Jojy George Koduvath

Introduction

Damages arise from ‘tortious liability’ and ‘breach of contract’.

It is observed in Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum, (1997) 9 SCC 552, as under:

• “In tort, liability is primarily fixed by law while in contract they are fixed by the parties themselves. 
• In tort, the duty is towards the persons generally while in contract it is towards specific person or persons.
• If the claim depends upon proof of breach of the contract, action does not lie in tort.
• If the claim arises, from the relationship between the parties, independent of the contract, an action would lie in tort at the election of the plaintiff, although the might alternatively have pleaded in contract.”

PART I

Tortious Liability

Blacks Law Dictionary defines ‘tort’ as violation of duty imposed by general law or otherwise upon all persons occupying the relation to each other involved in a given transaction. There must always be a violation of some duty owed to plaintiff and generally such a duty must arise by operation of law and not by mere agreement of the parties.

Essential Elements of Tortious Liability

The essential elements of tortious liability are –

• (a) some wrong doing and (b) negligence or strict liability.

Damages in Civil Cases:

1. It is a matter for judicial determination.
2. Therefore, a proper civil suit is necessary.
3. The damages may be special damages (as in contract) or general damages (as in tort; also, sometimes, in contract).

General Damages (contra distinct to specific damages as in breach of contract):

• It is the damages awarded by the court for the harm inflicted by the defendant upon the plaintiff, like pain and suffering. It can be –
  • It includes mental anguish, anxiety.
  • Public humiliation, loss of reputation, shame.
  • Sleep-disturbance, emotional distress, depression.

Kinds of Damages Awarded by Court:

Damages (in general) are of three kinds: First, nominal; Second, general damages; Third, special damages.

The court awards following types of damages.

• .1. Exemplary/punitive damages – it is in the form of a punishment against the defendant for his illicit acts.  The award of damages may exceed the actual loss suffered by the plaintiff in such cases.
• 2. Aggravated damages – It is awarded over and above the actual damages that may be calculated in a normal case; or, the actual pecuniary loss.  It is done considering the gravity of the illicit act of the defendant; or, to make good the injury or deprivations suffered by the plaintiff.
• 3. Compensatory damages – In the cases where damages are awarded as compensatory damages the courts consider the actual injury or damages suffered by the plaintiff.  It may be the expenses for the treatment or the loss of  income.
• 4. Contemptuous damage – In the award of contemptuous damages the court does not award the exact or proved loss suffered by the plaintiff; it gives only a lesser amount.  
• 5. Nominal damages – In cases where nominal damages were awarded, court does not take the actual (or reasonable) damages suffered by the plaintiff.   It is done in cases where the plaintiff failed to prove the damages in money terms, or where the court considers that the plaintiff is not entitled for a compensation in its full sense.

Quantum of Damages where No Scale to Measure Damages:

Where the plaintiff proved his entitlement for damages but failed to place the materials for the foundation of fixing damages in Tort, should the plaint be dismissed?

• No. The court can, in such cases, award –
  • (i) nominal damages; or(ii) damages considering the attendant or all relevant circumstances to fix the damages.

Guess work -In K. Narendra v. Riviera Apartments (P) Ltd., AIR 1999 SC 2309, our Apex Court while dealing with award of compensation under Sect. 21 of the Specific Relief Act opined that ‘compensation to some extent is a matter of guess work’. The explanation appended to the Section expressly enacts that the Court is not precluded from exercising jurisdiction to award compensation even in a case where the contract has been rendered incapable of specific performance.

Wrong-doer cannot complain damages cannot be measured – In Story Parchment Co. Vs. Paterson Parchment Paper Co., 282 U.S. 555 (1931), it was held that the wrong-doer is not entitled to complain that the damages cannot be measured with exactness or precession.

Should actual Damages be Established in Court?

For awarding damages under Tort, some objective evidence must be placed before the court so that the court can fix the quantum; otherwise, the court may award only nominal damages.

How the court determines pecuniary damages in Tort?

For asserting tortious liability, as observed by our Apex Court, in Rajkot Municipal Corpn. v. Manjulben Jayantilal Nakum, 1997 (9) SCC 552, it must be established before a court of law that:

• (i) The defendant was under duty of care, primarily fixed by law, not to create physical danger to the person or property of third party;
• (ii)  The defendant ought to have reasonably foreseen the physical danger likely to be affected;
• (iii)  Violation of such duty fastened liability upon the defendant to pay damages; and
• (iv) Actual physical damage must have been caused to the plaintiff or his property out of such breach of duty.

Foreseeability of Damages

In United India Insurance Co.  v. Thomas, 1999-1 KLT 165; 1999 1 RCR(Civ) 610, the Kerala High Court held as under:

•  “In a suit for damages in a tort case, the court has power to award pecuniary compensation to the plaintiff for the injury or damage caused to him out of the wrongful act of the defendant. The test employed for determining whether the defendant is liable for damages is the test of directness, that is to say the defendant is liable for all direct consequences of the tortuous acts suffered by the plaintiff whether or not a reasonable man would have foreseen them. The Court of Appeal in Re Polemis and Furness, Withy & Co. Ltd. (1921) 3 K.B. 560) held that once the tortuous act is established the defendant is to be held liable for all the damages which ‘is in fact directly traceable to the negligent act, and not due to independent causes having no connection with the negligent act’.
• Foreseeability of some damage is relevant to decide whether the act complained of was negligent or not. But the liability for damages is not restricted to foreseeable damage but extends to all the damage directly traceable to the negligent act. This view was adopted by the Privy Council in Overseas Tankship (U.K.) Ltd. v. Morts Dock & Engineering Co. Ltd. (1961) 1 All. E.R.404 (PC). In holding foresee ability to be the correct test, the judicial committee observed that Polemis” case (supra) should not be regarded as a good law. Lord Viscound Simonds observed:
  • “For it does not seem consonant with current ideas of justice or morality that, for an act of negligence .however slight or venial, which results in some trivial foreseeable damage, the actor should be liable for all consequences, however, unforeseeable and however grave, so long as they can be said to be “direct”. It is a principle of civil liability subject only to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act.”
• His Lordship further said:
  • “But, with great respect to the full court, this is surely irrelevant, or, if it is relevant, only serves to show that the Polemis rule works in a very strange way. After the event even a fool is wise. Yet it is not the hindsight of a fool, but it is the foresight of the reasonable man which alone can determine responsibility. The Polemis rule, by substituting “direct” for “reasonably foreseeable” consequence, leads to a conclusion equally illogical and unjust.”
• The above test of foreseeability was affirmed in The Wagon Mound (No. 2) (1966) 2 All. E.R.709) and Hughes v. Lord Advocate (1963) 1 All. E.R.705). While adjudicating the claim for compensation by the Tribunal under S.165 of the Act the foresee ability test has no application. It is for the Civil Court to apply this test while assessing the damages in accordance with the facts and circumstances of each case.”

Do Indian Courts award Exemplary Damages?

V.R. Krishna Iyer, J., in Organo Chemical Industries v. Union of India, AIR 1979 SC 1803; 1979(4) SCC 573, says as to the ‘exemplary damages‘ as follows:

• “But the essentials are (a) detriment to one by wrongdoing of another, (b) reparation awarded to the injured through legal remedies and (c) its quantum being determined by the dual components of pecuniary compensation for the loss suffered and often, not always, a punitive addition as a deterrent-cum-denunciation by the law.
• For instance, ”exemplary damages” are damages on an increased scale, awarded to the Plaintiff over and above what will barely compensate him for his property loss, where the wrong done to him was aggravated by circumstances of violence, oppression, malice, fraud, or wanton and wicked conduct on the part of the Defendant, and are intended to solace the Plaintiff for mental anguish, laceration of his feelings, shame, degradation, or other aggravations of me original wrong, or else to punish the Defendant for his evil behaviour or to make an example of him, for which reason they are also called “punitive” or “punitory” damages or “vindictive” damages, and (vulgarly) “smart-money”. (Quoted in: A. Valliammal vs Chitra Travels and The Branch Manager, United India Insurance Co. Ltd., (2011) ACJ 1964 : (2010) 3 LW 132)

As in England (Rooks Vs. Bernard, [1964 AC 1129: (1964) 1 All ER 367, 410] ; Cassel Vs. Broome, [1972 AC 1027: (1972) 1 All ER 801]) Indian courts also award  exemplary damages in rare cases.  Such damages are awarded if only the court finds that there is contumacious, arbitrary and willful acts from the part of the defendant; and the court finds that the plaintiff deserves a sympathetic consideration from the court; and that the plaintiff proves his case in toto.

In some cases, such damages are seen awarded against the Govt. The Supreme Court awarded exemplary damages in the following cases:

1. Ghaziabad Development Authority Vs. Balbir Singh, (2004) 5 SCC 65.
   • Referred to – Salmond and Heuston on the Law of Torts; Cassell & Co. Ltd. v. Broome [1972 AC 1027: (1972) 1 All ER 801]; and  Rookes v. Barnard [1964 AC 1129: (1964) 1 All ER 367, 410].
2. Lucknow Development Authority Vs. M.K.Gupta, AIR 1994 SC 787, 1994 SCC (1) 243
   • Referred to – Salmond and Heuston on the Law of Torts.

The Bombay High Court awarded exemplary damages in Rustom K. Karangia Vs. Krishnaraj, AIR 1970 Bom. 424. In this case it was found that there was high-handed, oppressive, insulting,  or contumacious behavior from the part of the defendant which increased mental pain and suffering to the plaintiff,  by defamation.

In A. Valliammal vs Chitra Travels and The Branch Manager, United India Insurance Co. Ltd., (2011) ACJ 1964 : (2010) 3 LW 132) it is observed as under as regards ‘general damages’:

• “15. Broadly speaking, general damages are compensation for that kind of damage which the law presumes to follow from the wrong complained of and which therefore, need not be specifically mentioned in the pleadings. On the contrary, special damages are compensation for damage of such a kind that it will not be presumed by the law, but must be specially set out and proved by the party who claims it.”

General and Special Damages

Halsbury’s Laws of England (Vol. 24, 3rd Edn., paras 222 – 224), provides the list of items that could fall under general and special categories of damages. They are the following –

• General
• .(a) mere injury to feelings,
• (b) the illness of the Plaintiff, illness not being a natural result of the defamatory words,
• (c) illness of any other person,
• (d) the death of any other person,
• (e) the mere loss of the society of acquaintances, as contrasted with the material loss of hospitality,
• (f) the loss of membership of some society or congregation constituted for religious purposes, the membership of which does not carry with it material temporal advantages,
• (g) any damage not pecuniary or capable of being estimated in money.
• Special
• (a) loss of consortium of husband,
• (b) loss of marriage,
• (c) loss of material hospitality,
• (d) loss of employment,
• (e) loss of dealing, even though it might have turned out unprofitably,
• (f) loss of particular customers,
• (g) general falling off of profits,
• (h) any other material loss. (Quoted in: A. Valliammal vs Chitra Travels and The Branch Manager, United India Insurance Co. Ltd., (2011) ACJ 1964 : (2010) 3 LW 132)

Remoteness of Damages

Our Supreme Court, in Karsandas H. Thacker v. The Saran Engineering Co. Ltd., AIR 1965 SC 1981, held that compensation was not to be given for any remote and indirect loss or damage sustained by reason of breach.

One might be liable to another for breach of any liability.  But the first one will not be responsible for indirect or remote loss that may have been arisen from his act or omission. That is, courts will award damages for ‘natural and probable result’ of the wrong act of the defendant.In the celebrated decision Hadley v. Baxendale [1854] EWHC J70, it is held as under:

• “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.”

In Donoghue v. Stevenson [(1932) AC 562, 581], another well known decision it is held, as regards proximity of damage, as under:

• “Such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act.”
• “…the postulate of a simple duty to avoid any harm that is, with hindsight, reasonably capable of being foreseen becomes untenable without the imposition of some intelligible limits to keep the law of negligence within the bounds of common sense and practicality. Those limits have been found by the requirement of what has been called a “relationship of proximity” between plaintiff and defendant and by the imposition of a further requirement that the attachment of liability for harm which has occurred be “just and reasonable”. But although the cases in which the courts have imposed or withheld liability are capable of an approximate categorisation, one looks in vain for some common denominator by which the existence of the essential relationship can be tested. Indeed it is difficult to resist a conclusion that what have been treated as three separate requirements are, at least in most cases, in fact merely facets of the same thing, for in some cases the degree of foreseeability is such that it is from that alone that the requisite proximity can be deduced, whilst in others the absence of that essential relationship can most rationally be attributed simply to the court’s view that it would not be fair and reasonable to hold the defendant responsible. “Proximity” is, no doubt, a convenient expression so long as it is realised that it is no more than a label which embraces not a definable concept but merely a description of circumstances from which, pragmetically, the courts conclude that a duty of care exists.” (Quoted in: Rajkot Municipal Corporation v. Manjulben Jayantilal Nakum, (1997) 9 SCC 552)

Chitty on Contracts 26th edn (1989) Vol. 2, p. 1128- 1129 says as under:

• “The important issue in remoteness of damage in the law of contract is whether a particular loss was within the reasonable contemplation of the parties, but causation must also be proved: there must be a causal connection between the defendant’s breach of contract and the plaintiff’s loss. The courts have avoided laying down any formal tests for causation: they have relied on common sense to guide decisions as to whether a breach of contract is a sufficiently substantial cause of plaintiff’s loss.” (quoted in Kanchan Udyog Ltd. v. United Spirits Ltd. (2017) 8 SCC 237)

In Rajkot Municipal Corporation v. Manjulben Jayantilal Nakum, (1997) 9 SCC 552, our Apex Court held as under:

• “It is seen that when a person uses a road or highway, under common law one has a right to passage over the public way. When the defendant creates by positive action any danger and no signal or warnings are given and consequently damage is done, the proximate relationship gets established between the plaintiff and the defendant and the causation is not too remote. Equally, when the defendant omits to perform a particular duty enjoined by the statute or does that duty carelessly, there is proximity between the plaintiff-injured person and the defendant in performance of the duty and when injury occurs or damage is suffered to person or property, cause of action arises to enable the plaintiff to claim damages from the defendant. But when the causation is too remote, it is difficult to anticipate with any reasonable certainty as ordinary reasonable prudent man, to foresee damage or injury to the plaintiff due to causation or omission on the part of the defendant in the performance or negligence in the performance of the duty.”

In this case (Rajkot Municipal Corporation v. Manjulben Jayantilal Nakum, (1997) 9 SCC 552) our Apex Court referred various foreign decisions including the following:

• Hadley v. Baxendale [(1854) 9 Ex. 341], Haynes v. Harwood [(1935 1 K.B. 146], Dorset Yacht Co. v. Home Office [(1970) AC 1004], Geddis v. Proprietors of Bann Reservoir [1978) 3 App. Cas. 430],  Bourhill v. Young [(1943) AC 92],  Anns v. Merton London Borough [(1978) AC 728], Donoghue v. Stevenson [(1932) AC 562, Hedley Byrne & Co. Ltd. v. Heller & Partnrs Ltd. [(1964) AC 465], Dorset Yacht Co. v. Home Office [(1970) AC 1004], Murphy v. Brentwood District Council [(1991) 1 AC 398]. Governors of the Peabody Donation Fund v. Sir Lindsay Parkinson & Co. Ltd. [(1985) AC 210, 240], Leight and Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [(1986) AC 785], Harwich in Curran v. Northern Ireland Co-ownership Housing Association Ltd. [(1987) AC 718],  Council of the Shire of Sutherland v. Heymand [(1985) 157 CLR 424], Anns and Yuen Kun Yeu v. Attorney General of Hong Kong [(1988) AC 175, 191],  Coparo Industries Plc. v. Dickman & Ors. [(1990) 2 AC 605], Hill v. Chief Constable of West Yorkshire [(1989) a AC 191] Smith & Ors. v. Littlewoods Organisation Ltd. [(1987) AC 141], Bourchill v. Young [(1943) AC 92 104], Burton vs. West Suffolk Country Council [(1960) 2 WLR 745], Sheppard vs. Mayor, Aldermen and Burgesses of the Borough of Glossop [(1921) 3 King’s Bench 132], Alderson B. in Blyth vs. Birmingham Waterworks Co. [(1856) 11 Ex. 781 at 784], Fardon vs. Harcourt-Revington [(1932) 146 L.T. 391], Rylands vs. Fletcher [(1869) LR 3 HL 330], Baxter vs. Stockton-on-tees Corporation [(1959) 1 Queen’s Bench Division 441], Wilson vs. Kingston-Upon-Thames Corporation [(1949) 1 ELR 699], Noble vs. Harrison [(1926) 2 King’s Bench Division 332], Barket vs. Herbert [(1911) 2 K.B. 633], Cunliffe vs. Bankes [(1945) 1 All E.L.R. 459], Gaminer & Anr vs. Northern & London Investment Trust, Ltd. [(1950) 2 ALL ELR 486]

Mitigation of damages

The party claiming damages should have taken all reasonable and timely steps to mitigate its damages, from his side (see: Murlidhar Chiranjilal v. Harishchandra Dwarkadas, (1962) AIR SC 366, Bismi Abdullah & Sons, Merchants v. Regional Manager, F.C.I., AIR 1987 Ker 56).

Read Blogs:

• Who has to fix Damages in Tort and Contract?
• Law on Damages in Defamation Cases
• Pleadings in Defamation Suits

PART II

Remedies on breach of contract

The remedies for breach of contract are primarily governed by Indian Contract Act, 1872 and Specific Relief Act. They are depended upon the nature of the contract. Usual remedies awarded by courts on breach of contract are specific performance, damages, restitution, rescission and injunctions.

Award of Damages in Breach of Contracts

Damages on breach of contract are money compensation awarded by a court, or that is fixed by the parties to contract, for the loss or injury suffered one party, out of breach by the other. Sec. 73 and 74 of the Indian Contract Act, 1872 lays down the provisions relating to such compensation.

Sec. 73 of the Contract Act reads as under:

• Sec. 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 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 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.
• Illustrations
• .(a) A contracts to sell and deliver 50 maunds of saltpetre to B, at a certain price to be paid on delivery. A breaks his promise. B is entitled to receive from A, by way of compensation, the sum, if any, by which the contract price falls short of the price for which B might have obtained 50 maunds of saltpetre of like quality at the time when the saltpetre ought to have been delivered.
• .(b) A hires Bs ship to go to Bombay, and there take on board, on the first of January, a cargo, which A is to provide, and to bring it to Calcutta, the freight to be paid when earned. Bs ship does not go to Bombay, but A has opportunities of procuring suitable conveyance for the cargo upon terms as advantageous as those on which he had chartered the ship. A avails himself of those opportunities, but is put to trouble and expense in doing so. A is entitled to receive compensation from B in respect of such trouble and expense.
• .(c) A contracts to buy of B, at a stated price, 50 maunds of rice, no time being fixed for delivery. A afterwards informs B that he will not accept the rice if tendered to him. B is entitled to receive from A, by way of compensation, the amount, if any, by which the contract price exceeds that which B can obtain for the rice at the time when A informs B that he will not accept it.
• (d) A contracts to buy B’s ship for 60,000 rupees, but breaks his promise. A must pay to B, by way of compensation, the excess, if any, of the contract price over the price which B can obtain for the ship at the time of the breach of promise.
• (e) A, the owner of a boat, contracts with B to take a cargo of jute to Mirzapur, for sale at that place, starting on a specified day. The boat, owing to some avoidable cause, does not start at the time appointed, whereby the arrival of the cargo at Mirzapur is delayed beyond the time when it would have arrived if the boat had sailed according to the contract. After that date, and before the arrival of the cargo, the price of jute falls. The measure of the compensation payable to B by A is the difference between the price which B could have obtained for the cargo at Mirzapur at the time when it would have arrived if forwarded in due course, and its market price at the time when it actually arrived.
• (f) A contracts to repair B’s house in a certain manner, and receives payment in advance. A repairs the house, but not according to contract. B is entitled to recover from A the cost of making the repairs conform to the contract.
• (g) A contracts to let his ship to B for a year, from the first of January, for a certain price. Freights rise, and, on the first of January, the hire obtainable for the ship is higher than the contract price. A breaks his promise. He must pay to B, by way of compensation, a sum equal to the difference between the contract price and the price for which B could hire a similar ship for a year on and from the first of January.
• (h) A contracts to supply B with a certain quantity of iron at a fixed price, being a higher price than that for which A could procure and deliver the iron. B wrongfully refuses to receive the iron. B must pay to A, by way of compensation, the difference between the contract price of the iron and the sum for which A could have obtained and delivered it.
• A delivers to B, a common carrier, a machine, to be conveyed, without delay, to A’s mill, informing B that his mill is stopped for want of the machine. B unreasonably delays the delivery of the machine, and A, in consequence, loses a profitable contract with the Government. A is entitled to receive from B, by way of compensation, the average amount of profit which would have been made by the working of the mill during the time that delivery of it was delayed, but not the loss sustained through the loss of the Government contract.
• (j) A, having contracted with B to supply B with 1,000 tons of iron at 100 rupees a ton, to be delivered at a stated time, contracts with C for the purchase of 1,000 tons of iron at 80 rupees a ton, telling C that he does so for the purpose of performing his contract with B. C fails to perform his contract with A, who cannot procure other iron, and B, in consequence, rescinds the contract. C must pay to A 20,000 rupees, being the profit which A would have made by the performance of his contract with B.
• (k) A contracts with B to make and deliver to B, by a fixed day, for a specified price, a certain piece of machinery. A does not deliver the piece of machinery at the time specified, and in consequence of this, B is obliged to procure another at a higher piece than that which he was to have paid to A, and is prevented from performing a contract which B had made with a third person at the time of his contract with A (but which had not been then communicated to A), and is compelled to make compensation for breach of that contract. A must pay to B, by way of compensation, the difference between the contract price of the price of machinery and the sum paid by B for another, but not the sum paid by B to the third person by way of compensation.
• (l) A, a builder, contracts to erect and finish a house by the first of January, in order that B may give possession of it at that time to C, to whom B has contracted to let it. A is informed of the contract between B and C. A builds the house so badly that, before the first of January, it falls down and has to be re-built by B, who, in consequence, loses the rent which he was to have received from C, and is obliged to make compensation to C for the breach of his contract. A must make compensation to B for the cost of rebuilding the house, for the rent lost, and for the compensation made to C.
• (m) A sells certain merchandise to B, warranting it to be of a particular quality, and B, in reliance upon this warranty, sells it to C with a similar warranty. The goods prove to be not according to the warranty, and B becomes liable to pay C a sum of money by way of compensation. B is entitled to be reimbursed this sum by A.
• (n) A contracts to pay a sum of money to B on a day specified. A does not pay the money on that day, B, in consequence of not receiving the money on that day, is unable to pay his debts, and is totally ruined. A is not liable to make good to B anything except the principal sum he contracted to pay, together with interest up to the day of payment.
• (o) A contracts to deliver 50 maunds of saltpetre to B on the first of January, at a certain price. B afterwards, before the first of January, contracts to sell the saltpetre to C at a price higher than the market price of the first of January. A breaks his promise.
• In estimating the compensation payable by A to B, the market price of the first of January, and not the profit which would have arisen to B from the sale to C, is to be taken into account.
• (p) A contracts to sell and deliver 500 bales of cotton to B on a fixed day. A knows nothing of Bs mode of conducting his business. A breaks his promise, and B, having no cotton, is obliged to close his mill. A is not responsible to B for the loss caused to B by the closing of the mill.
• (q) A contracts to sell and deliver to B, on the first of January, certain cloth which B intends to manufacture into caps of a particular kind, for which there is no demand, except at that season. The cloth is not delivered till after the appointed time, and too late to be used that year in making caps. B is entitled to receive from A, by way of compensation, the difference between the contract price of the cloth and its market price at the time of delivery, but not the profits which he expected to obtain by making caps, nor the expenses which he has been put to in making preparation for the manufacture.
• (r) A, a ship-owner, contracts with B to convey him from Calcutta to Sydney in A’s ship, sailing on the first of January, and B pays to A, by way of deposit, one-half of his passage-money. The ship does not sail on the first of January, and B, after being in consequence detained in Calcutta for some time and thereby put to some expense, proceeds to Sydney in another vessel, and, in consequence, arriving too late in Sydney, loses a sum of money. A is liable to repay to B his deposit, with interest, and the expense to which he is put by his detention in Calcutta, and the excess, if any, of the passage-money paid for the second ship over that agreed upon for the first, but not the sum of money which B lost by arriving in Sydney too late.

Sec. 74 of the Contract Act reads as under:

•  “Section 74.   Compensation for breach of contract where penalty stipulated for.
•  When a contract has been broken, if a sum is named in the contract as the amount to 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 is 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.
• Exception.– 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.
• Explanation.– A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested.

Illustrations

(a) A contracts with B to pay B Rs. 1,000, if he fails to pay B Rs. 500 on a given day. A fails to pay B Rs. 500 on that day. B is entitled to recover from A such compensation, not exceeding Rs. 1,000, as the Court considers reasonable.

(b) A contracts with B that, if A practises as a surgeon within Calcutta, he will pay B Rs. 5,000. A practises as a surgeon in Calcutta. B is entitled to such compensation; not exceeding Rs. 5,000, as the Court considers reasonable.

(c) A gives a recognizance binding him in a penalty of Rs. 500 to appear in Court on a certain day. He forfeits his recognizance. He is liable to pay the whole penalty.

(d) A gives B a bond for the repayment of Rs. 1,000 with interest at 12 per cent. at the end of six months, with a stipulation that, in case of default, interest shall be payable at the rate of 75 per cent. from the date of default. This is a stipulation by way of penalty, and B is only entitled to recover from A such compensation as the Court considers reasonable.

(e) A, who owes money to B a money-lender, undertakes to repay him by delivering to him 10 maunds of grain on a certain date, and stipulates that, in the event of his not delivering the stipulated amount by the stipulated date, he shall be liable to deliver 20 maunds. This is a stipulation by way of penalty, and B is only entitled to reasonable compensation in case of breach.

(f) A undertakes to repay B a loan of Rs. 1,000 by five equal monthly instalments, with a stipulation that in default of payment of any instalment, the whole shall become due. This stipulation is not by way of penalty, and the contract may be enforced according to its terms.

(g) A borrows Rs. 100 from B and gives him a bond for Rs. 200 payable by five yearly instalments of Rs. 40, with a stipulation that, in default of payment of any instalment, the whole shall become due. This is a stipulation by way of penalty.”

If the parties had not pre-determined the damages or if the court finds the pre-determined damages in the contract is illegal or unconscionable, the court will fix the damages under Sec. 21 of the Specific Relief Act, 1963.

Sec. 21 of the Specific Relief Act reads as under:

•   “21. Power to award compensation in certain cases.
• (1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance.
• (2) If, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.
• (3) If, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.
• (4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872 (9 of 1872).
• (5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint: Provided that where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation. Explanation.—The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section.”

PART III

Pleadings – No Strict ‘Denial’ warranted in ‘Damages’

Order VI, rule 1 and 2 of Code of Civil Procedure 1908 lay down the basics of pleading. They read as under:

• Rule 1: Pleading: “Pleading” shall mean plaint or written statement.
• Rule 2: Pleading to state material facts and not evidence:
• (1) Every pleading shall contain, and contain only a statement in a concise form of the material facts on which the party pleading relies for his claim or defence as the case may be, but not the evidence by which they are to be proved.
• (2) Every pleading shall, when necessary, be divided into paragraphs, numbered consecutively, each allegation being, so far as is convenient, contained in a separate paragraph.
• (3) Dates, sums and numbers shall be expressed in a pleading in figures as well as in words.

Order 6 rule 4 of the Civil Procedure Code stipulates guidelines for precise pleadings. Order 6 Rule 4 CPC reads as under:

• “Rule 4. Particulars to be given where necessary: In all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, willful default, or undue influence and in all other cases in which particulars may be necessary beyond such as are exemplified in the forms aforesaid, particulars (with dates and items if necessary) shall be stated in the pleading.”

Order VIII Rule 3, 4 and 5 CPC reads as under:

• Rule 3: Denial to be specific: It shall not be sufficient for a defendant in his written statement to deny generally the grounds alleged by the plaintiff, but the defendant must deal specifically with each allegation of fact of which he does not admit the truth, except damages.
• Rule 4: Evasive denial: Where a defendant denies an allegation of fact in the plaint, he must not do so evasively, but answer the point of substance. Thus, if it is alleged that he received a certain sum of money, it shall not be sufficient to deny that he received that particular amount, but he must deny that he received that sum or any part thereof, or else set out how much he received. And if an allegation is made with diverse circumstances, it shall not be sufficient to deny it along with those circumstances.
• Rule 5: Specific denial: (1) Every allegation of fact in the plaint, if not denied specifically or by necessary implication, or stated to be not admitted in the pleading of the defendant, shall be taken to be admitted except as against a person under disability :
• Provided that the Court may in it discretion require any fact so admitted to be proved otherwise than by such admission.
• (2) Where the defendant has not filed a pleading, it shall be lawful for the Court to pronounce judgment on the basis of the facts contained in the plaint, except as against a person under a disability, but the Court may, in its discretion, require any such fact to be proved.
• (3) In exercising its discretion under the proviso to sub-rule (1) or under sub-rule (2), the Court shall have due regard to the fact whether the defendant could have, or has, engaged a pleader.
• (4) Whenever a judgment is pronounced under this rule, a decree shall be drawn up in accordance with such judgment and such decree shall bear the date on which the judgment was pronounced.

Under Order 6 rule 4, CPC, vague or general allegations are insufficient in pleading with respect to the matters laid down in this rule and it requires ‘full‘ particulars of such matters in pleadings.

Read Blog: Pleadings Should be Specific; Why?

Damages: Issue will be framed, without denial

As shown above, Order VIII Rule 3 gives an exemption to strict ‘denial’ with regard to the claim of ‘damages’. Why? J. B. Ross v. C. R. Screven, AIR 1917 Cal 269 explained as under:

• “(O. 8, R 3, CPC) puts the burden on the plaintiff, whether or not the defendant denies in such a case an issue is necessary.” (Quoted in – Indore Malwa United Mills Ltd.  Vs Ramkaran Ghisslal, AIR 1963 MP197. Also see: W.  Jaya-raghavan v. The Leo Films, 1948 61 LW 173; 1948 1 MLJ 209)

In Fateh Chand Vs. Balkishan, AIR 1963 SC 1405, it was observed that the ‘Legislature has sought to cut across the web of rules and presumptions under the English common law’ with regard to the compensation to be awarded in case of breach of contract. Section 74 speaks as to ‘reasonable’ compensation. It is pointed out that this proposition as to ‘reasonable’ compensation, and thereby the intervention of court to fix the reasonable amount, laid down in Section 74, is a deliberate deviation from the English Common Law which allows forfeiture of genuine pre-estimated damages, by the affected party.

Pleadings on Defamation

The Pleading requirements –

• Defamatory words must be set out in the plaint. (M.J. Zakharia Sait v. T.M. Mohammed, (1990) 3 SCC 396; R. Rajagopal v. J. Jayalalitha: AIR 2006 Mad 312 (DB))
• When the defamatory sense is not apparent , the defamatory meaning must also be set out.
• Where particular context is to be set out, for showing defamation, it shod be stated.

In M.J. Zakharia Sait v. T.M. Mohammed, (1990) 3 SCC 396, the Supreme Court held as under:

• 30. In W. Hay and Ors. v. Aswini Kumar Samanta, AIR 1958 Cal 269 a Division Bench of the Calcutta High Court held that it is well-settled that in a “libel action” the ordinary defamatory words must be set out in the plaint. Where the words are per se or prima facie defamatory only the words need be set out. Wherever the defamatory sense is not apparent on the face of the words, the defamatory meaning or as it is technically known in law, the innuendo must also be set out and stated in clear and specific terms. Where again the offending words would be defamatory onlyin the particular context in which they were used, uttered or published, it is necessary also to set out except where as in England, the law is or has been made expressly otherwise, the offending context (colloquium) in the plaint, and to state or ever further that this context or the circumstances constituting the same, were known to the persons to whom the words were published, or, at least, that they understood the words in the defamatory sense. In the absence of these necessary averments, the plaint would be liable to be rejected on the ground that it does not disclose any cause of action.
• 31. What exactly should be pleaded in an action for defamation has been stated also in Halsbury’s Laws of England [Vol. 28 – 4th ed.].
• In paragraphs 174, 175, 176, 177 and 178 of the said Volume, we have discussion with regard to natural and ordinary meaning of the words complained of, and about the innuendo and the facts and matters supporting innuendo which should be pleaded and proved. It is stated there that in drafting a statement of claim in libel or slander, it is necessary to distinguish between cases in which the words complained of are alleged to be defamatory in their natural and ordinary meaning, whether the literal or the inferential meaning, and those in which the defamatory meaning is a secondary meaning derived from extrinsic or special facts or matters, so that a legal or true innuendo must be pleaded. If it is claimed that the words are defamatory in their natural and ordinary meaning and the words bear only one literal meaning, which is clear and explicit, it is not necessary to plead the meaning in the statement of claim. However, if the words are reasonably capable of bearing more than one literal meaning or if the defamatory meaning relied on is inferential (a “false or popular” innuendo), it is desirable and may even be necessary to plead the defamatory meaning or meanings. Where the plaintiff wishes to claim that the words complained of were understood to be defamatory in a secondary or extended meaning by those persons having knowledge of some special facts or matters, such a meaning constitutes a separate cause of action and the same should be pleaded expressly in a separate paragraph in the statement of claim (emphasis supplied). Particulars must be given of the facts and matters on which the plaintiff relies in support of any secondary or extended defamatory meaning which it is decided to plead. These special facts or matters may be extrinsic to the words used or there may be some special meaning of the words themselves. The plaintiff should plead that particular words bore the innuendo meaning.
• Paragraph 172 of the Halsbury’s Laws of England, Vol-28. Paragraph 172 is extracted as under :-
• “172. Pleading and proof of words – In an action for defamation, the actual words complained of, and not merely their substance, must be set out verbatim in the statement of claim. A libel action cannot be brought in respect of a document the contents of which the plaintiff is unaware; but in a slander action interrogatories may, in an exceptional case, be permitted, prior to the statement of claim, to ascertain the precise words spoken. It is no longer necessary to prove at trial the precise words pleaded; it will suffice to prove words substantially the same and the jury should be invited to consider whether the words are defamatory in the version it has accepted. Where the plaintiff complains of a book or long article, he must specify the passages which he alleges to be defamatory rather than merely plead the whole book or article.” (Quoted in: Essel Infraprojects Ltd vs Devendra Prakash Mishra, 2015-1 AIR BomR 482, 2015-1 BCR 340)

In W.Hay and others vs. Aswini Kumar Samanta AIR 1958 Cal 269 it was held as under:

• “11. It is well settled that, in a libel action, the defamatory words must be set out in the plaint. Where the words are per se or prima facie defamatory only the words need be set out. Where, however, the defamatory sense is not apparent on the face of the words, the defamatory meaning, or as it is technically known in law, the “innuendo” must also be set out and set out in clear and specific terms. These are universally accepted propositions. Where again the offending words would be defamatory only in the particular context, in which they were used, uttered or published, it seems to us that it is necessary also to set out, except where, as in England, the law is or has been made expressly otherwise, the offending context (Colloquium) in the plaint and to state or aver further that this context or the circumstances, constituting the same, were known to the persons, to whom the words were published, or, at least, that they understood the words in the defamatory sense. In the absence of these necessary averments, the plaint would be liable to be rejected on the ground that it does not disclose any cause of action.” (Quoted in: Essel Infraprojects Ltd vs Devendra Prakash Mishra, 2015-1 AIR BomR 482, 2015-1 BCR 340)