Rules under the Indian contract act for estimating the damage arising from a breach of contract


Damages are the monetary compensation allowed to the aggrieved party for the loss or injury suffered by him by the breach of contract. The fundamental principle underlying damages is not punishment but compensation for the pecuniary (having to do with money) loss that naturally flows from the breach. “If the actual loss is not proved no damages will be awarded.

Damages may be of different types they are as follows:

1. Ordinary or natural or general or compensatory damages: Ordinary damages are generally the difference between the contract price and market price in the sale of such damages which arise naturally in the usual course of things from the breach of contract.

2. Special damages: where a party to a contract receives a notice of special circumstances affecting the contract, he will be liable not affecting the contract, he will be liable not only for damages arising naturally but directly from the breach and also for special damages.

3. Nominal (or) token damages: Nominal damages are awarded where the plaintiff has proved that there has been a breach of contract but he has not in fact suffered any real damage. Now you may ask why such damages are awarded. The answer is simple. It is awarded just to establish the right to decree or the breach of contract. The amount may be even a rupee.

4. Vindictive or exemplary damages: Exemplar damages are punitive damages that are awarded by the court in some cases. It is generally given by way of compensation for loss suffered and not by way of punishment for the wrong inflicted.

Exemplary damages are awarded only in two ways:

a) Breach of contract of marrying.

b) Dishonor of a cheque by a banker when there are sufficient funds to the credit of the consumer.

5. Damages for loss of reputation: Damages for loss of reputation in case of breach o contact are generally not recoverable. But there is an exemption to this rule exists in the case of a banker who wrongly refuses to honor a customer’s cheque. If the customer happens to be a trade man, he can recover damages in respect of any loss to his trade reputation by the breach of contract. And the rule of law is: the smaller the number of damages awarded. But If the customer is not a tradesman, he can recover only nominal damages.

6. Damages or inconvenience and discomfort: Damages can be recovered for physical inconvenience and discomfort. If, how ever the inconvenience or discomfort caused by a breach is substantial, the damages can be recovered on the ground of fairness

7. Mitigation of damages: It is the duty o the injured party to take all reasonable steps to mitigate the loss caused by the breach. He cannot claim compensation or loss which is really due not to the breach but due to his own neglect.

8. Cost of the decree: The aggrieved party is entitled, in addition to damages, to get the decree for damages. The cost of a suit for damages is at the discretion of the court.

9. Damages agreed upon in advance in cash for breach: If a sum is named in a contract as the amount to be paid in cash of its breach, or if the contract contains any other stipulation by way of penalty for failure to perform the obligations, the aggrieved party is entitled to receive from the party who has broken the contract, a reasonable compensation not exceeding the amount so named in the contract.

10. The difficulty of assessment: The damages which are difficult to assess with inconvenience discomfort and sufficiency cannot be recovered. But the damages which are difficult to assess with certainty do not prevent the aggrieved party from recovering them. The court will look into it and may allow monetary damages of ouch inconveniences.

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