Whenever a party suffers any injury or loss as a result of any breach of contract, he may claim damages for the loss or injury suffered by him as a result of that act. The major principle forming the base of this scheme is to provide compensation and not punishment.
The approach adopted by the court in the suit for damages aims to put the injured party into a position that he had been in before the act of breach of contract. It also aims to get the performance by the defaulting party to complete the tasks and not to punish the defaulting party. The general rule of the suit of damages is that compensation must satisfy the injured party with monetary requirement arising naturally from the breach of contract. In case the actual loss is not proved, no damages will be awarded by the court of law.
What is a contract and its breach
Any agreement or any promise made between two or more parties that is valid in the eyes of law is a contract. Sometimes the agreement or promises so made by the party are not fulfilled which leads to the breach of contract.
Remedies available after breach of contract
- Suit for specific performance can be initiated before the court of law.
- Suit for damages can be initiated before the court of law.
- Injunctions can be availed through the court of law.
Assessment of damages
In order to assess the damages to be awarded to the plaintiff, the court of law has to consider the extent to which a plaintiff is entitled to demand damages for the breach of the contract. Section 73 of the Indian Contract Act provides for the same. According to Section 73 of the Indian Contract Act, an injured party is entitled to receive the following damages from the defaulter party:
(a) Damages which arose in the natural and usual course of things from such breach can be claimed by the injured party. The breach of contract must be directly related to the injury caused by the defaulting party. If the injury is such that it is remotely linked to the breach of contract, then no compensation will be awarded by the court of law in the suit for damages.
(b) Sometimes damages are known to the parties when the parties enter into any contract that the damages will arise as likely to result from the breach of contract. Those damages can also be claimed. These damages are known as special damages.
(c) While calculating the damages to be awarded to the injured party, it must be noted that the means which are used for remedying the inconvenience so caused by the breach of contract must also be taken into account for the calculation of the damages to be awarded to the injured party.
Limitation period for a suit for damages
The period of limitation for a suit for damages in the court of law after a breach of contract whether that contract is expressed or implied, when not provided specifically is three years. The period of limitation in the situation of suit for damages starts when the actual contract is breached.