Loss arising out of damage due to non performance of a contract

In estimating the loss or damage arising from a breach of contract, the means of which exited of remedying the inconvenience caused by the non- performance of the contract must be taken into account (Sec 73).

The party suffering from the breach of contract is expected to take reasonable steps to minimize the loss. He cannot claim as damages any sum which is due to his own neglect. In La Blanche v. L & N W. R & CO., where the plaintiff hired a special train in order to be at his destination at a certain hour, it was held that the plaintiff had acted unreasonably. He was, therefore, not entitled to recover the expenses so incurred as damages.

Similarly, in case of contracts for sale or purchase of goods, when either party commits breach, the buyer or seller may purchase or sell the goods at the prevailing market price and recover from the defaulting party the difference between the contract price and the price at which he purchased or sold the goods as damages. The seller or buyer waits till the price rises to recover enhanced loss. So also, when the aggrieved party increases his loss by unreasonable conduct or by his own default, he cannot recover such increase in loss.

In short, while awarding damages, where breach of contact is committed, the law endeavor to place injured party in the same financial position as if the contract has been performed, subject to —

1. loss has arisen naturally in the usual course of things from such breach; or
2. which the parties knew, when they made the contract, to be likely to result from the breach of it; and
3. the loss sustained by reason of the breach is not too remote and indirect.

Computation of damages on the basis of difference between the contract rate and the lowest market rate prevailing at the time of breach of contract is neither unreasonable nor illegal.

Interest by way of Damages:

Interest by way of damages is not allowed under this section. However, it may be allowed in the following cases:

1. Where there is an express or implied agreement to pay interest
2. Where interest is allowed by custom or usage.
3. Under the Interest Act
4. Under the Sale of Goods Act.
5. By count of Equity in the case of money obtained or retained by fraud.

Only reasonable interest will be allowed by the Courts.

Quantum Meruit:

“Quantum Meruit” means “as much as earned or deserved” or “as much as is merited”.

A person can under certain circumstances claim payment for the work done or goods supplied without any contract or under a contract which is discharged by the breach of the other party.

On several occasions, it so happens that where no contract has been entered into but one party has either done some work or supplied goods, it is but natural that he should be compensated for what he has done. It is based on implied promise by the other party to pay for what has been done. It may also be that the contract has entered into and the party has performed part of his contract and balance part he is not able to perform because the other party has committed a breach, whereby the contract is discharged. The first party has therefore to be compensated for the part he has performed. This is called doctrine of “Quantum meruit” Under quantum meruit, either party may sue the other on an implied contract to pay for the work done.

Therefore, where a party has rendered some service, and further performance has been rendered useless by other party, he is entitled to reasonable compensation for the service rendered by him. Where the author had prepared a considerable manuscript of the publishers’ library but subsequently the publishers had discontinued the library, the author was held entitled to compensation for trouble he had taken, where a printer having printed most of the work, refused to complete it because the work was libelleous, he was held entitled to recover on quantum meruit. Obligation to pay reasonable remuneration is imposed by rule of law.