Compensation for loss or damage caused by breach of contract
When a contract is violated, the injured party has the right to receive compensation from the party responsible for the breach. This compensation should cover any loss or damage that naturally occurred as a result of the breach, or that the parties were aware would likely happen when they entered into the contract.
No compensation will be provided for any loss or damage that is not directly caused by the breach.
Remuneration for the failure to fulfill a duty that is similar to those established by a contract. If a person fails to fulfill an obligation similar to those established by a contract, anyone harmed by this failure has the right to receive compensation from the party at fault. This compensation should be equivalent to what the injured person would have received if they had entered into a contract to fulfill the obligation and then breached that contract.
Explanation
When assessing the extent of harm resulting from a contract violation, it is necessary to consider the available methods for resolving the inconvenience created by the failure to fulfill the contract.
Illustration
- A contracts B’s vessel for transportation to Bombay, where A will supply a cargo to be loaded on board. The cargo will then be transported to Calcutta, with the freight payment to be made upon completion of the service. Ship B does not travel to Bombay, but A has the chance to find a suitable means of transportation for the cargo at conditions that are just as advantageous as the ones on which he had rented the ship. An individual takes advantage of those chances, but experiences inconvenience and financial burden in the process. A is eligible to collect remuneration from B for the inconvenience and costs incurred.
- A party, referred to as A, enters into an agreement to purchase a ship from another party, referred to as B, for the sum of 60,000 rupees. However, A fails to fulfill their commitment. A must pay to B, by way of compensation, the excess, if any, of the contract price above the amount which B can acquire for the ship at the time of the breach of promise.
- A agrees to lease his vessel to B for a duration of one year, starting from January 1st, for a certain cost. The cost of shipping increases, and by January 1st, the rate for hiring the ship exceeds the agreed-upon price. Individual A fails to uphold their commitment. He is obligated to provide B with a payment that is equivalent to the discrepancy between the agreed contract price and the price at which B might rent a comparable ship for a year, starting from January 1st.
- A agrees to sell and transport to B, on January 1st, a certain type of fabric that B plans to use for making caps. This type of caps is only in demand during that particular season. The fabric is delivered past the scheduled time, and thus too tardy to be utilized in the current year for cap production. B is eligible to receive from A, as a form of reparation, the discrepancy between the agreed-upon price of the cloth and its prevailing market price at the moment of delivery. However, B is not entitled to claim the anticipated profits from producing caps, nor the costs incurred in preparing for the manufacturing process.
- A ship-owner, referred to as A, enters into a contract with B to transport B from Calcutta to Sydney aboard A’s ship, which is scheduled to depart on January 1st. As a deposit, B pays A half of the total amount for the journey. The ship does not depart on January 1st. As a result, B is delayed in Calcutta for a significant period of time, incurring additional costs. B then travels to Sydney on a different ship. Unfortunately, due to the delayed arrival, B suffers a financial loss. A is obligated to reimburse B for his deposit, together with interest, and the costs incurred due to his confinement in Calcutta. Additionally, A must cover any difference in the amount of passage-money paid for the second ship compared to the agreed amount for the first ship. However, A is not responsible for compensating B for the monetary loss resulting from his delayed arrival in Sydney.
