REMEDIES

1. In a contract, each party has to perform their own duties. When the plaintiff alleges
breach on the defendant’s part, the defendant can be take defence of invalidity
(fraud, mistake, etc) or may justify his breach on impossibility, reciprocal promises,
novation, alternation and time.
2. Assuming theses defences are not valid, then either he terminates the contract i.e.
both the parties are relieved from the duties and rights under the contract or still
perform the obligations and then go on to claim damages.
3. ASCERTAINING THE DAMAGES:-
a. In Tort- to restore the party to past position
In Contract- The standard principle is to put the parties in same position as if the
contract has been performed.
The principle in torts is the reliance interest. It is the only principle in torts. In
contract both the standard rule and the reliance interest rule is present.
b. The expectation/performance interest rule came in Robinson v Harman case. In
ICA and English law there is no prohibition in party claiming reliance interest or
expectation interest.
c. Section 73 of ICA- spells out damages for breach of contract- it does not rely on
any particular interest.
d. Fuller’s article- “the reliance interest in contract damages“- the history of law-
tort and contract were treated as same- hence there is no reason to make a
distinction between the damages in contract and torts- so, the reliance interest
should be taken as a measure in contract as well.
Criticism of the article:-
The purpose of the contract law is to enforce performance rather than just giving
token money under reliance interest.
Inspite of the criticisms, the article was landmark.
e. Angellia v Reeve case-(suggested reading)
4. THE DEFENCES FOR NON PERFORMANCE BY THE DEFENDANT:-
I. FORESEEABILITY
Harvey v Baxendale:-
The plaintiff had a particular mill. The plaintiff’s shafts broke and they gave it to
the defendants for repair. The defendants state to repair in a specified time.
However, the defendants delayed. The plaintiff sued the defendants for
damages. The claimed damages included- the days delayed and loss of profit
incurred for the mill being closed. The defendants contended that the incurrence
of loss of profit was not foreseeable and hence they are not liable for that part of
damages.
Lord Alderson:-
 Where two parties have made a contract and one of them has broken, the
damages which the other party ought to receive in respect of such breach should
be such as may fairly and reasonable be considered either naturally arising i.e.
the usual course of things or such as may be reasonably suppose to have been in
the contemplation of the parties.
In the case, the defendants had assumed that the plaintiff has a stand by shaft
for working. Hence the loss of profits was not in contemplation of the parties.
Thus the case stated about damages for:-
i. Usual course of things
ii. Things which are foreseeable to the parties
a. Section 73- incorporates the principle of the case stated above.
b. Why ICA does does not talk about the expectation interest rule?
The section 73 talks about the defence of foreseeability, but the ICA leaves the
claiming of damages under expectation or reliance rule as open.
c. Victoria Laundry case:-
There was a laundry company. Their boiler was damaged. They gave it for repair
to defendants and stated that it should be given back as soon as possible. Two
kinds of damages was claimed- loss of profits and loss a huge contract with the
government. The court held that the first was reasonable and second was not.
The court stated:-
i. It is well settled that the governing purpose of damages is to foot the
parties whose right have been violated in the same position as if his rights
have been observed. {The court has acknowledged the expectation
interest being the paramount principle of calculating damages for breach
of contract.}
ii. This purpose if relentlessly pursued would provide the party with all loss
resulting from the breach however improbable.
iii. In cases of breach the aggrieved party is only entitled to such part of the
loss actually resulting as was at the time of contract reasonably
foreseeable from the result of the breach.
iv. What is reasonable foreseeable depends on the knowledge then
possessed by the parties or at all events by the party who later commits
the breach.
v. Knowledge possession is of two kinds- imputed knowledge (the usual
course of things) and actual knowledge (special circumstances which are
in contemplation of the parties).
II. Mitigation:-
a. A contracted with B for the delivery of 100 bales of cotton for Rs 100/bale.
Both parties knew that A has a cotton garment industry and that A will use
that cotton to manufacture clothes which he will sell for 40,000. As per
standard rule, the damages which can be claimed is 40,000. A contracted C
 for bales of cotton. B had a responsibility to ensure the delivery of the cotton
bales may be by contracting another person who can deliver.
Principle of mitigation:-
“When a party suffers damage from breach of contract, such party has a
responsibility to reduce the damage as much as possible.”
b. Murlidhar case:-
The parties enter into a contract for delivery of cotton. The delivering has to
discharge it by rail. But, he did not a rail ticket, so he could not deliver. He took
the defence of impossibility-he said the contract is dependent on me getting a
rail ticket, since I could not get the ticket; hence it became impossible to
perform. The court held that since the he knew that he has to deliver it by rail
and was required to get a ticket. Since he didn’t try to get ticket during
reasonable time i.e. not at the last moment, hence he is liable. Thus there is a
breach of contract. When B did not get the bales of cotton, then he brought the
cotton from his city itself which was costlier than the price of the cotton he
would have paid to A. So, B is entitled to get money by which he fell short of the
money when brought the cotton from his city itself.
Illustration under section 73.
A contended that the B rather than buying from his city, should have brought
from C who was in city of A. he contended that the price would have been less.
To this, B said that it was obvious that I could not have brought the cotton from
anywhere else. A proved the cotton was of lesser price.
Mitigation of loss principle:-
The court held that B should have done everything to mitigate the loss as far as
possible. Since he B did not do so, B was not entitled of any damages.
III. Contributory negligence
When the plaintiff himself contributed to the breach, the court will reduce the
damages accounting for such contribution.
British westing house case.
Pannalal Jankidas v Mohanlal case:
A contracts with B stating that X goods are coming in and he has to keep it with
him and then dispatch them to A form B’s godown. A tells B that he will pay B for
insurance. B fails to buy the insurance. So, there is a breach of contract. As a
result of great Bombay fire, all goods of A in godown was destroyed. A thought
that he will get money due to insurance and hence filed the suit. B stated that if
he had taken the fire insurance, the loss would not have been recoverable. The
majority judgment held even if the fire conditions did not mention it, it was a
standard term and the claimed 10 lakhs is payable. However, the minority
judgement (IMP) said that if we apply the ICA then it would have no difference
whether the insurance was taken or not because the even if the contract was
performed, the money was not available as the premium they were paying was
 less and lesser the premium, lesser the coverage of the incidents under the
insurance.

LIQUIDATED DAMAGES (Section 74)-If there is a breach of a contract, the contract itself
provides for the consequences of the breach in monetary terms.

1. Firstly, there is breach and then the question of remedies arises.

2. Purpose of liquidated damages:-
a. Do away with the formalities of calculating the damages and to ensure the
b. To ensure the performance of the contract itself.
3. The concept (as such) does not exist in India.
4. The purpose of the contract law is positive to ensure performance of the contract. In
case where the specified sum is not in function of the sum is not to enforce performance
of the contract but deterrence amounting to a penalty.
5. English law:-
a. Penalty- under English law such prescription of damages is called ‘In terterrum’
clause i.e. the clause tend to terrorise the party to perform the contract. Such is
held to be void in English law. Pary gets only nomial damages.
b. Genuine pre estimate of the damages- The all the consequences in section 73
such as proving the mitigation and foresee ability does not come into play and
the specified sum is held valid and pay the specified sum.

Dunlop Pneumatic Types v New Garage case

Facts:-

D entered into a contract with New Garage stating that some types will be given for
market distribution for sale. One of the clauses was that the types should not be sold
below the specified sum. The New Garage gave tyres to Selfridges who sold the tyres
less than the specified sum. Then, D sued the New garage. The new garage
contended that selling below a certain price increases the D’s market sale which
balances the sum being less. And in the alternate, the clause is ‘In terrum’. D
contended that the selling of the tyres at lesser price affects their marketing
strategy.

Issue:-

Whether the sum specified in the contract was a penalty or genuine pre estimate?

Lord Akinson stated five principles to differentiate the penalty from the genuine
damages.

6. Indian law:-
a. The Indian law diverted from the English law by the
Section 74:
 i. A contract must be broken i.e. breached like in Section 73
ii. Sum must be named.
iii. Whether or not loss is proved- different from the English law.
iv. Maximum limit/ Reasonable compensation.
b. In Indian law, the amount is only the maximum limit and the court will award
reasonable compensation (as opposed to the English law where in genuine clause,
the party has to pay the whole sum specified)- Fatehchand v Balkrishan Das case- It
was held that the Indian law has diverted from the Dunlop Pneumatic types v new
Garage by diluting the English law about the genuine pre estimate.
7. Kailashnath V. DDA case:-

Justice Nariman spoke about two aspects which further diluted Section 74:-

a. Fact of loss- if no loss, then no section application of section 75. If there is no loss
that has occurred, then liquidated damages in contract cannot come into play. For
this, the fact of loss has to be proved.
b. Requirement to prove loss-If the court can ascertain the loss, the extent of the
loss has to be proved. In cases only where such loss cannot be ascertained, then
the court will apply the genuine pre estimate clause. Here, the court further
diluted the proving loss requirement.
8. Cavendish Pneumatic Square Tyre Co Ltd v Talal El Makessi (2015)

Argument placed:- If two standard (no undue influence, coercion, etc) parties decide to a
liquidated damage clause, there is no reason to not enforce the clause. The Dunlop v New
Garage case can be held as a different because the parties were not at par with each other
i.e. equal in terms of economic standing.

The court disapproved of this argument. Thus, the Dunlop case was narrowed in down to a
public policy test in English law. (Different from the Indian law- it is only in English law)