Chapter 9: Consequences for Breach of a Contract

Question 1

What are two types of Damages under Contract Act?

Answer 1

1. Ordinary Damages
2. Special Damages.

[Chapter 9 LO 1]

Question 2

What are “Ordinary Damages” and “Rules” for allowing?

Answer 2

Ordinary Damages:
Compensation for loss/damage arising naturally from breach a contract.

Rules for allowing Ordinary Damages:
1. Allowed even if not stated in the contract.
2. Actual loss is allowed as damages.

Examples:
1. Difference between market price and contract price.

[Chapter 9 LO 1]

Question 3

What are “Special Damages” and “Rules” for allowing?

Answer 3

Special Damages:
Compensation for loss/damage which is likely to result from breach of contract, and parties knew at time of making contract.

Rules for allowing Special Damages:
1. Allowed only if communicated at time of contract.
2. Actual loss is allowed as damages.

Examples:
1. Loss on other contract due to breach of this contract

[Chapter 9 LO 1]

Question 4

What is the Rule for allowing “Remote and Indirect loss”?

Answer 4

Rule:
Losses which are “remote and indirect” are not allowed.

Examples:
1. Loss of future projects

[Chapter 9 LO 1]

Question 5

What is “Penalty” and what is the Rule for allowing?

Answer 5

Penalty:
Penalty is the amount specified by parties in the contract, to be paid on breach of contract.

Rules for allowing Special Damages:
1. Court allows reasonable damages or fixed amount whichever is lower.

Examples:
1. increase in interest from date of default.
2. paying double amount of loan on default.

[Chapter 9 LO 1]