Monday, 7 February 2022

Damages in Indian Contract Act, 1872

 Damages in Indian Contract Act, 1872

The Indian Contract Act of 1872 does not define the term "damages." In common language, however, it refers to a monetary award made by a defaulting party to a non-defaulting party as compensation for loss or harm suffered as a result of the defaulting Party's breach of the contract's terms and conditions.

Let's say 'Y' has a contract to deliver 10 bags of mangoes to 'Z' for Rs. 500 per bag, but 'Y' cancels the contract because 'Y' doesn't have bags to deliver.' Instead, 'Y' has contracted with someone else to deliver the bags of mangoes, and he purchased the bags from the market, but the price has reached a peak, so 'Y' will have to purchase at a high price, and he will Damages is the term for the amount of money lost.

Types of Damages

The Indian Contract Act, 1872, defines remedy by way of damages as the right of the aggrieved party to obtain compensation for losses incurred as a result of the contract's non-performance. 

1) Ordinary Damages

In the event of a contract violation, the suffering party may be subjected to damages that would otherwise occur in the normal course of events. Even though the suffering party was aware of the possible harm if the contract was broken, he is entitled to compensation.

X agrees to sell and deliver 10 bags of tomatoes to Y for Rs 2,000 after two months. On the date of delivery, the price of tomatoes increases and X refuses to perform his promise. Y purchases 10 bags of tomatoes for Rs 2,500. He can receive Rs 500 from X as ordinary damages arising directly from the breach.

2) Special Damages

Special damages only occur in exceptional circumstances, just as ordinary damages have only occurred in the usual course of business. Special damages only arise in exceptional circumstances. It's not the kind of loss that happens in everyday life. Special damages only occur in exceptional circumstances, just as ordinary damages have only occurred in the usual course of business. Special damages only arise in exceptional circumstances. It's not the kind of loss that happens in everyday life.

Example: Let's assume 'X' pledged to supply 100 sacks of wheat to 'S,' but 'X' was unable to do so owing to disturbances in the city. This isn't just any transaction; it's a one-of-a-kind occasion. As a result, in this case, the Court will look into whether the special event is directly liable for the contract breach. So, the Court appoints an officer to conduct further investigations in order to locate the correct and accurate piece; if the cause of the breach of contract is directly related to it, the Court may award special damages; otherwise, special damages are not the exclusive remedy.

Special damages can include the following:

1) Loss of contracts, revenue, and business possibilities.

2) Reputational harm or loss.

3) Inconveniences such as lost time.

4) Revenues lost from operations.

5) Property and commercial products are lost.

For example, if both parties projected loss and split the difference of Rs. 6 per bag, but he only has to lose Rs. 2 per bag, he must pay the entire amount of loss, and the specific amount will be recovered under Special damages.

Difference between Ordinary Damages and Special Damages

General damages are more common and result directly from a breach of contract. General damages are intended to compensate for the harm produced by a violation of contract. For example, if a contractor was hired to modernize a restaurant owner's kitchen and fails to install an oven, the owner of the restaurant can seek general damages from the court. These cash will be used to pay for the necessary goods as well as the expense of hiring someone else to finish the task.

Additionally, the business owner has the right to seek extraordinary damages, which could include revenue losses due to a construction delay. For example, a restaurant's lack of an oven may have an influence on sales.

People may be hesitant to attend or return to a restaurant if the menu is restricted to non-oven fare while the kitchen is being renovated. This can have a negative impact on current and future earnings, as well as ruin the restaurant's reputation. Private people and organizations can seek and be granted special damages and general damages.

Case related to Special Damages

Cedrick Makara vs. Newmark Realty

Makara claims compensation in Cedrick Makara vs. Newmark Realty after injuring his thumb while leaving the restroom at work and being unable to return to work for six months as a result of the injury. He required surgery as a result of the injuries, and the jury gave him $ 2 in compensatory damages for pain and suffering, as well as $2,00,000 in special damages for any future medical needs.

Bret Michaels vs. CBS

Bret Michaels vs. CBS was a case in which a celebrity sued a firm for an accident. He was struck in the head by a set piece during the 2009 Tony Awards broadcast; breaking his nose and suffering a brain bleed as a result of not being adequately advised on how to exit the stage. Although the court found in Michael's favour, the amount of compensatory and general damages has not been disclosed.

Entitled to Special Damages

In most cases, special damages are not necessary; nonetheless, failing to request special damages will result in the non-breaching party losing the right to special damages. Some requirements must be met in order to get Special Damages.

Predictable- The parties may easily predict the loss at the time of contract formation.

Losses as a Result of the Violation- Losses should not be the direct and ultimate result of a contract breach. There should be some form of link between the breach and the damages.

Calculable– Because exceptional damages are not awarded in the regular contract circumstances, calculating the loss amount is difficult.

For example, an individual's loss of commercial reputation is impossible to quantify. It should be calculated at the time the contract is being formed.


Special damages are those that do not derive from the defendant's breach of contract and can only be collected if they were in the parties' reasonable consideration at the time the contract was signed.

It refers to those losses that must be pleaded and proven specifically.

It refers to monetary losses that may be calculated. It represents the exact amount of monetary damage experienced by the claimant as a result of the pled facts.

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