Remedies for breach of contract
Sections 39, 53 to 55, 64, 65 and 73 to 75 of the Indian Contract Act, 1872, and the Specific Relief Act, 1963
In one minute
When a party breaks a contract, the other party does not have to just accept it. The law gives him a set of remedies. He may end the contract and get back what he gave. He may claim money. He may ask the court to make the other side perform, or to stop him from doing something.
The ordinary remedy is damages. Specific performance and injunction are special remedies of the court. In exams, a clear list of remedies with the section for each, and the choice between them, earn the marks. In real life, the right choice depends on what the injured party actually wants: his money, or the thing promised.
Exam focus
- Frequency: Rarely asked
- Usually asked as: Long answer (10 to 15 marks)
Legal provision
- Section 39: when a party has refused to perform, or has disabled himself from performing, his promise in its entirety, the promisee may put an end to the contract, unless he has accepted its continuance.
- Sections 53 and 55: where one party prevents the other from performing, or fails to perform at a time that is of the essence, the contract becomes voidable at the option of the other party. He may claim compensation.
- Section 64: a person who rescinds a voidable contract must restore any benefit he has received. The other party need not perform his own promises.
- Section 65: a person who has received an advantage under a void agreement or a contract that becomes void must restore it or make compensation for it.
- Section 73: the party who suffers by a breach is entitled to compensation for loss that naturally arose in the usual course of things, or that the parties knew to be likely. Remote and indirect loss is not compensated.
- Section 74: where a sum is named as payable on breach, or a penalty is stipulated, the party complaining is entitled to reasonable compensation not exceeding the sum named.
- Section 75: a person who rightfully rescinds a contract is entitled to compensation for any damage he has sustained through its non-fulfilment.
- Specific Relief Act, 1963, section 10: the specific performance of a contract shall be enforced by the court, subject to section 11(2), section 14 and section 16.
- Specific Relief Act, section 21: in a suit for specific performance, the plaintiff may also claim compensation. If the court refuses specific performance but finds that the contract was broken and the plaintiff is entitled to compensation, it shall award it.
- Specific Relief Act, sections 36 to 42: preventive relief is granted by injunction, temporary or perpetual. Section 42 allows an injunction to perform a negative agreement.
Meaning and definition
A remedy is the relief that the law gives to a party whose right has been breached. The Contract Act deals with the effects of breach mainly in sections 39, 53 to 55, 64, 65 and 73 to 75. The Specific Relief Act, 1963 adds the remedies that a court gives in kind: specific performance and injunction.
The reason for having several remedies is that injured parties want different things. One wants out of the contract and his money back. One wants compensation for a loss. One wants the very thing that was promised. The tree groups the remedies by what they achieve.
- Breach of contract
- Ending the contract and restoring the position
- Rescission by the injured party sections 39, 53, 55He is freed from his own promises.
- Restoration of benefits sections 64, 65Each side gives back what it received.
- Money remedies
- Damages section 73Compensation for loss caused by the breach.
- Agreed sum or penalty section 74Reasonable compensation, up to the sum named.
- Compensation on rescission section 75Damage from non-fulfilment, after rightful rescission.
- Quantum meruit sections 65, 70A reasonable price for work done.
- Remedies from the court
- Specific performance Specific Relief ActThe court orders the contract to be performed.
- Injunction Specific Relief ActThe court orders a party to stop a breach.
- Ending the contract and restoring the position
Detailed explanation
Step 1: the first choice, end the contract or keep it alive
A breach does not end a contract by itself. The innocent party chooses. Under section 39 he may put an end to the contract if the other party refuses to perform, or disables himself from performing, his promise in its entirety. If he accepts the continuance of the contract by words or conduct, he loses the right to end it for that breach, but keeps his right to compensation.
The same choice arises when the breach comes before the due date. In Hochster v. De La Tour (1853), a courier was engaged for a tour starting on 1 June 1852. His employer told him on 11 May that his services would not be needed. The courier sued on 22 May, and the court allowed him to sue before the date for performance.
Example. A caterer agrees to cook for a wedding on 10 December. On 2 December he says he will not come. The family may treat the contract as ended and hire another caterer, or it may wait for the date. The choice is the family's.
Step 2: rescission and restoration
When the innocent party ends the contract, he is freed from his own promises. If the contract was voidable and he rescinds it, he must restore any benefit he has received (section 64). If an agreement is void, or a contract becomes void, anyone who has received an advantage must restore it or pay for it (section 65).
A person who rightfully rescinds is also entitled to compensation for any damage he sustained through the non-fulfilment of the contract (section 75). The Act's illustration is the singer who stays away on the sixth night of a two-month engagement. The manager rescinds, pays her for the five nights she sang (section 65, illustration (c)), and may claim compensation (section 75).
Step 3: damages, the ordinary money remedy
Damages are the usual remedy. Section 73 gives compensation for loss that naturally arose from the breach or that both parties knew to be likely, and not for remote and indirect loss. The Explanation to section 73 adds that the means of remedying the inconvenience must be taken into account. The kinds of damages are explained under kinds of damages. The rule on mitigation is explained under duty to mitigate.
The rule on remoteness comes from Hadley v. Baxendale (1854). Millers sent a broken crank shaft by carrier to Greenwich to be copied, and told the carrier's clerk the mill had stopped. The carrier delayed delivery. The court held that the profits lost during the delay were not recoverable on the facts before the jury, because the damage must either arise naturally from the breach or have been in the contemplation of both parties.
Step 4: the agreed sum and the penalty
If the contract itself names a sum payable on breach, section 74 limits what the court will award to reasonable compensation not exceeding that sum. This applies whether the clause is a genuine pre-estimate or a penalty. In Fateh Chand v. Balkishan Dass (1963), the Supreme Court applied section 74 to a clause forfeiting Rs 25,000 already paid under a house sale. The seller could keep only the Rs 1,000 earnest money. The details are explained under liquidated and unliquidated damages and penalty.
Step 5: quantum meruit and restitution
Where work was done and a contract cannot be enforced, the injured party may claim a reasonable price for the work done (quantum meruit). Where he has paid money under a contract that fails, he may claim it back. A court may also order the refund of an earnest money or deposit in a suit where specific performance is refused (Specific Relief Act, section 22(1)(b)).
Step 6: specific performance
Specific performance means that the court compel the defaulting party to do what he promised. Before the Specific Relief (Amendment) Act, 2018, the court had a wide discretion. Section 10 now says that specific performance of a contract "shall be enforced" by the court, subject to section 11(2), section 14 and section 16.
Three limits remain. Section 14 lists contracts that cannot be specifically enforced, such as a contract that needs a continuous duty that the court cannot supervise, or one that depends on personal qualifications. Section 16 bars relief to a plaintiff who cannot prove that he has performed, or has always been ready and willing to perform, the essential terms that he must perform. Section 19 protects a transferee who paid for the property in good faith without notice of the original contract.
The 2018 amendment also added substituted performance (section 20). After a written notice of not less than thirty days, the injured party may have the work done by a third party or by himself and recover the cost from the party in breach. A party who does so cannot then ask for specific performance (section 14(a) and section 16(a)).
The Supreme Court held in Katta Sujatha Reddy v. Siddamsetty Infra Projects (2022) that the amendment is prospective. The same Court recalled that judgment in review in 2024, and the review judgment did not decide whether the amendment is prospective. The position on older contracts is therefore not settled by that case.
In land sales, delay can defeat the claim even when time is not of the essence. In K.S. Vidyanadam v. Vairavan (1997), the buyer sued after more than two and a half years while prices had risen sharply. The Court refused specific performance. In Saradamani Kandappan v. S. Rajalakshmi (2011), the contract made payment on dated instalments the essence, so the sellers could cancel when the buyer defaulted.
Example. Ravi agrees to sell a flat in Hyderabad to Meera for Rs 60 lakh and takes Rs 5 lakh as advance. He then refuses to complete the sale. A flat is unique, so Meera may ask the court for specific performance. She must prove that she has always been ready and willing to pay the balance (section 16(c)).
Step 7: injunction
An injunction is a court order that stops a party from breaking a negative term of the contract. Section 42 of the Specific Relief Act allows the court to grant an injunction to perform a negative agreement, even if it cannot compel the affirmative part of the contract. Section 41(e) says an injunction cannot be granted to prevent the breach of a contract whose performance would not be specifically enforced, subject to section 42.
Example. A software engineer agrees to work only for Company A for two years. Company A cannot be forced to keep him on the payroll, and the court cannot compel him to work. But if he promised not to work for a rival during the term, the court may restrain him from joining the rival.
Step 8: choosing between remedies
The remedies are not all added together. The injured party cannot both end the contract and ask for its performance, because the two are inconsistent. He may claim compensation along with specific performance (Specific Relief Act, section 21). He may claim damages along with rescission (section 75). He cannot recover both quantum meruit and damages for the same work, because the remedies are not cumulative in that way.
The remedies at a glance
| Remedy | What it gives | Law | Typical use |
|---|---|---|---|
| Rescission | Frees the injured party from his own promises | Sections 39, 53, 55, 64 | A party refuses to perform the whole contract |
| Restitution | Return of benefits received | Sections 64, 65 | An advance was paid and the contract failed |
| Damages | Compensation for loss caused by the breach | Sections 73, 75 | Goods not delivered, price risen |
| Agreed sum or penalty | Reasonable compensation up to the sum named | Section 74 | A forfeiture or late-delivery clause |
| Quantum meruit | A reasonable price for work done | Sections 65, 70 | Contractor stopped midway by the other side |
| Specific performance | An order to perform the contract | Specific Relief Act, sections 10, 14, 16, 20, 21 | Sale of land or other unique property |
| Injunction | An order to stop a breach | Specific Relief Act, sections 36 to 42 | Breach of a promise not to compete |
Don't confuse: damages, specific performance and injunction
All three are remedies for breach. They give the injured party different things.
| Point | Damages | Specific performance | Injunction |
|---|---|---|---|
| What the court orders | Payment of money | Performance of the promise | Stopping a breach, or in a few cases doing an act |
| Source | Indian Contract Act, section 73 | Specific Relief Act, sections 10 to 14 | Specific Relief Act, sections 36 to 42 |
| When the court gives it | As of right, if loss is shown | Enforced, subject to sections 11(2), 14 and 16 | At the court's discretion, within the Act's limits |
| Best suited to | Goods that can be bought elsewhere | Land or unique goods | A promise not to do something |
Inside the idea. A buyer contracts for 50 maunds of ordinary rice, and the seller fails to deliver. Rice can be bought on the market, so damages for the price difference are enough.
Just outside it. A seller refuses to complete the sale of a house that the buyer has paid for and wants to live in. Money cannot replace the house, so the buyer asks for specific performance.
Common mistakes
- Saying a breach ends the contract by itself. The injured party chooses to end it or keep it alive.
- Treating specific performance as the ordinary remedy for goods. Damages are the usual remedy for goods that can be bought elsewhere.
- Claiming both rescission and specific performance. They are inconsistent.
- Forgetting that the plaintiff in a suit for specific performance must prove readiness and willingness.
- Writing the old law that specific performance is discretionary without mentioning the 2018 amendment to section 10.
Apply it
Problem
Ravi agrees in writing to sell a flat in Hyderabad to Meera for Rs 60 lakh. She pays Rs 5 lakh as advance and is ready with the balance. On the due date Ravi refuses to complete the sale. The flat is still in his name and has not been sold to anyone else. What remedies are open to Meera?
Issue. What are Meera's remedies for Ravi's refusal to perform?
Rule. The injured party may end the contract and claim compensation (sections 39 and 75). Or he may ask for specific performance, which the court shall enforce subject to sections 11(2), 14 and 16 (Specific Relief Act, section 10). He may also claim compensation along with specific performance (section 21), and a refund of the advance if specific performance is refused (section 22).
Application. A flat is unique property, and damages may not replace it. Meera has paid part of the price and is ready to pay the rest, so she can prove readiness and willingness under section 16(c). She must sue promptly, because delay with rising prices can defeat the claim (K.S. Vidyanadam). The contract is not one of the kinds listed in section 14.
Conclusion. Meera may sue for specific performance, with compensation under section 21 if needed. In the alternative she may end the contract, recover her Rs 5 lakh and claim damages for the loss. She cannot both end the contract and ask for the flat.
Leading case laws
- Hadley v. Baxendale (1854)
Facts. The crank shaft of a Gloucester steam mill broke. The mill owners sent it by carrier to Greenwich as a pattern for a new one and told the carrier's clerk that the mill had stopped. The carrier delayed delivery by neglect, and the mill lost profits.
Principle. Damages are those arising naturally from the breach, or reasonably in the contemplation of both parties when they made the contract. (1854) 9 Exch 341.
Why it matters. It is the source of the rule on remote loss in section 73.
- Fateh Chand v. Balkishan Dass (1963)
Facts. A buyer paid Rs 1,000 as earnest money and Rs 24,000 towards the price of a Delhi house, and failed to complete the sale. The contract said the Rs 25,000 would be forfeited.
Principle. Section 74 applies to a clause that forfeits money already paid. The seller could keep only the Rs 1,000 earnest money. AIR 1963 SC 1405.
Why it matters. It shows how the law of remedies limits what the wronged party may keep.
- Hochster v. De La Tour (1853)
Facts. A courier was engaged from 1 June 1852. On 11 May his employer wrote that he would not be needed. The courier sued on 22 May.
Principle. The injured party may sue as soon as the other party clearly refuses to perform, without waiting for the due date. (1853) 2 E & B 678.
Why it matters. It shows the injured party's choice on an anticipatory breach.
- K.S. Vidyanadam v. Vairavan (1997)
Facts. A buyer agreed on 15 December 1978 to buy a house for Rs 60,000 within six months. He sent a notice only on 11 July 1981, after prices had risen. AIR 1997 SC 1751.
Principle. Even where time is not of the essence in a land sale, the buyer must act within a reasonable time. The Supreme Court refused specific performance.
Why it matters. It shows that delay can defeat the remedy of specific performance.
- Saradamani Kandappan v. S. Rajalakshmi (2011)
Facts. An agreement of 17 January 1981 to sell 24 acres of land at Rs 15,000 an acre fixed dated instalments and made payment on those dates the essence. The buyer paid part of the price and missed the later instalments. The sellers cancelled on 2 August 1981. (2011) 12 SCC 18.
Principle. Where the contract makes time for payment the essence, default justifies cancellation, even in a sale of immovable property. The Court ordered a refund of Rs 3,50,000 with 12 per cent interest from 2 August 1981.
Why it matters. It shows when cancellation and refund replace specific performance.
- Katta Sujatha Reddy v. Siddamsetty Infra Projects (P) Ltd. (2022)
Facts. A purchaser claimed specific performance of 1997 agreements to buy land near Hyderabad. The Supreme Court decided on 25 August 2022 that the 2018 amendment to section 10 is prospective, and in 2024 recalled the judgment in review.
Principle. The 2022 judgment said the amendment does not reach earlier transactions. The 2024 review judgment did not decide that question.
Why it matters. It shows that the effect of the 2018 amendment on older contracts is not settled.
How to write this answer in the exam
5-mark answer
- State that a breach gives the injured party a choice, and name the main remedies.
- List: rescission, damages, quantum meruit, specific performance, injunction.
- Give the section for each.
- Say that damages are the ordinary remedy.
10-mark answer
- Introduce breach and the injured party's choice (section 39, Hochster).
- Rescission, restitution and compensation (sections 64, 65, 75).
- Damages (section 73, Hadley) and the agreed sum (section 74, Fateh Chand).
- Quantum meruit.
- Specific performance and injunction under the Specific Relief Act, with the 2018 amendment.
- The choice between remedies, with an example, and a short conclusion.
Key points to remember
- A breach gives the injured party a choice of remedies. It does not end the contract by itself.
- Damages under section 73 are the ordinary remedy.
- Section 74 limits compensation to the sum named, and the court awards what is reasonable.
- Rescission under sections 39, 53, 55 and 64 comes with restoration (section 65) and compensation (section 75).
- Specific performance is now enforced subject to sections 11(2), 14 and 16 of the Specific Relief Act.
- Remedies that are inconsistent, such as rescission and specific performance, cannot be claimed together.
Quick self-test
1. Name the main remedies for breach of contract.
Rescission with restitution, damages, an agreed sum or penalty under section 74, quantum meruit, specific performance and injunction.
2. What did the 2018 amendment change in section 10 of the Specific Relief Act?
It made specific performance something the court "shall" enforce, subject to sections 11(2), 14 and 16, instead of a wide discretion.
3. Can the injured party both rescind and claim specific performance?
No. The two are inconsistent. He may claim compensation with either.