DAMAGES

&
MEASURE OF DAMAGES

Submission of project for Bachelor of Law

I semester

Submitted by

ANUPAM
Enroll. No.: A3221509048
Batch: 2009-14
Amity Law School
AUUP
NEHA SRIVASTAV
Lecturer
Amity Law School

CERTIFICATE

This is to certify that ANUPAM, student of Bachelor of Business Administration, Bachelor

of Laws (Hons.), Amity Law School, AUUP has satisfactorily prepared this project as
Damages and Measure of Damages under my supervision & guidance. The present work
incorporates the result of his independent study and research.

Supervisor

(i)
 ACKNOWLEDGEMENT

I wish to extend my thanks to my teacher for her informative and illuminative guidance. I
take this opportunity to express my deep sense of gratitude and whole hearted thanks to my
teacher for her valuable guidance and support.

At last my sincere thanks to all those who have directly or indirectly helped me during the
making of the project.

ANUPAM

(ii)
 TABLE OF CONTENTS

CERTIFICATE (i)
ACKNOWLEDGEMENT (ii)
TABLE OF CASES (iv)
LIST OF ABBREVIATIONS (v)
INTRODUCTION 1
DAMAGES FOR BREACH.........................................................................................................................2

SECTION 73 0F CONTRACT ACT………………………………………………………………………………………………………6

MEASURE OF DAMAGES………………………………………………………………………………………………………………..9

BIBLIOGRAPHY…………………………………………………………………………………………………………………………….12

(iii)
 TABLE OF CASES

 Hadley v Baxendale
 Sunrise Associates v Govt NCT of Delhi, (2006) 5 SSC 603
 Sudesh Prabhakar Volvoikar v Gopal Babu Savolkar, (1996) 5 Bom CR 1
 Ram Kumar v Lakshmi Narayan, AIR 1947 Cal 157
 Plasgraf v Long Island R. R. Co
 Horne v Midland Railway Co
 British Columbia Saw Mill Co v Nettleship
 Ghaziabad Development Authority v Union of India, (2000) 6 SCC 113
 Sarvaraya Textiles Ltd v Pavan T. Punjabi, (2004) 1 Bom CR 551
 Chief Secy, State of Gujrat v Kothari Associates, (2003) 1 Guj CD 372 (Guj)
 State of Rajasthan v Nathulal, AIR 2006 Raj 19
 Draupadi Devi v Union of India, (2004) 11 SSC 425
 Cotton Corp. of India Ltd v Nand Kishore Parasramka, AIR 2001 Cal 137
 Dhamudhar Prasad Verma v State of A.P., (2003) 2 BC 351 (Gau)
 Maharashtra State Electricity Board v Sterlite Industries (India) Ltd, (2002) 1 ICC
178 (SC)
 Pannalal Jankidas v Mohanla, AIR 1951 SC 145, 149
 Food Corporation of India v Laxmi Cattle Food Industries, (2006) 2 SCC 699
 Bombay Motor Sports v Union of India, (2000) 1 BLJR 23 (Pat)
 (iv)

LIST OF ABBREVIATIONS

i.e. …………………………………………that is
SCC ………………………………………Supreme Court Cases
AIR ……………………………………....All India Reporter
v. …………………………………………versus
NCT …………………………………………..National Capital Territory
Ltd ……………………………………………Limited
Co. …………………………………………...Company
 (v)

INTRODUCTION

Oxford dictionary defines damages as “financial compensation for loss or injury”.

In law, damages are money claimed by, or ordered to be paid to, a person as compensation
for loss or injury Black's Law Dictionary.

In context of the Indian Contract Act, 1872 damages are referred in context to breach of
contract i.e. a party's failure to perform some contracted-for or agreed-upon act, or his failure to
comply with a duty imposed by law which is owed to another or to society.

Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not
honored by one or more of the parties to the contract by non-performance or interference with the
other party's performance

On a breach of contract by a defendant, a court generally awards the sum that would restore
the injured party to the economic position they expected from performance of the promise or
promises (known as an "expectation measure" or "benefit-of-the-bargain" measure of
damages).

When it is either not possible or not desirable to award damages measured in that way, a
court may award money damages designed to restore the injured party to the economic
position they occupied at the time the contract was entered (known as the "reliance
measure"), or designed to prevent the breaching party from being unjustly enriched
("restitution").

Parties may contract for liquidated damages to be paid upon a breach of the contract by one
of the parties. Under common law, a liquidated damages clause will not be enforced if the
purpose of the term is solely to punish a breach (in this case it is termed penal damages). The
clause will be enforceable if it involves a genuine attempt to quantify a loss in advance and is
a good faith estimate of economic loss. Courts have ruled as excessive and invalidated
damages which the parties contracted as liquidated, but which the court nonetheless found to
be penal.

Damages are likely to be limited to those reasonably foreseeable by the defendant. If a

defendant could not reasonably have foreseen that someone might be hurt by their actions,
there may be no liability. This is known as remoteness.
This rule does not usually apply to intentional torts (e.g. deceit), and also has stunted
applicability to the quantum in negligence where the maxim Intended consequences are never
too remote applies – 'never' is inaccurate here but resorts to unforeseeable direct and natural
consequences of an act.
 DAMAGES FOR BREACH

A contract is not a property. It is only a promise supported by some consideration upon

which either the remedy of specific performance or that of damage is available. 1 The party
who is injured by the breach of a contract may bring an action for the damages. “Damages”
means compensation in terms of money for the loss suffered by the injured party. Burden lies
on the injured party to prove his loss.2 Every action for damages raises two problems. The
first is the problem for “remoteness of damage” and the second that of “measure of
damages”.

Remoteness of Damage

Every Breach of contract upsets many a settled expectations of the injured party. He may feel
the consequences for a long time and in variety of ways. A person contracts to supply to a
shopkeeper pure mustard oil, but he sends impure stuff, which is a breach. The oil is seized
by an inspector and destroyed. The shopkeeper is arrested, prosecuted and convicted. He
suffers the loss of oil, the loss of profits to be gained on selling it, the loss of social prestige
and of business reputation, not to speak of the time and money and energy wasted on defence
and mental agony and torture of prosecution.3

Thus theoretically the consequences of a breach may be endless, but there must be an end to
liability. The defendant cannot be held liable for all that follows from his breach. There must
be a limit to liability and beyond that limit the damage is said to be too remote and, therefore,
irrecoverable.4 The problem is to where to draw the line.

The rule in Hadley v Baxendale

A very noble attempt was made as early as (1854) in the well known case of Hadley v
Baxendale5 to solve the problem by laying down certain rules.

ALDERSON B laid down the following rule:

Now we think about the proper rule in such a case as the present is this:
Where two parties have made a contract which one of them has broken, the damages which
the other party ought to receive in respect of such breach of contract should be such as may
fairly and reasonably be considered either arising naturally, i.e., according to the usual course
of things, from such breach of contract itself, or such as may reasonably be supposed to have
been in the contemplation of both parties, at the time they made the contract, as the probable
result of the breach of it.

1
Sunrise Associates v Govt NCT of Delhi, (2006) 5 SSC 603.
2
Sudesh Prabhakar Volvoikar v Gopal Babu Savolkar, (1996) 5 Bom CR 1.
3
See Ram Kumar v Lakshmi Narayan, AIR 1947 Cal 157.
4
See judgment of ANDREWS, J in Plasgraf v Long Island R. R. Co, Court of Appeals of New York, (1928) 284 NY
339.
5
(1854) 9 Ex 340.
The decision in the above case has always been taken as laying down two rules.

(i) General Damages

General damages are those which arise naturally in the usual course of things from
the breach itself. Another mode of putting this is that the defendant is liable for all
that which naturally happens in the usual course of things after the breach.

(ii) Special Damages

Special damages are those which arise on account of the unusual circumstances
affecting the plaintiff. They are not recoverable unless the special circumstances
were brought to the knowledge of the defendant so that the possibility of the
special loss was in contemplation of the parties.

No recovery of Special Damages when Special Circumstances not known

Lack of knowledge of special circumstances once again prevented recovery of special

damages in Horne v Midland Railway Co.6

For the same reason loss of profits was not allowed to be recovered in British Columbia
Saw
Mill Co v Nettleship.7

Special Circumstances already within Knowledge of Contract Breaker

But in the subsequent case of Simpson v London & North Western Railway Co8 the above
suggestion was qualified to this extent that if the special circumstances are already within
knowledge of the party breaking the contract, the formality of communicating them to him
may not be necessary.

In another case9 a fragmentiser was purchased by the plaintiff under hire-purchase

agreement. Its rotor broke down before normal life. The plaintiff had no means to replace it at
cash price. He had to arrange it again a hire-purchase price and claimed the same as damages.
The defendant contended the plaintiff had to pay hire- purchase price because of his lack of
means. This contention was rejected. The fact that in the present circumstances of economy
the business has to depend upon hire-purchase system, was held to be within the
contemplation of the parties.

6
(1873) LR 8 CP 131.
7
(1868) LR 3 CP 499: 18 LT 604.
8
(1876) 1 QBD 274.
9
B.P. Exploration & Co v Heent, (1982) 2 QBD 925. Where the lessor knew the purpose for which the lessee
required the premises, he was held liable for the loss of that purpose during the delayed period. Jaques v
Millar, (1877) 6 Ch D 153.
Relationship between Two Rules Re- examined

The relationship between the rules was re-examined in Victoria Laundry (Windsor) Ltd v
Newman Industries Ltd10 LORD ASQUITH worked out a number of propositions from a
consideration of the leading authorities.

The judgment emphasised that both the rules are based upon the principles of
“forseeability”.11

This gives a “new look for Hadley v Baxendale”. Now it has been clearly so stated by
DIPLOCK LJ in C. Czarnikow Ltd v Koufos.12

“That there are not two rules formulated in Hadley v Baxendale but only two different
instances of the application of a single rule.”

To the same effect is the decision of the House of Lords in Monarch Steamship Co Ltd v
Karlshmans Oljefabriker (A/B).13

House of Lords Restore Original Vitality of Two Rules

The interpretation put upon the Hadley v Baxendale principles by the Court of Appeal in the
Victoria Laundry case had virtually replaced the expression “contemplation of the parties”
with “reasonable man’s foresight” and this being the principle in law of torts also, hardly any
distinction remained between tort and contract principles relating to remoteness of damages.
But the House of Lords in their decision in the Heron II, Koufos v C. Czarnikow Ltd14 have
restored the distinction by again laying emphasis upon the “contemplation of the parties”.

Lord HODSON also presented the same view of Hadley v Baxendale.

Physical Injury Resulting from Breach

The wisdom of the distinction between tort and contract principles, at any rate in reference
to physical injury caused by breach, has again been questioned by Lord DENNING in
Parsons v Uttley Ingham & Co.15

In the opinion of the Court of Appeals it was held that the principle of Hadley v Baxendale
should be confined to economic loss and for physical injuries the principle of forseeability
which operates in torts should apply.16
10
(1949) 2 KB 528 CA: (1949) 1 All ER 997.
11
Also so observed by DEVLIN J in Biggin & Co v Permanite Ltd, (1951) 1 KB 422.
12
(1966) 2 WLR 1397, 1497; on appeal. Heron II, the Koufos v C. Czarnikow Ltd, (1969) 1 AC 350: (1967) 3 All ER
997
13
(1949) AC 196.
14
(1967) 3 All ER 686: (1969) 1 AC 350: (1967) 3 WLR 1491
15
(1978) 1 All ER 525.
16
Distinction between tort and contract is breaking down at many points. See Fridman, (1977) LQR 482.
Damages for Negligent Survey Report

The applicable principles have been stated by the Court of Appeals in Watts v Morrow. The
plaintiffs purchased a country home for £177,500 in reliance on a survey prepared by the
defendant surveyor in which he stated that overall dwelling house was sound, stable and in
good condition although there were minor defects which could be dealt with as part of
ordinary ongoing maintenance repair. After taking possession the plaintiffs discovered
substantial defects not mentioned in the defendant’s report which required urgent repair,
including the renewal of the roof, windows and floor boards. The plaintiff carried out repairs
to remedy the defects at a cost of £ 33,691 and sought to recover this amount. The surveyor
admitted liability but pleaded that it should not be more than £ 15,000 being the difference
between the price paid and the price that the home was worth if the defects were taken into
account. The court held that the proper measure of damages was the diminution in value
rather than cost of repairs. Applying the principle of restitution to the terms of the contract,
the amount required to put the plaintiff in the position in which he would have been if the
surveyor had carried out the contract of survey properly was the amount by which he was
caused to pay more the value the house in its true condition.17

17
The court followed Philips v Ward, (1956) 1 A11 ER 874 and Perry v Sidney Philips & Son (a firm), (1982) 3
A11 ER 705
Section 73 of the Contract Act

The same principles are applicable in India. The Privy Council, for example, observed in
Jamal, A.K.A.S. v Moola Dawood Sons & Co18 that Section 73 is declaratory of the common
law as to damages. Similarly, PATANJALI SASTI J (afterwards CJ) of the Supreme Court
observed in Pannalal Jankidas v Mohanla19 “that the party in breach must make
compensation in respect of the direct consequences flowing from the breach and not in
respect of the loss or damage indirectly or remotely caused”.20 The section provides:

73. Compensation for 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, from the party
who has broken the contract, compensation for any loss or damage caused to him thereby,
which naturally arose in the usual coarse 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 or 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 the non-performance of the
contract must be taken into account.

18
(1916) 43 IA 6: ILR 1916 43 Cal 493: (1916) 1 AC 175: 43 IA 6
19
AIR 1951 SC 144, 153: 1950 SC R 979: 53 Bom LR 472: (1951) 21 Comp Cas 1
20
Pannalal Jankidas v Mohanla, AIR 1951 SC 145, 149
Section 73 incorporates Two Rules of Hadley v Baxendale

The section declares that compensation is not to be given for any remote or indirect loss or
damage sustained by reason of the breach.21The section also provides that the same principles
will apply where there has been a breach of a quasi-contractual obligation.

The section thus clearly lays down two rules. Compensation is recoverable for any loss or
damage—
(i) arising naturally in the usual course of things from the breach, or
(ii) which the parties knew at the time of the contract as likely to result from breach.

The first rule is “objective” as it makes the liability to depend upon a reasonable man’s
foresight of the loss that will naturally result from the breach of the contract. The second rule
is “subjective” as, according to it, the extent of liability depends upon the knowledge of the
parties at the time of the contract about the probable result of the breach.22

The burden of proof lies on the plaintiff to show that damage has been sustained and what
shall be the measure of converting the loss into money. A claim for damages becomes liable
to be rejected where this burden is not discharged.23

Liability in ordinary cases

The extent of liability in ordinary cases is what may be foreseen by “the hypothetical
reasonable man”, as arising naturally in the usual course of things. One illustration is the
decision of the Madras High Court in Madras Railway Co v Govinda Rau.24

Fazal Ilahi v East Indian Railway Co25 is another illustration of the same kind.

In a claim for general damages the plaintiff has to assert that he has suffered such loss but for
the purpose of claiming special damages he has specifically to plead and prove that he has
sustained such special loss.26

21
State of Rajasthan v Nathulal, AIR 2006 Raj 19
22
See Murray Pickering, The Remoteness of Damages in Contract, (1968) 31 Mod LR 203.
23
Draupadi Devi v Union of India, (2004) 11 SSC 425.
24
(1898) 21 Mad 172Damages cannot be recovered by a person who does not do his duty under the contract.
25
(1921) ILR 43 All 623.
26
Chief Secy, State of Gujrat v Kothari Associates, (2003) 1 Guj CD 372 (Guj).
Building Contracts

Since works and building contracts are undertaken only with a view to earn profits, the
party committing the breach would be liable for the contractor’s loss in terms of expected
profits. The Supreme Court came to this conclusion in A.T. Brij Pal Singh v State of Gujrat.27

Some earlier cases on the subject were also decided either on the basis of cost of cure or
difference in value depending on whether in the circumstances of the case, cure would be
reasonable or whether recovery on the basis of difference in value would be reasonable. The
latter would be more reasonable where the building, though defective, is nevertheless
substantially useful. The cost of rectification even if recovered, may not be so used.28

Delay suffered by builder

The builder was required to complete the work within 18 months but by reason of delays
caused by the Department, it took 27 months to be complete. The builder suffered itemized
damages which he proved by leading oral evidence. The amount claimed being reasonable
was decreed.29

Scheme for allotment of plots

Damages for mental pain and anguish cannot be awarded in a case in which there is a
breach on the part of the development authority in delaying the completion of the scheme. It
is not a head of damages in ordinary commercial contracts. The court, however, allowed
interest at the rate of 12% on the refundable amount though there was no provision in the
contract to that effect. It was justifiable on equitable grounds. The brochure of the scheme
clearly excluded the liability of the authority to pay interest in cases of refund of
consideration. It was held that this clause would apply only to cases in which the claimant
himself was brought about the circumstances of refund.30

Difference between market price and contract price [Sale and Supply transactions]

In a sale transaction, damages are generally awarded on the basis of difference between
the contract price and market price. If the seller defaults, the buyer may have to buy
elsewhere at an extra cost. If the buyer defaults, the seller may have to make a forced sale
which may bring him less money than what he would have under the contract. Such damages
difference is recoverable as damages. The fact that because of the seller’s default, the buyer
could not carry out production in his factory and suffered losses, such losses were held not to
be recoverable being a remote consequence. The buyer was under duty to keep his loss to
minimum by buying his material elsewhere so as to keep his business going.31

27
(1948) 4 SSC 59: AIR 1984 SC 1703.
28
See East Ham B.C. v Bernard Sunley & Sons Ltd, (1965) 3 All ER 619 HL.
29
Chief Secy, State of Gujrat v Kothari Associates, (2003) 1 Guj CD 372 (Guj).
30
Ghaziabad Development Authority v Union of India, (2000) 6 SCC 113.
31
Sarvaraya Textiles Ltd v Pavan T. Punjabi, (2004) 1 Bom CR 551.
Whether actual purchase or sale of goods necessary

The High Court of Delhi was of view in Union of India v Commercial Metal Corp. that it
is not necessary that on default by the seller to deliver, the plaintiff should have actually
bought the goods elsewhere and only than claim the difference. The court said that the
damages could be claimed on market basis. The same ruling was repeated in Saraya
Distillery v Union of India, the court saying that the injured party can recover compensation
on the basis of the difference between the contract and market prices without actually
purchasing the goods. All that is to be proved is the buying price at which the injured party
can obtain substitute goods.

Getting work done through other sources

The contractor failed to complete the work within 4 months from the date of contract. The
delay was the result of his own doings and not that of other party. The corporation had to get
the work completed by inviting fresh tenders. Extra amount paid to the other contractor was
allowed to be recovered. The consequences of delay were compensated by allowing interest
at 6% on the amount of extra payment.

Award of interest on difference

Where because of the purchaser’s breach, the supplier had to resell the goods elsewhere
and became entitled to recover the differences, the court allowed future interest @ 20% p.a.
from the date of suit till the date of judgment and 6% from date of judgment till realization.32

Loss of profit is a special loss

Thus, loss of profits which are to accrue upon resale cannot be recovered unless it is
communicated to the other party that the goods are for resale upon a special contract. This is
borne out by the decision of the Supreme Court in Karsandas H. Thacker v Saran
Engineering Co. Ltd.

Meaning of market price

In almost all sales transactions which fail to go through the normal yardsticks for working
out the sum of money to which the aggrieved party is entitled is the difference between the
contract and market prices.33 This rule presupposes the existence of a market and the
possibility of ascertaining the price of goods in that market. Both these concepts were the
subject-matter of some explanation in a case where the buyer refused to accept the goods.34

32
Cotton Corp. of India Ltd v Nand Kishore Parasramka, AIR 2001 Cal 137.
33
Hajee Ismail & Sons v Williams & Co. (1918) 41 Mad 709.
34
Shearson Lehman Hutton Inc. v Maclaine Watson & Co Ltd, (1990) 3 All ER 723 QBD.
 MEASURE OF DAMAGES

Once it is determined whether general or special damages have to be recovered they have
to be evaluated in terms of money. This is the problem of measure of damages and is
governed by some fundamental principles.

Claim for damages is not debt

A claim for damages arising out of breach of contract, whether for general or liquidated
damages, remains only a claim till its adjudication by the court and become a debt only after
courts award it. Till then and on the basis of the claim alone, the claimant is not entitled to
present a winding up petition of the defendant company on the ground of its inability to pay
debts.35

Damages are compensatory, not penal

In the words of ASQUITH J: “It is well settled that the governing purpose of damages is
to put the party whose rights have been violated in the same position, so far as money can do
so, as if his rights have been observed.”36

Robinson v Harman37 is an apt illustration of the above principle.

Inconvenience caused by breach

But the inconvenience caused by the breach may be taken into account. Thus, for
example ,in Hobbs v London & South-Western Rly Co, where a train pulled its passengers to
a wrong direction and consequently the plaintiff and his wife, finding no other conveyance,
nor a place to stay, had to walk home at midnight, the jury allowed £ 8 as damages for
inconvenience suffered by the plaintiffs in being obliged to walk and £ 20 in respect of the
wife’s illness caused by catching cold. On appeal, the court of Queen’s Bench held that the £
8 was properly awarded but not £ 20.

This was critcised in the subsequent case of Mc Mohan v Fields.

Nominal damages (No loss situation)

Where the plaintiff suffers no loss the court may still award him nominal damages in
recognition of his right. But this is in the discretion of the court. The court may altogether
refuse to award any damages or may award even substantial damages.”The court is
competent to award reasonable compensation in case of breach, even if no actual damage is
proved or shown to have been suffered in consequences of breach of contract.”38

35
Greenhills Exports(P) Ltd v Coffee Board,(2001) 4 Kar LJ 158 (DB).
36
In Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949) 2 KB 528 CA.
37
(1848) 18 LJ Ex 202.
38
T.A. Choudhary v State of A.P., (2004) 3 ALD 357 (DB).
Refund on partial cancellation of contract

The agreement for sale of damaged food grains. The purchaser deposited a certain amount
with the Food Corporation. An application was made for cancellation of a certain part of the
agreement which was not capable of being performed. This was conceded and some refund
was made. The purchaser was not allowed to sue the corporation for breach of contract in the
matter of refund. There was no proof of any such breach.39

Agreement to provide scientific process

The agreement was for setting up a project for converting menthons to menthol. The
agreement showed that the requisite technical knowhow was to be provided by the Indian
Institute of Petroleum (IIP). A huge expenditure was incurred in setting up the plant. But IIP
failed in its experiments of converting the material even up to five years. It was something
which had to be done under the contract in five months. The arbitrator awarded compensation
of Rs 90 lacs for the loss suffered in setting up the plant. The court said there was nothing
against public policy in the award.40

Injunctions for restraining breach of contract

A supply system to the army which had been going on since 1960was not allowed to be
scrapped all of a sudden by blacklisting the supplier. A person dealing with the government
in matters of sale and purchase develops legitimate interest and expectations. The order of
blacklisting amounted to denial of equality of opportunity. Before issuing such an order some
explanation should be called for. The court would not interfere in the matter if it is decided
again by giving opportunity to the supplier.41

Writ remedy against termination of dealership

A dealership agreement was terminated by reason of breaches on part of the dealer. He

applied for a writ against the order expecting that contractual obligations should be decided
on the basis of affidavit evidence. The court found that the termination had become necessary
in public interest. There was no violation of Article 14 and, therefore no scope of
interference.42

Waver and writ remedy

Waiver of credit guarantee commission charges, rebate and concessional rates of interest
were held to be a part of the term of loan. They were contractual matters between the parties.
Any dispute as to such matters could be resolved through a civil suit and not under writ
jurisdiction.43

39
Food Corporation of India v Laxmi Cattle Food Industries, (2006) 2 SCC 699.
40
CSIR v Goodman Drug House(P) Ltd, AIR 2007 Utt’1 58
41
Bombay Motor Sports v Union of India, (2000) 1 BLJR 23 (Pat).
42
O.J.S. Corp. Transstory v Govt of Karnataka, AIR 2005 Kant HCR 1492.
43
Devi Prasad Steels (P) Ltd v A.P. State Financial Corp. (1999) 1 BC 497 (AP).
Non performance of its contract by Government and writ remedy

On the completion of a Government contract, the Government becomes liable for payment
of the amount accrued to the contractor. He gets a legal right to invoke the jurisdiction of the
writ court praying for mandamus for direction to the Government to make payment for the
admitted outstandings.44

Non performance of Government contract by contractor and writ

A foreign company contracting with the Government failed to complete the road building
projects within the stipulated periods. Sufficient time and opportunities were afforded to the
company to amend defaults. But it could not do so. Termination of the contract by the
Government in according with the contract stipulations was held to be justified in public
interest. There was no violation of Article 14 and no occasion of issuing a writ.45

Recovery of damages as arrears of land revenue

The Supreme Court has upheld the validity of a clause in a Government contract which
authorized the State to recover damages as arrears of land revenue. 46 Where there was no
such clause recovery of dues under a contract by way of arrears of land revenue was not
allowed.47

Exclusion of Section 73: Arbitration Clause

Whether in the context of terms and conditions of a contract it is permissible to provide

that Section 73 would not apply and the special terms of the contract should be applied for
making out recoverable loss, the court said that it depends upon the appreciation of the facts
of case and if the arbitrator had followed the special provision, no fault in his award could be
found for that reason alone.48

BIBLIOGRAPHY
44
Dhamudhar Prasad Verma v State of A.P., (2003) 2 BC 351 (Gau).
45
O.J.S. Corp. Transstory v Govt of Karnataka, AIR 2005 Kant 351.
46
State of Karnataka v Shree Rameshwara Rice Mills, (1987) 2 SCC 160
47
Mohd Umar v Nagar Palika,Khatima, AIR 1988 All 227.
48
Maharashtra State Electricity Board v Sterlite Industries (India) Ltd, (2002) 1 ICC 178 (SC).
 CONTRACT & SPECIFIC RELIEF

by Avtar Singh

 INDIAN CONTRACT ACT

by R.K. Bangia

 indlaw.com

 google.co.in

 wikipedia.org

 indiankanoon.org