Question 5 (a)
Damages and liquidated damages; kinds of damages
9 marks
- Time to write
- About 18 minutes
- Topic
- Breach and remedies
- Notes
- Crux notes
Question
Question 5 (a) · 9 marks"The terms Damages and Liquidated Damages are one and the same thing." Do you agree? Discuss the kinds of damages that are available to the aggrieved party in case of a breach of contract.
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
Read from the question
- Are…?Discuss…2 asks, each with its own marks below. Answer both.
- agreeA statement to judge: take a stand on it in your first line, and come back to it at the end.
Write it in this order
- Read; underline the asks; jot your points 1 min
- 1 Damages versus liquidated damages; section 74 4 marks 7 min
- 2 Kinds of damages, with examples 5 marks 9 min
- Check: every ask answered, key terms underlined 1 min
Short on time? Trim steps 1 and 2 evenly rather than skip one: each is capped at its own marks.
Try it first. About 18 minutes for 9 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.
Do you agree? No. Damages are the compensation the court awards for the loss the injured party has actually suffered by the breach. Liquidated damages are a sum the parties themselves name in the contract as payable on breach, being a genuine pre-estimate of the likely loss (as distinct from a penalty, an arbitrary sum). In India, section 74 treats any such named sum alike: the court awards reasonable compensation not exceeding the sum named, and may allow less but never more. So liquidated damages fix the ceiling of recovery in advance, whereas damages are assessed by the court after the breach. If A contracts to pay B ₹50,000 if A practises as a surgeon in Kolkata, and he does so, B gets such compensation not exceeding ₹50,000 as the court thinks reasonable.
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.
Kinds of damages available to the aggrieved party:
- Ordinary (general) damages: for loss arising naturally in the usual course of things from the breach. Where rice contracted at ₹5,000 a bag rises to ₹5,500 by the delivery date and the seller refuses to deliver, the buyer gets ₹500 a bag. Where a broken mill-shaft was sent for repair, the carrier was not liable for the mill's loss of profit, as the special circumstance was not made known.
- Special damages: for loss arising from special circumstances communicated to the other party at the time of the contract; a carrier told that a mill is stopped for want of a machine must pay the average profit lost during the delay.
- Vindictive or exemplary damages: awarded only for breach of a promise to marry and for wrongful dishonour of a customer's cheque by a banker.
- Nominal damages: a token sum where a breach is proved but no real loss is suffered.
- Damages for deterioration caused by delay: ordinary damages for the fall in the value of the goods during the delay.
- Pre-fixed (liquidated) damages under section 74: the sum named in the contract is the ceiling of reasonable compensation.
Where the 9 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Damages versus liquidated damages; section 74 | 4 |
| 2 | Kinds of damages, with examples | 5 |
| Total | 9 |
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