Damages under the Contract Act 1872

Damages
Arpeeta Shams Mizan
Lecturer
NUB
copyright (c) arpeeta shams mizan. all
rights reserved

The Philosophy of damages
• The interrelation of right and remedy
• The difference between remedies and
damages
• The difference between rescinding and breach
of contracts
rights reserved

Mitigation
• It is known as doctrine of avoidable
consequence. It imposes on injured party duty
to exercise reasonable diligence.
rights reserved

Types of damages
• Liquidated: the amount predetermined and
agreed by the parties whilst making the
contract. It is the sum agreed by the parties to
be payable on default of one of them.
• Unliquidated: when the sum is not fixed. The
court quantifies or assesses the damages.
• Contemplated breach:
rights reserved

What kind of Damages Plaintiff is
entitled to
• The question is whether plaintiff is entitled to
have compensation for whatever damage he
has suffered as a consequence .
rights reserved

Lord Wright (1933):
• Law cannot take account of everything that
follows a wrongful act. It regards some
subsequent matters as outside the scope of its
selection. Because ‘it were infinite for the law
to judge the cause of the causes’ , or
consequence of the consequences.
rights reserved

The Rule of Remoteness of Damage
• Hadley v. Baxendale (1854)
The case defined what kind of damages is appropriate
subject for compensation. According to Alderson B:
“Where to parties have made a contract which one of
them has broken, the damages which the other party
ought to receive in respect of such breach of contract
should be such as may fairly and reasonably be
considered either naturally or according to the usual
course of things, or such may reasonably be supposed
to have been in the contemplation of the parties.
rights reserved

• A shaft in Hadley’s (P) mill broke rendering the mill
inoperable. Hadley hired Baxendale (D) to transport the
broken mill shaft to an engineer in Greenwich so that he
could make a duplicate. Hadley told Baxendale that the
shaft must be sent immediately and Baxendale promised to
deliver it the next day. Baxendale did not know that the mill
would be inoperable until the new shaft arrived.
Baxendale was negligent and did not transport the shaft as
promised, causing the mill to remain shut down for an
additional five days. Hadley had paid 2 pounds four shillings
to ship the shaft and sued for 300 pounds in damages due
to lost profits and wages. The jury awarded Hadley 25
pounds beyond the amount already paid to the court and
Baxendale appealed.
rights reserved

• The Court in this case held that, although the
negligence of the Defendant was the direct
cause of damage, but loss of profit cannot be
termed as a natural and direct consequence of
the breach of contract.
rights reserved

Victoria Laundry Ltd. v. Newman Ltd.
(1949)
• Newman Industries Ltd was meant to deliver a
boiler for Victoria Laundry (Windsor) Ltd. The
delivery was five months late. As a result of not
having enough laundry capacity, Victoria Laundry
lost a lucrative cleaning contract from the
Ministry of Supply. Victoria Laundry sued for the
ordinary profit that it had forgone through not
having the boiler on time. The question was
whether it could also claim the extraordinary
profit it would have made, had it been able to
take advantage of the lucrative Ministry of Supply
contract.
rights reserved

• Asquith LJ in the Court of Appeal held that Newman
Industries only had to compensate for the ordinary, not
the extraordinary loss of profits. He distinguished (at p
543) losses from “particularly lucrative dyeing
contracts” as a different type of loss which would only
be recoverable if the defendant had sufficient
knowledge of them to make it reasonable to attribute
to him acceptance of liability for such losses. The
vendor of the boilers would have regarded the profits
on these contracts as a different and higher form of
risk than the general risk of loss of profits by the
laundry.
rights reserved

• The crux of the matter is whether the special
circumstances were within the actual or
constructive knowledge of the defaulter at
the time of contract. The Court said that
mere difficulty in determining damages
cannot be an excuse to avoid special damages.
rights reserved

Chaplin v. Hicks (1961)
• A theatre manager failed to carry out his
contractual obligation to engage the D in
remunerative employment.
• Fletcher Moulton J. held:
“whereby a contract a man has a right…which is
something of value, it is the duty of the jury to
estimate the pecuniary value of that
advantage if it is taken from him.”
rights reserved

Section 73 of the CA 1872
“……. Compensation is not to be given for any
remote and indirect loss or damage sustained
by reason of the breach.”
It is evident from s. 73 that law has imposed a
duty to mitigate the loss. If the claimant fails
to mitigate the amount of loss , this factor is
of relevance in assessing the amount of
damages.
rights reserved

Province of West Pakistan v. Ms. Shaj
& Co. (1964)
• It is the undoubted law that the person who
sues for damages owes the duty of taking all
reasonable steps to mitigate the loss
consequent upon the breach and cannot
obtain as damages any sum which is due to
his neglect.
rights reserved

How to measure Damages
the measure of damages is the difference
between the contract price and the market
price at the time of the breach. If the subject
matter is not marketable, the value must be
taken as fixed by the price.
The fact that the buyer sustains no actual loss
from the seller’s failure to deliver goods is no
ground for awarding nominal damages. This is
evident from the illustration A to s. 73.
rights reserved

• The Delhi HC in the Tribhuvan Patel case
noted:
‘Note may be taken of the market rate. Market
rate is a presumptive test. The intention of
Law is to place the injured party at par with
the contract breaker by the subject test of
market rate.’
rights reserved

Market Rate
• 1. a contract tio supply goods of a particular
sort which at the time of breach can be
obtained in the market: the measure of
damages is the difference between the
contract price and the market price at the
time of breach.
• CP 5tk, MP 10 tk. Compensation 10-5= 5 tk.
100 unit has the gross loss of 500 tk.
rights reserved

• 2. if the subject matter of contract may not be
marketable: value must be taken as fixed by
the price which actually has to be paid for the
best and nearest available substitute.
• 3. if the buyer after giving the seller time at
his request, finally has to go to the market and
buy at an advanced price, he may recover the
whole difference between the contract price
and the price he actually paid.
rights reserved

• 4. Accordingly the decisive date for fixing the
damages is the last date to which the contract
was extended.
rights reserved

Damages under the Contract Act 1872

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Ähnlich wie Damages under the Contract Act 1872

Ähnlich wie Damages under the Contract Act 1872 (20)

Kürzlich hochgeladen

Kürzlich hochgeladen (20)

Damages under the Contract Act 1872