Remedies for Breach of Contract

AUTHOR'S PROFILE: Angela Arora, a first-year student of USLLS, GGSIPU

INTRODUCTION

"A breach of contract occurs when a party to that renounces his liability under it, or by his act makes it impossible that he should perform his obligations under it or totally or partially fails to perform such obligations" [1]. The failure to perform or the renunciation may occur when the time for performance has arrived or even before it.

A breach of contract is a failure, without legal excuse, to perform any promise that forms all or part of the contract. A contract is legally binding as per the Indian Contract Act, 1872. Hence, a breach of contract violates the entitled legal duty. A breach of contract could be either in its entirety or partly. The party who breaches the contract is liable to compensate the suffering party.

The Indian Contract Act, 1872 states, "The party injured by the breach of contract may bring an action for damages". It is the only remedy it affords in case of a breach of a contract [2]. The Specific Relief Act 1963, widens the scope of reliefs available to aggrieved parties. This Act in itself does not provide any legal rights. It requires it to be pleaded before the Court to be granted and enforced.

The remedies and reliefs provided for the breach of contract in the Specific Relief Act, 1963 are as follows-

• Damages or Compensation
• Recovery of Possession of Property
• Specific Performance of Contract
• Rectification of Instrument
• Rescission of Contracts
• Cancellation of instruments
• Declaratory Decrees
• Injunctions

DAMAGES OR COMPENSATION

Damages mean Compensation in terms of money for the losses suffered by the injured party. The burden of proof lies on the injured party to prove their loss. Various damages exist, such as liquidated, compensatory, nominal, etc. It is up to the discretion of the Court what damages are to be awarded. Damages awarded are usually in proportion to the losses that occurred, or such damages are provided that restore the injured party's status quo.

In Hardley v. Baxendale (1854), specific rules were established that bought clarity about the extent of damages payable to the aggrieved party. The plaintiffs ran a mill. Their mill was stopped by a breakage of the crankshaft by which the mill worked. The defendants were carriers engaged in transporting the broken piece to its manufacturer for its repair work. It was informed to the defendants by the Plaintiff that the mill had stopped and the delivery was urgent. Due to some neglect on the defendant's part, the delivery was delayed. Plaintiff did not receive the shaft in time, and as a consequence, the mill did not work for several days.

Plaintiff bought an action for the loss of profit they suffered due to the inactivity of the mill during the period of delay. It was held that the defendants are not liable because, in ordinary circumstances, a mill does not stop working because of a broken shaft. Even if it was informed that the mill had stopped, there could be many reasons for the same. Plaintiff's case was a special one, and it was Plaintiff's duty to inform the defendant of the unique circumstances and the excessive loss they may suffer due to any delay. Hence, no special damages were awarded.

Section 73 of The Indian Contract Act 1872 lays down provisions regarding the Compensation for loss or damage caused by the breach of contract and talks about the party's right who suffers from the breach of a contract.

Section 74 deals with a situation where the parties have already specified the penalty for breach of contract.

Section 75 states that a party who has rightfully rescinded a contract is entitled to Compensation.

RECOVERY OF POSSESSION OF PROPERTY

1. Recovery of specific immovable property

Section 5 of The Specific Relief Act, 1963- Recovery of specific immovable property. —A person entitled to the possession of the specific immovable property may recover it in the manner provided by the Code of Civil Procedure, 1908 (5 of 1908). The essence of the Act is that any person who is the lawful owner of any immovable property can get its possession by lawful means.

Section 6 restrains a person from using force and dispossessing a person without his consent otherwise than in due course of law.

Forcibly, a tenant was dispossessed in K. Krishna v. A.N. Paramkusha Bai (2011) [2]. The Court said that he could file a suit for repossession immediately. However, he gained the repossession forcibly. He later filed a suit, but the relief of possession was not granted.

1. Recovery of specific movable property

Section 7 of The Specific Relief Act, 1963 says- A person entitled to the possession of the specific movable property may recover it in the manner provided by the Code of Civil Procedure.

Illustration- A pledges certain jewels with B to secure a loan. B disposes of the jewel to C before he is entitled. A, without having cleared the loan, sues C for the possession of jewels. This suit will be dismissed, as A is not entitled to immediate possession of jewels.

The specific movable property must be capable of being seized and delivered. If it is not, Plaintiff is only entitled to damages or compensation.

SPECIFIC PERFORMANCE OF CONTRACT

Specific performance is equitable relief given by a court in case of breach of contract in the form of a judgment that the defendant is actually to perform the contract according to its terms and stipulation.

An obligation includes every duty enforceable by law. Whenever a person comes under a liability to do or not do something, he remains under obligation. An obligation to forebear is a positive duty generally imposed by a contract. This form of specific relief is called the specific performance of the contract.

Remedy of specific performance is awarded when there is no substitute or alternate for the subject matter of the contract.

Remedy of specific performance is awarded in the case of goods, the value of which cannot be readily ascertained, and the goods have a unique character. For example, buildings, land, or goods having exceptional value for the Plaintiff.

Section 26 of the Specific Relief Act, 1963, describes the rectification of INSTRUMENT. Rectification means the action of putting something right. The 'something' means any legal contract. Section 26 provides that when any contract may be rectified-

• When there is a fraud or when there is a mutual mistake by both the parties
• If the Court finds that the contract is made by fraud or by mutual mistake of the parties, then the Court has discretionary power to rectify it.
• If parties claim rectification and the Court thinks fit, it will be specifically enforced.
• No relief shall be granted until the parties specifically claim to rectify the instrument.

In Joseph Johan Peter Sandy v. Veronica Thomas Rajkumar &Anr (2013), In this case, it was held that the appellants are the son and daughter of late B.P Sandy. He transfers his two houses in favour of his youngest son and daughter, but the house given to his daughter ought to have been given to his son, and the house passed to the son ought to be given to his daughter. The Court held that it is applicable only where it is pleaded and proved through fraud or mutual mistake of the parties and considered that appeals are devoid of any merit[3].

RESCISSION OF CONTRACTS

Rescission is a remedy that is made available when the underlying basis for making a contract is fundamentally tainted. Some conduct on behalf of a contracting party undermines the reason the other party made the contract in the first place. The contract can be rescinded at the option of the affected party [4] The remedy of rescission means that an entire contract is set aside.

For legal purposes, it is treated as though it was never made. It never took place. There are various grounds on which contracts can be rescinded. Some are misrepresentation, mistake of law, breach of fiduciary duties, etc. The main aim is to restore the status quo or the pre-contractual state of the parties.

CANCELLATION OF INSTRUMENTS

Cancellation of documents is dealt with under Sections 31, 32 & 33 of the Specific Relief Act, 1963. Suppose there is a contract that is void or voidable due to some reason and a party to such a contract has enough reasons to believe that the said contract poses a potential threat to his interest. In that case, that party can file a suit to cancel such a contract.

There are specific requirements for the cancellation of a contract. A suit of cancellation of a contract can be filed on the following grounds-

• If the contract against which the suit is filed is void or voidable.
• If the contract poses potential harm to the party that files the cancellation suit.
• If the party filing the contract has strong reasons to believe that the performance of the contract would cause them injury.
• Given all case circumstances, the Court must be satisfied that such cancellation is reasonable and would serve justice to the party who filed it.

DECLARATORY DECREES

According to Section 34 of the Special Relief Act, 1963, any person entitled to any legal character or any right as to any property may institute a suit against any person denying or interested in denying his title to such character or suitable. The Court may make therein a declaration that he is so entitled. In such a suit, Plaintiff need not ask for any further relief.

Four essential elements are needed for a valid declaratory suit. These are-

• At the time of the suit, Plaintiff was entitled to any legal character.
• The defendant had denied or was planning or interested in denying the Plaintiff's rights.
• The declaration should be the same as the declaration that Plaintiff was entitled to a right.
• Plaintiff was not able to claim a further relief than a mere declaration of his rights which the defendant has denied.

In the case of the State of M.P. vs. Khan Bahadur Bhiwandiwala and co., The Court observed that to obtain the relief of declaration, Plaintiff had to fulfill the four conditions mentioned above [5].

INJUNCTIONS

Lord Halsbury gave the following definition of an injunction- “An injunction is a judicial process whereby a party is ordered to refrain from doing or to do a particular act or thing."

An injunction may be issued for and against individuals, public bodies, or even the State. Disobedience of an injunction is punishable as contempt of Court. There are three main elements of an injunction-

• It is a judicial process,
• the relief obtained is prevention,
• the Act which is prevented is wrongful.

An injunction will not be issued if-

• damages are the appropriate remedy,
• an injunction is not the appropriate relief,
• plaintiff is not entitled to an injunction on account of his/her conduct
• where the injunction would operate inequitably.

Section 37 of the Specific Relief Act, 1963 describes temporary injunctions, and Section 38 describes perpetual injunctions. It should be noted that the grant of an injunction is discretionary by the Court.

In Ravi Singhal v. Manali Singhal (2001) [6], in an application for interim relief in respect of a settlement, the Court said that it is at the discretion of the Court to grant interim relief, and the exercise of discretion should not be irrational.

CONCLUSION

The Specific Relief Act, 1963, provides a variety of remedies in case a contract is breached. However, it is essential to note that these remedies are granted at the courts' discretion, and several conditions have to be fulfilled to claim them.

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ENDNOTES

[1] This definition of breach appeared in Associated Cinemas of America, Inc v. World Amusement Co (1937)

[2] 'The Indian Contract Act, 1872' (Indiankanoon.org, 2021) https://indiankanoon.org/doc/171398/

[3] 'Joseph Johan Peter Sandy Vs. Veronica Thomas Rajkumar &AnrOn 12 March, 2013' (Indiankanoon.org, 2021) <https://indiankanoon.org/doc/156545202/?type=print>

[4] 'Rescission: Contract Law Remedy | Misrepresentation, Mistake, Fraud' (Hallellis.co.uk, 2021) <https://hallellis.co.uk/rescission-contract-law-meaning/>

[5] Diva Rai, 'Declaratory Decree Under The Special Relief Act, 1963 - Ipleaders' (iPleaders, 2021) <https://blog.ipleaders.in/declaratory-decree-under-the-special-relief-act-1963/>

[6] 'Ravi Singhal Vs. Manali Singhal On 4 October 2018' (Indiankanoon.org, 2021) <https://indiankanoon.org/doc/83152887/>