Introduction
When an offer made by one person is accepted by another person then it becomes a promise. When the person making the offer is getting something in return as a consideration from the person to whom the offer is made becomes an agreement. An agreement enforceable by law is a contract.
A contract can be written or verbal. When the promise or agreement (may be written or verbal), is broken by any of the party leads to the breach of a contract.
In the case of a written contract, most of the times the condition and remedy for the breach of contract is already added in the contract itself. The two parties with a mutual consent try to bind each other by all the conditions of the contract. All the predictable problems that may arise in future are taken into consideration while the formation of a contract. Still, an unforeseen situation may arise and that might lead to the breach of contract by one of the party. In such cases, the person who did the breach of contract will be held liable for it.
Is Liability enough?
Only making a person liable for the breach of contract is not enough. There must be some kind of remedy for the innocent party. To protect the innocent party from loss and the effect of the breach of contract, the court provides a different form of remedies to the innocent party. There are several remedies for the breach of a contract such as damages, specific performance, rescission, or restitution.
The main motive behind providing a remedy to the innocent party is to protect his rights and to protect him from suffering any monetary loss because of the breach of the contract by the other party. Therefore the most common form of remedy provided is in the form of Damages.
Damages
Section 73 of the Indian Contract Act, 1872 clearly says that when a contract has been broken, the party who suffered by such breach is entitled to receive damages from the party who has broken the contract, as a compensation for any loss or damage caused to him because of the breach of the contract. Damages are mainly of two types, they are:-
- Liquidates damages- These are the types of damages for which all the parties to the contract have already agreed in advance and are ready to pay that amount if in case there is a breach of a contract.
- Unliquidated damages- These are the type of damages which are decided by the court to provide the compensation to the party who has suffered due to the breach of the contract.
Recession
If one of the parties to the contract does not fulfil their part of obligation towards the contract then the other party can revoke the contract and can stop the performance of his obligation towards the contract too.
Section 65 of The Indian Contract Act states that any person who has received any kind of advantage under a contract which is discovered to be void, is bound to restore it or to pay compensation to the person from whom he received it.
Also, Section 75 of The Indian Contract Act states that any person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract by the other party.
Specific performance
If any of the parties to the contract are not able to fulfil their part of obligation towards the contract then the court may ask the party to perform his part of the obligation in place of giving compensation to the other party.
For example, A promises to sell his land to B. B with a plan of constructing a hotel on A’s land gives 90k to the construction agency as a token money which was not refundable. A later ends up not selling his land to B. The court, in this case, may ask A to sell his land to B in place of compensation.
Injunction
Injunction is a kind of specific performance. The court may pass an order of injunction to stop a party from doing an act which he promised to not do under the Contract.
Quantum Merits
Quantum Meruits means ‘as much is earned’. If a person is topped by the other party from performing his part of obligation towards the contract then he can claim quantum merits and the other party will have to compensate him for the amount of work already done by him under the contract.
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