Remedies of Discharge of a Contract

Hellow! Welcome once again to the series of notes on Contract Law.

Last time we had looked upon the concept of discharge of a contract, and today we are going to look upon the Remedies of Discharge or termination of a Contract.

So without Wasting any milisecond, let us proceed together!

The Concept of Remedies of Discharge of a Contract

Under the principles of equity, there is a popular principle which states “ No one can benefit from his own Wrong”, So what does it mean?

It means that Equity requires when you have made a wrong decision or choice, then you cannot expect to benefit from it, but rather you must face the consequences of your actions.

The same principles is applied under Contract Law, that is to say, once you have defaulted from exercising your contractual obligations then you must be held accountable for it.

You cannot choose not to fulfill your duties to escape your from duties, and expect to get a free pass!

Generally when a contract is breached the innocent party is entitled to be compensated by the defaulter. Remedies are compensation awarded to the innocent party where the contract is breached.

In law of contract there are two main remedies to be awarded to the innocent party i.e. damages and equitable remedies. It is important to differentiate between damages and damage; Damage refers to injuries or loss which a person has suffered and damages is the kind of compensation in the eye of the law.

Other remedies constitute specific performance, Restitution, Injuction, and action in quantum merit

Damages includes amount or the sum of money awarded by the court to a party (innocent party) when a contract is breached. This sum of money may be liquidated and unliquidated.

Damages

Liquidated damages are the sum of money which is predetermined by the parties to the contract as it will be compensation to an innocent party when the contract will be breached.

This means parties to the contract themselves agree to the amount that will be a compensation when one party to the contract breached the contract.

Unliquidated damages are the amount of money which is set by the court when one of the party claims that the contract has been breached. As in the case of ADDIS V GRAMOPHONE [1909]

There are other several types of damages apart from liquidated and unliquidated damages i.e.

General damages, this is a pecuniary compensation which a judge/court is entitled to award on proof that a breach of contract has been committed.

Specific or special damages, these are damages which specifically the innocent party claims due to the loss incurred to be paid by the defendant.

Nominal damages, this is awarded to the innocent party in action where the person has not suffered any loss which he/she has to be compensated.

Aggravated damages, this is some of money awarded by the court over and above the general.

Exemplary or punitive damages, this is the kind of damages awarded not to compensate the plaintiff (innocent party) but to punish the wrongdoer for an act which caused loss to the plaintiff as the breach of contract.

Principles Governing the Court In Awarding Damages

Causation

The court will be trying to see extent to which/how the defendant caused damage to the plaintiff.

It is a duty of the plaintiff to prove that the loss which occurred was the result of the breach of contract by the defendant himself.

If the damage was the result or sequence of act done by other persons including the defendant, in such case sometimes the court may not hold the defendant liable for breach of contract or cannot give the compensation for the defendant being alone.

There should be a direct cause or link. In some cases there is intervening act by the 3rd party i.e. intervening act may be of a cause of itself or cause of the plaintiff himself.

Remoteness of Damage

HADLEY V. BAXENDALE [1849] In this case parties entered into a contract whereby the plaintiff has a mills and the defendant was a carrier of goods.

The crankshaft of the plaintiff’s steam engine was broken with the result that work in the mill had come to halt. They had ordered a new shaft from an engineer in Greenwich and arranged with the defendant to carry the broken shaft from Gloucester to Greenwich to be used by the engineer as a model for the new shaft which had been ordered.

The defendants didn’t know that the plaintiffs had no spare shaft and that the mill couldn’t operate until the new shaft was installed. The defendant delayed the delivery of the broken shaft to the engineer for several days with the result that plaintiff were prevented from working hence sued the defendants for damages. It was held that Damages which may fairly and reasonably be considered as arising naturally from the breach and also Damages which may reasonably be supposed to have been in the contemplation of the parties as liable to result from the breach of contract at the time of the contract.