When two parties undergo any signed contact, both agree to perform certain obligations. However, if any of the parties break the promise bringing loss to the other party, the latter has complete right to file a damage case against the former. The Indian Contract Act, 1872 has laid down specific clauses under the suit for damages, giving full right to file the lawsuit against the party for breaking the promise.
The Indian Contract Act, 1872 has laid down some rules that determine the compensation to be paid by the party for breaking the contract. Here are some of the rules-
The suffering party has complete right to claim compensation for the loss arising naturally or due to the course of certain events.
In case the party knew about the breach of the contract and loss to be suffered, he can claim the compensation.
Special damages if claimed when the suffering party has already served notice about it earlier. Moreover, the party suffering the loss has the complete right to take steps to minimize the loss.
In case of exceptional damage cases, it is best to check out with a professional lawyer who can describe the law or act stated under the Indian Contract Act, 1872.
There are three essentials elements of damages pointed by the act-
Detriment the wrongdoings by another
Compensation awarded to the loss bearded through legal remedies
Quantum being determined by dual components for the tangible loss suffered
The Indian Contract Act, 1872 has led different types of damages in contract law, which both parties should be aware of before signing. Let us now check types of damages in the contract law-
Under this, there are two types of compensatory damages- General Damages and Special Damages.
General Damages- Also known as Ordinary Damages, these are the damages caused naturally due to contract breach. These damages are restricted to direct consequences arising due to unforeseen circumstances.
Special Damages- These are consequential damages caused due to the breach of contract and special circumstances. Special damages are awarded by courts when parties are making a contract; these circumstances are unforeseen by the party committing the violation.
Let us clear this idea with an example- A hired the service of B to transport a machine to his factory on an urgent basis. Meanwhile, A informed B that his business stopped for the need of the machine. However, B delayed the delivery of the machine for some time. This resulted in the loss of huge order for A since he did not have the machine.
In this case, A has the full right to claim compensation from B. The amount could be the profit that can be made by A from the project.
In this type of suit for damages, if the party files the lawsuit for the loss occurred by the second party and proves there has been a breach of contract, he is liable to get compensation. The nominal damage suit is established to keep the right to a decree for the violation of the contract.
Some contracts include provisions having a pre-set amount of damages that will come to use during the event of a breach. These types of suits for damages are called Liquidated Damages. These damages are included when they are difficult to predict and have no clue about the estimated damage.
In this case of damage, if party B transporting the goods of A, and delays causing them to deteriorate, then A has full right to file the suit for damages for the delay caused. Here, deterioration can be physical damage to goods and loss of the sale opportunity.
The speculative damages are allowed during the circumstances which can lead to a loss for the party. There are two circumstances in this regard-
When the damage is uncertain, i.e., not due to a specific result of the breach
Damages, which are uncertain in the amount
In many cases, uncertain damages are unrecoverable. However, damages, which are attributable to the wrong, is recoverable. Parties falling under speculative damages situations must connect with professionals.
These damages are those, which exceeds the speculated amount, resulting from the conduct of the defendant. Aggravated damages gain importance when the plaintiff due to motives, behaviour or manner of inflicting injury causes the damage. These damages are compensatory in all nature.
Exemplary Damages, on the other hand, are punishable. They intend to punish the defendant.
Since we have listed different types of damages, you must have complete knowledge about how the Indian Contract Act, 1872 has accordingly explained each. This suit of damages is an essential part of a business deal to make things look professional.
Q1. Do I Need a Lawyer for Assistance During the Suit of Damage or Breach of Contract Damage?
Ans: In case you are facing any legal issues like the breach of contract or suit of damage, it is best advised to seek professional lawyer assistance. The right lawyer will review the contract and advise you on the proceedings.
Q2. If in the Contract, the Penalty Amount Mentioned is Rs 100,000, but the Actual Loss Caused is Rs 70,000. How Much Does the Respondent Have to Pay for the Damage?
Ans: If in the contract, the penalty amount is Rs 100,000 and the actual loss is Rs70, 000, then the suffering party should claim for Rs 70,000.