Loss of profits are not considered as Damage

The loss of profits is never taken into accounting in estimating the damages unless otherwise agreed upon. In this case, Hicks organized a beauty competition in which 50 ladies were to be selected by votes of the readers of certain newspaper. Hicks could select 12 out of 50 and secured theatrical job for them. C was one of the 50. By Hicks’ breach of contract, C was prevented from being present when the final selection was made. It was held that C was entitled to damage even though it was difficult to calculate them. The fact that damages are difficult to assess does not prevent the injured party from recovering them.

In another case, Madras Railway Co., Gobindas was a tailor and he delivered a sewing machine and some cloth to the Madras Railway Company to be sent to a place where he expected to carry on his business with special profit by reason of a forthcoming festival. Because of the fault of the Railway Company’s servants the goods were delayed in transit and were not delivered until some days after the conclusion of the festival. Gobindas had given no notice of the fact that the goods were required to be delivered within a fixed time for any special purpose. It was held here that the damages claimed were too remote as Gobindas did not inform the Railways Company of the special purpose for which the goods were required. The damages could have been in contemplation of the parties when they made the contract.

It should be noted that the court may allow remote damages, if special circumstances were known to both the parties and if such damages may reasonably be supposed to have been in contemplation of both the parties at the time they made the contact. Such damages are called special damages, as discussed above.

A having contracted with B, to supply B with 1,000 tons of iron at Rs 100 a ton to be delivered at a stated time contracts with C for the purchase of 1,000 tons of iron at Rs 80 a ton, telling C that he does so for the purpose of performing his contract with B. C fails to perform his contract with A, who cannot procure other iron, and B in consequences, rescinds the contract. C must pay to A Rs 20,000 being the profit which A would have made by the performance of his contract with B.

A contracts with B to make and deliver to B, by a fixed day, for a specified price, a certain piece of machinery. A does not deliver the piece of machinery at the time specified, and in consequence of this, B is obliged to procure another at a higher price than that which he was to have paid to a, and is prevented from performing a contract which B had made with a third person at the time of his contract with A (but which had not been then communicated to A), and is compelled to make compensation, for breach of that contract. A must pay to B, by way of compensation, the difference between the contract price of the piece of machinery and the sum paid by B for another but not the sum paid by B to the third person by way of compensation.

Remote and indirect loss or damage sustained by reasons of the breach will not entitle the party to any compensation. According to illustration above to section 73 the person guilty of the breach has to pay to the other party the difference between the contract price of the article agreed to be sold and the sum paid by the other party for purchasing another article on account of the default of the first party. The first party has not, however, to pay the compensation which the second party had to pay to third party as he had not been told at the time of the contract that the second party was making the purchase of the article for delivery to such third party.