Question 2

Damages for breach: the rules; manager wrongfully dismissed who refuses another job

18.75 marks

Time to write
About 38 minutes

From an older CBCS paper

Question

Question 2 · 18.75 marks

Q.2. “If a contract is broken, the law will endeavour, as far as money can do it, place the party injured in the same position as if the contract has been performed.” Indicating the rules that guide the court in assessing damages, Discuss the statement. Giving reasons, discuss also the following problem:

Case: Rajeev employs Sanjay as manager at his factory for a four years' term at a monthly salary of ₹45,000. After two years of service, without any lapse on Sanjay's part, Rajeev dismisses him. Sanjay got an alternate job elsewhere, but he does not take that job up, and sues Rajeev for damages for breach of contract. Will he succeed? If yes, assess the amount of damages he can recover.

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

38 minfor 18.8 marks

Read from the question

  • Will he succeed…?A case problem: state the rule and its section, apply it to these facts, then answer in one line (yes or no, and why).
  • DiscussTie the answer to the quoted statement: say what it means first, and come back to it at the end.

What the paper leaves open

The paper prints no mark per question (any four of six, equal marks, 75 in all); each question is reckoned here at 18.75 marks.

Write it in this order

  1. Read the facts; underline who did what, and the exact question 2 min
  2. 1 The statement (section 73) 3 marks 5 min
  3. 2 Rules for assessing damages 8 marks 15 min
  4. 3 Sanjay's case and the measure of damages 7.8 marks 14 min
  5. Check: section named, answer stated in one line 2 min

Short on time? Trim steps 1–3 evenly rather than skip one: each is capped at its own marks.

Try it first. About 38 minutes for 18.75 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

The statement. Damages for breach are compensatory: on a breach the injured party is entitled to compensation for loss or damage caused to him, which puts him, so far as money can, in the position he would have occupied if the contract had been performed (s. 73).

Picture itDamages for breach: the rules; manager wrongfully dismissed who refuses another job

1The contract itself names the sum: it goes down on paper beside the money bag.

Liquidated damagesLiquidated damages are a sum the parties themselves name in the contract as payable on breach

2The flour never came, the stall stood closed—the usual, natural loss of a broken promise.

Ordinary (general) damagesFor loss arising naturally in the usual course of things from the breach.

3The judge allows the wedding orders too—but only because they were told of them at signing.

Special damagesFor loss arising from special circumstances communicated to the other party at the time of the contract

4A breach proved, no loss shown: the court presses a single token coin into his palm.

Nominal damagesA token sum where a breach is proved but no real loss is suffered.

Rules for assessing damages:

  1. Ordinary damages: for loss which naturally arises in the usual course of things from the breach (Hadley v. Baxendale). If A fails to deliver rice at ₹5,000 a bag when the price on the delivery date is ₹5,500, B recovers ₹500 a bag.
  2. Special damages: for loss arising from special circumstances, only if they were known to the parties when the contract was made.
  3. No remote or indirect loss is compensated.
  4. Duty to mitigate: the injured party must take reasonable steps to minimise the loss; he cannot recover loss he could have avoided.
  5. Vindictive or exemplary damages only for breach of promise to marry and wrongful dishonour of a cheque; nominal damages where breach is proved but no loss.

Sanjay's case. Rajeev wrongfully dismissed Sanjay with two years of the four-year term left. Sanjay will succeed, but his damages are limited by the duty to mitigate:

  1. His loss in the usual course is the salary for the unexpired period: ₹45,000 × 24 months = ₹10,80,000.
  2. He was bound to take reasonable steps to minimise that loss, and an alternate job was available which he did not take up. He cannot recover what he could have earned in it; his damages are ₹10,80,000 less the earnings of the alternate job for the two years (the question does not give that salary).

Where the 18.75 marks sit

#ComponentMarks
1The statement (section 73)3
2Rules for assessing damages8
3Sanjay's case and the measure of damages7.75
Total18.75
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