DAMAGES

In law, damages is an award of money to be paid to a person as compensation for loss or

Damages, money award that the judgment of a court requires the defendant in a suit to pay to the
plaintiff as compensation for the loss or injury inflicted. Damages are the form of legal redress
most commonly sought.

TYPES OF DAMAGES
General damages

General damages, compensate the claimant for the non-monetary aspects of the specific harm
suffered. This is usually termed 'pain, suffering and loss of amenity'. Examples of this include
physical or emotional pain and suffering, loss of companionship, loss of consortium,
disfigurement, loss of reputation, loss or impairment of mental or physical capacity, loss of
enjoyment of life, etc. This is not easily quantifiable, and depends on the individual
circumstances of the claimant.

General damages are generally awarded only in claims brought by individuals, when they have
suffered personal harm. Examples would be personal injury.

Speculative damages

Speculative damages are damages that have not yet occurred, but the plaintiff expects them to.
Typically, these damages cannot be recovered unless the plaintiff can prove that they are
reasonably likely to occur.

Special damages

Special damages compensate the claimant for the quantifiable monetary losses suffered by the
plaintiff. For example, extra costs, repair or replacement of damaged property, lost earnings loss
of irreplaceable items, additional domestic costs, etc. They are seen in both personal and
commercial actions.

Special damages can include direct losses and consequential or economic losses resulting from
lost profits in a business.
Statutory damages

Statutory damages are laid down in law. Mere violation of the law can entitle the victim to a
statutory award, even if no actual injury occurred. These are similar to, but different from,
nominal damages in which no written sum is specified.

For example, the possible remedies for misrepresentation in the United Kingdom are codified in
the Misrepresentations Act.

Nominal damages

On the other hand, nominal damages are very small damages awarded to show that the loss or
harm suffered was technical rather than actual.

Many times a party that has been wronged but is not able to prove significant damages will sue
for nominal damages. This is particularly common in cases involving alleged violations of
constitutional rights, such as freedom of speech.

Liquidated Damages

Liquidated damages constitute compensation agreed upon by the parties entering into a contract,
to be paid by a party who breaches the contract to a no breaching party. Liquidated damages may
be used when it would be difficult to prove the actual harm or loss caused by a breach. The
amount of liquidated damages must represent a reasonable estimate of the actual damages a
breach would cause.

Measure of Damages
When there is a breach of contract, the party who commits the breach does not eo instant i.e at
the instant incur any pecuniary obligation, nor does the party complaining of the breach becomes
entitled to a debt due from the other party. The only right which the party aggrieved by the
breach of the Contract has is the right to sue for damages. Thus no pecuniary liability arises till
the court has determined that the party complaining of the breach is entitled to damages. The
court in the first place must decide that the defendant is liable and then it should proceed to
assess what the liability is. But, till that determination by Court, there is no liability at all upon
the defendants.
The damages are to be assessed on the basis of the natural and probable consequences of the
breach within the general principles laid down in Hadley vs. Baxandale
Proof of damages
Section 73 makes it obligatory for the plaintiff to prove that he has suffered damages and the
extent to which he has suffered before a court can award him damages for breach of contract, and
if he does not give the best evidence, every presumption should be made against him, but this
does not relieve the Court altogether of the duty of assessing the damages, as best it can, on
evidence and materials actually before it. . In the case of breach of contract, it is obligatory on
the part of the aggrieved party to prove that it had sustained legal injury. If proof of actual loss is
not given, damages cannot be awarded. The opposite party is not entitled to forfeit security
amount and retention amount. .
The compensation is allotted or given only when actual loss or injury is suffered by the
Claimant. No compensation is given for remote or indirect loss or damage sustained. The
fundamental principle of law of damages is that the person injured by breach of contract shall
have fair and just compensation commensurate with loss sustained in consequence of the
defendant’s breach of contract which gives rise to the action. This amount is to be established
with reasonable certainty. The measure of compensation depends upon the circumstances of the
case. The complained loss or claimed damage must be fairly attributed to the breach as a natural
result or consequence of the same. The loss must be real loss or actual damage and not merely a
probable or a possible one. When it is not possible to calculate accurately or in a reasonable
manner, the actual amount of loss incurred or when the plaintiff has not been able to prove the
actual loss suffered, he will be, all the same, entitled to recover nominal damages for breach of
contract. Where nominal damages only are to be awarded, the extent of the same should be
estimated with reference to the facts and circumstances involved. The general principle to be
borne in mind is that the injured party may be put in same position as that he would have been if
he had not sustained the wrong. In the case of State of Bihar vs. P.K.Jain, AIR 1981 Pat 280, a
suit was filed by a contractor against the Government on account of breach of the contract, but he
failed to adduce evidence in support of the losses suffered by him. It was held that he was not
entitled to award of damages.
Quantum Meruit
Quantum meruit is but reasonable compensation awarded on implication of a contract to
remunerate, and an express stipulation governing the relations between the parties under a
contract, cannot be displaced by assuming that the stipulation is not reasonable.
In Alopi Parshad and Sons Ltd. v. Union of India 1960 2SCR793 observed at p. 809: it was held that Compensation
quantum meruit is awarded for work done or services rendered when the price thereof is not fixed by a contract. For
work done or services rendered pursuant to the terms of a contract compensation quantum meruit cannot be
awarded where the contract provides for consideration payable in that behalf.
The remedy under quantum Meeruit is available when the original contract has been discharged by the defendant in
such a way as to disentitle the plaintiff to regard him as discharged from any other performance and he must have
elected to do so. Compensation quantum meruit is awarded for work done or services rendered, when the price
thereof is not fixed by a contract. The work done or services rendered pursuant to the terms of a contract,
compensation quantum meruit cannot be awarded where the contract provides for the consideration payable in that
behalf.
The principle of quantum meruit has no application to cases where there are specific contracts in
operation, and has only application to cases where there is no conflict in operation.
Claim for damages when not permissible
The concept of compensation is linked up with the loss of damages that result from breach of
contract and where no loss of damage is ensured, there would be no question of awarding
compensation.
Loss of damages must be actual and not by way of punishment. If no actual purchase had been
made by plaintiff on the failure of the company to supply the balance quantity of the ordered
material, there is no question of any loss being suffered by the opposite party.
In a works contract, a contractor applied for extension of time to enable him to complete the
contracted work. This was allowed by the employer. Two more extensions of time followed. A
supplementary agreement was entered into between the parties within the time frame mentioned
therein. Thereafter, he claimed damages for prolongation of contract. Held, the contractor having
voluntarily agreed to complete work under the supplementary agreement cannot seek damages.
Suit for damges
The remedy for suit of damages for a breach of contract need not be one of the terms of contract
but becomes available under the law in a acse of breach of contract without any express
stipulation. The whole basis of a suit for damages is that at the date of the suit there is no
pecuniary liability on the defendant and the plaintiff has come to court in order to establish a
pecuniary liability. The only right which the aggrieved by the breach of the contract has is the
right to sue for damages. No pecuniary liability thus arises till the court has determined that the
party complaining of the breach is entitled to damages.
In the case of Gujarat Housing Board vs. harilal Jethalal, AIR 2001 Guj 259, a contractor
delayed the completion of the work and the department had all along been warning the contractor
to accelerate the progress of work, to which the contractor paid no heed. The department paid
escalation as per formula given in the agreement. After receiving the final bill, the contractor
claimed escalation during the extended period of contract. The Court held that the suit by the
contractor for escalation of prices on basis of quantum meruit is not maintainable.
Mitigation of losses:
Damages are compensatory and not penal and one who has suffered loss from breach of contract
must take every reasonable step that is available to him to mitigate the extent of damages caused
by the breach. He cannot claim to be compensated by the party in default for loss which is really
due not to the breach but to his own failure to behave reasonably after the breach.
Damages for breach of contract are given by way of compensation for loss suffered and not by
way of punishment for wrong inflicted. One who has suffered loss for breach of contract must
take any reasonable steps that are available to him to mitigate the extent of the damage caused or
likely to be caused by the breach. He cannot claim to be compensated by the party in default for
loss which is really due not to the breach but his own failure to behave reasonably after the
breach.
The plaintiff is only required to act reasonably, and whether he has done is a question of fact in
the circumstances of each particular case, and not a question of law. He must act only in his own
interest but also in the interest but also in the interests of defendant and keep down the damages;
so far it is reasonable and proper, by acting reasonably in the matter.
A person who sues for damages owes the duty of taking all reasonable steps to mitigate the loss
consequent upon the breach and cannot claim as damages any sum which is due to his neglect.
It is undoubtedly the duty of a plaintiff to mitigate the damage caused by the defendant’s breach.
The plaintiff cannot claim to be compensated for the loss which was due to his own failure to
behave reasonably after the breach. The test to determine whether his behavior was reasonable is
to see whether he did ‘what a prudent man might have reasonably done if the whole expense was
to fall on him.’ The plaintiff must not have acted in a way legitimately open to blame. The rule
must be applied with discretion because the party who is already in the wrong by breaking the
contract is not entitled to impose new and extraordinary duties on the aggrieved party.’
The first principle on which damages in cases of breach of contract are calculated is that, as far
as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be
placed, as far as money can do it, in as good a situation as if the contract had been performed; but
this principle is qualified by a second, which imposes on a plaintiff the duty of taking all
reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any
part of the damages which is due to neglect to take such steps. Law imposes a duty on the
plaintiff of taking all reasonable steps to mitigate the loss consequent on the breach, and debars
him from claiming any part of the damage which is due to his neglect to take such steps.
There are three rules often referred to under the comprehensive heading of mitigation and these
are:
(i) The plaintiff cannot recover the loss upon the defendant’s breach of contract where the plaintiff could have
avoided the loss by taking reasonable steps.
(ii) If the plaintiff in fact avoids or mitigates his loss consequent upon the defendant’s breach, he cannot recover for
such avoided loss, even though the steps he took were more than could be reasonably required of him under the first
rule.
(iii) Where the plaintiff incurs loss or expense by taking reasonable steps to mitigate the loss resulting from the
defendant’s breach, the plaintiff may recover this further loss or expense from the defendant.
For a better understanding of damages in purview of section 73 and 74, it is necessary to extract
Section 73 and 74 of Indian Contract Act alongwith cases where Section 73 & 74 are dealt in an
elaborative manner :
Sec. 73 Compensation of loss or damage caused by breach of contract 

When a contract has been broken, the party who suffers by such breach is entitled to receive,
form the party who has broken the contract, compensation for any loss or damage caused to him
thereby, which naturally arose in the usual course of things from such breach, or 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 of damage sustained by reason of the breach.
Compensation for failure to discharge obligation resembling those created by contract: When an obligation
resembling those created by contract has been incurred and has not been discharged, any person injured by the
failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had
contracted to discharge it and had broken his contract.
Explanation : In estimating the loss or damage arising from a breach of contract, the means which existed of
remedying the inconvenience caused by non-performance of the contract must be taken into account.
74. Compensation of breach of contract where penalty stipulated for 

When a contract has been broken, if a sum is named in the contract as the amount be paid in case
of such breach, or if the contract contains any other stipulation by way of penalty, the party
complaining of the breach is entitled, whether or not actual damage or loss or proved to have
been caused thereby, to receive from the party who has broken the contract reasonable
compensation not exceeding the amount so named or, as the case may be, the penalty stipulated
for.
Explanation : A stipulation for increased interest from the date of default may be a stipulation by way of penalty.
Explanation : When any person enters into any bail bond, recognizance or other instrument of the same nature or,
under the provisions of any law, or under the orders of the Central Government or of any State Government, gives
any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon
breach of the condition of any such instrument, to pay the whole sum mentioned therein.

Limitations on Damages
There are several limitations on awarding damages to make the non breaching party
whole:

1. A party cannot recover for loss which he could have avoided  or mitigated through
his reasonable efforts.

2. Damages are limited to those losses which were foreseeable, i.e., in the contemplation
of the parties at the time the contract was entered into.

3. In order to be recoverable, damages must be established with reasonable certainty.

5. The injured party should not be in a better position as a result of the breach than he
or she would have been if the contract had been fully performed.