Short notes on Suit for Damages of Contracts

Damages means monetary compensation payable by the defaulting party to the aggrieved party in the event of the breach of a contract. The object of providing damages is to put the aggrieved party in the same position, so far as the money can do, in which he would have been, had the contract been performed. Sunley vs Cunard White Stars Ltd.

In this case, it was observed that “the role of common law is that where a party sustains loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed.” But this rule does not apply in all cases since there are certain cases where money is not always an adequate remedy. In some cases losses may be regarded as to remote to be awarded.

According to section 73 of the Act, “When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, (i) which naturally arose, or (ii) which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.”

This statement of law is generally known as the Rule in Hadley vs Baxendale. In that case, the plaintiff had delivered a crank shaft to the carrier for sending it to the manufacturers who were to make a new shaft on the basis of the old one. The plaintiff’s servant had informed the carrier that the working of the mill was stopped and the crank shaft must be sent to the manufacturers immediately. The carrier delayed sending the crank in consequence of which the new manufactured crank shaft must be sent to the manufacturers immediately.

The carrier delayed sending the crank in consequence of which the new manufactured crank shaft was received very late, and the mill could not work. The plaintiff filed a suit against the defendant, claiming damages for loss of profits because of the stoppage of mill due to non-availability of the crank-shaft. It was held that the plaintiff could not claim special damages because “in the great multitude of cases of millers sending off broken shafts for repair, it does not follow in the ordinary circumstances that the mill is stopped”.