Remedies for Breach of Contract

Chapter 13 The Contract Act of Bhutan 2013

How a breach of contract occurs?

A party to the contract makes it impossible for the other party to the contract to perform or, A party to the contract has done something against the intention of the contract or, A party to a contract absolutely refuses to perform the contract.

Remedies for aggrieved party Suit of damages Suit for specific performance of the contract Suit upon quantum meruit Suit for injunction

Suit for Damages

Damages are monetary compensation allowed to the injured party by the court for the loss or injury suffered by him as a result of the breach. The basic aim of awarding damages by the court is to put the injured party in the position in which he would have been, had there been performance of the contract. Thus, damages are given not with the aim to punish the guilty party but rather to compensate the guilty party.

CAB 2013
U/S 211 (1): Compensatory damages, which includes compensation for the loss or damage caused to him or her which naturally arose in the usual course of things from such breach, or which the parties knew, at the time of making the contract, to be likely to arise from a breach of the contract.

Suit for Damages (Contd.)

U/S 213: No compensation shall be payable for any loss or damage which is remote or indirect. U/S 214: Mitigation of Damages It is the duty of the injured party to take all the reasonable steps necessary to mitigate, i.e. to reduce the loss caused by the breach of contract. Injured party cannot claim compensation for loss which he could reasonably have avoided. Thus he cannot claim compensation for loss which is really due not to the breach but due to his own neglect to mitigate, i.e. reduce the loss after the breach.

Liquidated damages and penalty

Damages stipulated during the formation of contract by breach of contract. Liquidated damages: It represents a sum, fixed or ascertained by the parties in the contract, which is a fair and a genuine pre-estimate of the probable loss that might incur as a result of the breach, if it takes place. Penalty: is a sum named in the contract at the time of its formation, which is disproportionate to the damage likely to accrue as a result of the breach. It is fixed up with a view of securing the performance of the contract.

Suit for specific performance

Specific performance means actual carrying out of the contract. Sometimes in case of breach of contract, damages are not an adequate remedy. Thus the court may in such cases, direct the party in breach of contract to perform his part of agreement. The court will order specific performance only where it is just and equitable to do so.

Specific performance of contract may be ordered at the discretion of court, in following cases:
When the act agreed to be done is such that compensation in money for its nonperformance is not a sufficient relief. When there is no standard for ascertaining the actual damage caused by the nonperformance of the act agreed to be done. When it is possible that compensation in money on non-performance of the contract cant be obtained.

Suit upon Quantum Meruit

Quantum Meruit literally means as much as earned or in the proportion of the work done. A right to sue upon quantum meruit arises when a person has done some part of the work under a contract, there is a breach of the contract or the contract is later discovered void or becomes void. Then such party who has performed the work can claim remuneration for the work he has already done. This remedy may be availed: by either without claiming the damages, or in addition to claiming damages for the breach of contract.

Suit for Injunction

Where a party to the contract is doing something, which he promised not to do, the court may, by issuing an order, restrain him from doing what he promised not to do. Such an order of the court is known as an Injunction The injunction is, thus a mode of securing the specific performance of the negative terms of a contract.. Injunction is a preventive relief and is particularly appropriate in case of anticipatory breach where damages would not be an adequate relief.