- When a party renounces his liability or makes it impossible that he should perform his obligation under it or fails to perform it.
- Breach may be
- Anticipatory breach
- Actual breach
Breach of contract may take place in the course or time of performance but also while the contract is still wholly executory.
Sec 39 of ICA
Promisee acquires an immediate cause of action. Houchster v. De La Tour, (1853) D agreed in April to employ the P as his courier during a foreign tour commencing from June 1st. On may 11th he wrote he changed his mind and does not require a courier. P sued for damages before June 1st and was successful.
Frost v. Knight (1872) D agreed to marry P upon P’s father’s death. D broke off the engagement during the latter’s life time. The P immediately sued for damages and succeded.
Effects of anticipatory breach
- He may rescind the contract immediately.
- He can wait until the date of performance arrives.
Measures of damages in an anticipatory breach of contract:
If the contract is treated as discharged immediately, the damages will be measured by the difference of price prevailing on the date of the anticipatory breach and the contract price.
If the aggrieved party opts to wait till the date fixed for performance, the damages will be measured by the difference between the contract price and the price prevailing on the date fixed for performance of the contract.
- Suit for damages
- Suit upon quantum meruit
- Rescission of the contract
- Suit for specific performance
- Suit for injunction
Every action for damages raises two problems:
- Remoteness of damages
- Measures of damages
Hadley v. Baxendale (1854). This case lays down two rules
- General damages à which naturally arise in the usual course of things.
Special damages à damages which arise on account of the special circumstances of the plaintiff. No special damages unless the special circumstances were made known to the defendant at the formation of contract.
Illustrations appended to section 73
- Market price criteria
- Trouble and expense in hiring alternative conveyance
- Breach by buyer, seller’s loss on resale
- Breach by ship buyer, seller’s loss on resale
- Loss of value due to delay in transit by boat owner
- Cost of making the repairs that conforms to the contract
- Difference in hire charges of ship
- Buyer’s breach,market price criterion
- Delay caused by carrier
- Knowledge of resale, loss of profit recoverable
- No knowledge of resale agreement, no more than market difference recoverable
- Building contract
- Breach of warranty as to quality of goods
- Default in payment of money
- Market price and not loss of profit
- Defaulting seller not having knowledge of buyer;s mode of cobducting business not liable for closure of mill of the buyer
Defaulting seller not liable for loss of profits in the season.
Delay by passenger carrier
Rules regarding damages
Sec 73 and 74
Following principles from the decided cases:
- Damages for direct losses and not indirect
- The aggrieved party must take all reasonable steps to mitigate the losses. He cannot claim any damages which is due to his neglect. (Exp to sec 73)
- The loss to be ascertained is the loss at the date of breach of contract.
- Damages are compensatory not penal. Ordinarily damages for mental pain and suffering caused by breach are not allowed unless 1) it is justified dishonor of cheque 2) breach of promise to marry.
- Nominal damages are awarded when P did not suffer any loss.
- 6. In case of contract of sale, where the goods are available in the market, it is the difference between the market price on the date of the breach and the contract price which is the measure of damages.
- 7. In case of service contracts, where the dismissal is wrongful, salary for the whole unexpired period would be the compensation.
- 8. Sec 74 : sum stipulated as penalty then whether actual damage is caused or not, the party who has broken the contract will give a reasonable compensation not exceeding the amount so named or as the case may be, the penalty stipulated for.
Types of damages
- General or ordinary damages
- Special damages
- Nominal damages
- Damages for mental pain and suffering and exemplary damages