
circumstances, to a person who has rendered goods or services to another
person under a contract which could not has been fully performed.

Example:

A contractor is contracted to word on a school. The contractor does some work

but then quits(breach of contract). The contractor is entitled to be paid for the
services he has already provided for the school on the basis of quantum merit
(however the school may be entitled to damages arising out of the need to look
for a new contractor).

CASES IN WHICH QUANTUM MERIT CLAIM ARISE:

 In case of void agreement or contracts that become void [ section 65]

 In case of gratuitous act [ section 70].
 In case of act preventing the completion of contract.
 In case of divisible contract.

In case indivisible contract performed completely but badly.

ELEMENTS OF QUANTUM MERIT:

 Valuable services were rendered.

 That the services were rendered to the defendant.
  The services were accepted, used and enjoyed by the defendant.
 Defendant was aware that the plaintiff, in performing the services,
expected to be paid by the defendant.

Quantum Merit When Work is Incomplete:

In a situation in which a contract is entered into, but the services are not
completed, the question of fair payment may be brought to the court. Incomplete
performance on the part of the service provider may be due to many reasons,
including something happening that makes performance of the service
impossible. In a case of incomplete work, the theory of quantum merit is used to
determine whether payment is due, in what amount payment should be made,
and which party should be paid.
The court’s decision in such a case depends on the specifics of the contract, what
services were actually performed, and the circumstances which caused the
termination of the work.

Use of Quantum Merit:

Many situations exist in which people receive services from someone else,
often on an unexpected basis, without signing a contract for payment, or without
first obtaining a price for those services, although a reasonable person would
know that payment is expected. Examples of these situations include receipt of
care by an emergency room physician, legal services without signing a fee
agreement, or obtaining spur-of-the moment services of the neighbor’s gardener.
In such situations there can be no doubt that the individual deserves to be paid
for services rendered, but it is not uncommon for disputes to arise over the actual
amount billed after the fact.
Acceptance of Services:

A formal, written agreement is not required for a contractual relationship

to exist. When one individual provides services to another, who has either
requested those services, or freely accepted them, knowing they are not
performed free of charge, a contract is seen to exist. In the event the person
receiving services refuses or fails to pay, the provider of services may file a civil
lawsuit seeking payment.

4.SUIT FOR SPECIFIC PERFOMANCE OF THE CONTRACT:

VALID CONTRACT:
The remedy of specific performance presupposes the
existence of a valid contract between the parties to the controversy. The
terms of the contract must be definite and certain. This is significant
because equity cannot be expected to enforce either an invalid contract
or one that is so vague in its terms that equity cannot determine exactly
what it must order each party to perform. It would be unjust for a
Court to compel the performance of a contract according to ambiguous
terms interpreted by the court, since the Court might erroneously order
what the parties never intended or contemplated.
Essential elements to constitute lis pendens:
(Section 52 of The Transfer of Property Act)

The following are the essential elements to constitute lis

pendens principle :
 There must be suit is pending in the competent
Court.
 The suit or proceeding must not be collusive.
 The litigation must be one in which right to
immovable property is directly and specifically
in question.
 There must be a transfer of or otherwise dealing
with the property in dispute by any party to the
litigation.
  Such transfer must affect the rights of the other
party that may ultimately accrue under the
terms of the decree or order.

5.SUIT FOR AN INJUCTION:

An injunction is basically like a decree for specific performance but for a negative
contract. An injunction is a court order restraining a person from doing a particular
act.

So a court may grant an injunction to stop a party of a contract from doing

something he promised not to do. In a prohibitory injunction, the court stops the
commission of an act and in a mandatory injunction; it will stop the continuance
of an act that is unlawful.

A suit for injunction is a very common and effective remedy against any mischief
played by a third-party. All the civil courts are empowered to issue injunctions. An
injunction may be issued for and against individuals, public bodies or even State.
Disobedience of injunction is punishable as contempt of court. In India, some of
these points have been incorporated into rules of jurisdiction by being enacted as
sections of the Specific Relief Act. In other words civil suit is an effective legal
remedy by any person against the other seeking a Leif of restraint under the facts
when the person approaching the court is aggrieved by any mischief of the other
person.

An injunction will not be issued,

 where damages are the appropriate remedy,

 where an injunction is not the appropriate relief,
 where the plaintiff is not entitled to an injunction on account of his
conduct,
 where the contract cannot be specifically enforced,
 where the injunction would operate inequitably.
The cases in which an injunction is to be granted in preference to damages where
a property is concerned to have been summarized in Section 38, Specific Relief
Act.

Kind of injunction: Injunctions are either temporary (interlocutory) or perpetual.

They are defined in Section 37, Specific Relief Act, which reads as under:

(1) Temporary injunctions are such as are to continue until a specified time or
until the further order of the court and they may be granted at any stage of a suit,
and are regulated by the Code of Civil Procedure, 1908.

(2) A perpetual injunction can only be granted by the decree made at the hearing
and upon the merits of the suit; the defendant is thereby perpetually enjoined
from the assertion of a right, or from the commission of an act which would be
contrary to the rights of the plaintiff.

(i) Temporary injunctions: The procedure of granting the temporary injunction is

governed by the rules laid down in Order XXXIX, Rules 1 and 2, Civil Procedure
Code (Act V of 1908) which reads as under:

1. Cases in which temporary injunction may by granted:

Where in any suit it is proved by affidavit or otherwise

(a) that any property in dispute in a suit is in danger of being wasted, damaged or
alienated by any party to the suit, or wrongfully sold in execution of a decree, or

(b) that the defendant threatens, or intends, to remove or dispose of his property
with a view to defraud his creditors.

The court may order grant a temporary injunction to restrain such act, or make
such other order for the purpose of staying and preventing the wasting, damaging
alienation, sale, removal or disposition of the property as the court thinks fit until
the disposal of the suit or until further orders.
2. Injunction to restrain repetition or continuance of breach:-

(1) In any suit for restraining the defendant from committing a breach of contract
or other injuries of any kind, whether compensation is claimed in the suit or not,
the plaintiff may, at any time after the commencement of the suit, and either
before or after judgment, apply to the court for a temporary injunction to restrain
the defendant from committing the breach of contract or injury complained of, or
any breach of contract or injury of a like kind arising out of the same contract or
relating to the same property or right.

(2) The court may by order grant such injunction, on such terms as to the duration
of the injunction, keeping an account, giving security, or otherwise, as the court
thinks fit.

(3) In case of disobedience, or of breach of any such terms, the court granting an
injunction may order the property of the person guilty of such disobedience or
breach to be attached, and may also order such person to be detained in the civil
prison for a term not exceeding six months, unless in the meantime the court
directs his release.

(4) No attachment under this rule shall remain in force for more than one year, at
the end of which time, if the disobedience or breach continues, the property
attached may be sold, and out of the proceeds the court may award such
compensation as it thinks fit, and shall pay the balance, if any, to the party
entitled there to.

It should be noted that grant of an injunction is discretionary with the court.

Section 36 of the Specific Relief Act, 1963 expressly lays down that Preventive
relief is granted at the discretion of the court by injunction, temporary or
perpetual. Therefore the court will grant a temporary injunction if the following
conditions are satisfied:

(i) The plaintiff must establish a prima facie case. He is not required to make out a
clear title, but he must establish that there is a substantial question to be
investigated and that matters should be preserved in status quo until the
injunction is finally disposed of.
(ii) An irreparable injury would result if the injunction were refused and that there
is no other remedy open to the applicant by which he could protect himself from
the consequences of the apprehended injury.

(iii) The conduct of the plaintiff has not been blameworthy.

(iv) The balance of convenience requires that the injunction should be granted.

STAGES OF SUIT FOR INJUNCTION:

A suit for an injunction before a civil court in India is a prolonged but effective
legal remedy and legal process during which the opposite party is asked to file his
written statement.

STAGE-I. The plaint filed by the plaintiff that is the person approaching the civil
court is considered as the basic document.

STAGE-II. The opposite party is directed to file a written statement to the said
planned.

STAGE-III. After filing of the written statement, the plaintiff is directed to file his
rejoinder.

STAGE-IV. The court after that identifies the issues in dispute and frames issues
for the trial of the suit.

STAGE-V. The parties are directed to file their evidence before the court. The
plaintiff is at first directed to lead his evidence before the court which may be oral
or documentary by producing witnesses in its support as well as summoned
records from various sources in support of its case.

STAGE-VI. The opposite party i.e. the Defendant is directed to lead its evidence
both oral as well as documentary.

STAGE-VII. The court hears the arguments and decides the matter finally.

STAGE-VIII. Decree if passed by the court finally determining the rights of the
parties. The court may also reject the suit.
The entire process of trial of a suit is strictly governed by the provisions of the
code of civil procedure code, the Indian evidence act and various other related
acts based upon the facts of the case.

LAWS REGULATING CIVIL SUIT IN INDIA:

If any specific act is being relied upon, the provisions of the said act are also taken
into consideration by the Civil Court while adjudicating the suit. Once the
evidence of the plaintiff is completed, the defendant that is the opposite party
directed to lead his evidence during which he can lead his evidence by producing
witnesses as well as by summoning documents from various sources.

All the witnesses produced before the courts are subject to cross-examination
that is the counsel for the opposite party has a right to ask various questions
based on their depositions before the court that are called the cross-examination.
During the cross-examination, various related documents are also exhibited and
produced before the court.

This all is very complex which a common man cannot comprehend. He can only
assist his lawyer in leading the case. Once the evidence of the parties is concluded
before the court, the court hears the arguments of both the parties and
adjudicates the entire suit based on the evidence; the issue is framed, the law
applicable to the facts of the case.

The court after that passes the judgment in the suit followed by a decree. A
decree is the final adjudication of the dispute between the parties under the seal
of the court.

Once the civil suit has been decided, the parties have the remedy to file an appeal
against the said civil suits before the higher courts. The parties can even approach
the upper courts during the trial of the suit if they are agreed to any interlocutory
order passed by the trial court. This is the main reason for the delay of the civil
suit in Indian legal system.

The role of a lawyer in drafting, framing, presenting and conducting the civil suit is
very crucial as he determines the entire nature of the civil suit to be filed and
conducted. In Indian legal system, there are several acts which are attracted in
the adjudication of civil suits hence the duty of the lawyer becomes very crucial
and important to apprise the court about the said provisions of law and to point
out the same for his client.