dil warranties and contract

8/8/2019 Dil Warranties and Contract

1/33

Remedies For Breach of Contracts and Warranties

SYNOPSISthursday

Remedies for Breach ofContracts and Warranties

SUMBITTED BY:-

AJAY KUMARSINGHANASUYA SARKAR

PABITRA MOHAN SAMAL

DILBHADURYADAV

SUMBITTED TO: SHYNO SUSANPHILIP

RAJA GUPTA

PROF. GOPAL KRISHNA RITESH JHA

RICHA SINHABHARGAVI

C.PURNIMA

ASISH


2/33


Remedies for breach of contracts

In case of breach of contract, the aggrieved party has the following

remedies:

1.Suit for specific performance

2.Suit for injunction

3.Suit for damages, forthe loss sustained

4.Quantum Meruit

1 .Su

it for specific performance:By specific,the court, directs the party committing the breach of

Contracts to perform and promise to the terms ofthe contracts. Specific

Performance ofthe contract can be granted underthe Specific Relief Act,

1877.

2. Suit for injunction:

An injunction is an order ofthe court directing a personto do or refrain

From doing some act, which is the subject, matter ofthe contract and

Which a party undertakes to do ornotto do. The power ofthe courtto

grant injunction is discretionary and may be granted for a temporary or an

indefinite period. An injunction is therefore, used as a means of enforcing

a contract or a promise or forbidding the party from committing a breach.


3/33


3. Suit for damages, for the loss sustained:

In case of a breach of contract, injured party can claim damages forthe

Loss caused by breach of contract.

Damages are given by way of restitution as a monetary compensation

To the injured party. The aggreived party can recover the actual loss

caused

To him bythe breach of contract and notthe exemplary or unusual

Damages. Exemplary or remote damages can be recovered in case of a

Breach of promise of marriage where the Court have regard to the feelings

Ofthe aggrieved party. The injured party as placed inthe same financial

Position as he would have been in, ifthe contract had been performed.

Damages are thus given by way of compensation forthe loss suffered bythe plaintiff and not forthe purpose of punishing the defendant ofthe

Breach.

4. Quantum Meruit:

Quantum meruit means as much as earned or deserved or as much as is

merited.


4/33


Types of Monitory Damages:

1. Compensatory damages

2. Consequential Damages

3. Nominal Damages

4. Liquidated Damages

1.Compensatory Damages:y Award of money intended to compensate a non-breaching party for

the loss ofthe bargain.

y They place the non-breaching party inthe same position as ifthe

contract had been fully performed by restoring the benefit of the

bargain.

y The amount ofthat will be awarded for breach of contract depends

on:

The type of contract involved, and

Which party breached the contract.

y Special types of contracts:

Sale of Goods

Construction Contracts

Employment contracts


5/33


6/33


Provide an incentive to enter into contracts.

3.Nominal Damages:

Damages awarded whenthe non-breaching party sues the

breaching party eventhough no financial loss has resulted

from the breach.

Usually awarded in a small amount such as $1.

Cases involving nominal damages are usually brought on

principle.

Mitigation of Damages: dil bahadur yadav

A non-breaching party is under a legal dutyto avoid or reduce

damages caused by a breach of contract.

The extent of mitigation depends onthe type contract involved.

Enforcement of Remedies: dil bahadur yadav

Ifthe breaching party refuses to paythe court ordered judgment,

the court may issue.

Writ of Attachment

Writ of Garnishment

Writ of Attachment


7/33


Orders the sheriff to

Seize property inthe possession ofthe breaching partythat

he or she owns, and

To sell the property at auctionto satisfythe judgment.

Writ of Garnishment

Orders that

Wages, bank accounts, or other property ofthe breaching

partythat is inthe hands ofthird parties be paid overto the

non-breaching partyto satisfythe judgment.

RULES FOR ASCERTAINING DAMAGES: dilbahadur

yadav

Rule-1: 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 inthe usual course ofthings from such

breach or which the parties knew, whenthey made then contractto

be likelyto result from the breach of it.


8/33


9/33


In making an award of damages, the court has two major

considerations:

1. Remoteness for what consequences ofthe breach is the defendant

Legally responsible?

2.The measure of damages the principles upon which the loss or

damage is evaluated or quantified in monetaryterms.

The second consideration is quite distinct from the first, and can be

Decided bythe court only afterthe first has been determined.

Remoteness of loss:

The rule governing remoteness of loss in contract was established in

Hadley v Baxendale. The court established the principle that where one

party is in breach of contract,the other should receive damages which can

fairly and reasonably be considered to arise naturally from the breach ofcontract itself (inthe normal course ofthings), or which may reasonably

be assumed to have been withinthe contemplation ofthe parties atthe

time they made the contract as being the probable result of a breach.

Thus,there are two types of loss for which damages may be recovered:

1. what arises naturally; and

2. whatthe parties could foresee whenthe contract was made as the likely

result of breach.


10/33


As a consequence ofthe first limb ofthe rule in Hadley v Baxendale,the

party in breach is deemed to expectthe normal consequences ofthe

breach, whether he actually expected them ornot.

Underthe second limb ofthe rule,the party in breach can only be held

liable for abnormal consequences where he has actual knowledge thatthe

abnormal consequences might follow or where he reasonably oughtto

know thatthe abnormal consequences might follow Victoria Laundry v

NewmanIndustries.

The measure (or quantum) of damages:

In assessing the amount of damages payable,the courts use the

following principles:

y The amount of damages is to compensate the claimant for his loss

notto punish the defendant.

y Damages are compensatory not restitutionary.

The most usual basis of compensatory damages is to putthe innocent party

into the same financial position he would have been in had the contract


11/33


been properly performed. This is sometimes called the expectation loss

basis. In Victoria Laundry v NewmanIndustries, for example, Victoria

Laundry were claiming forthe profits they would have made had the

boiler been installed onthe contractually agreed date.

Sometimes a claimant may preferto frame his claim inthe alternative on

the reliance loss basis and thereby recover expenses incurred in

anticipation of performance and wasted as a result ofthe breach Anglia

Television v Reed.

In a contract forthe sale of goods,the statutory (Sale of Goods Act 1979)

measure of damages is the difference betweenthe market price atthe date

ofthe breach and the contract price, so that onlynominal damages will be

awarded to a claimant buyer or claimant seller ifthe price atthe date ofbreach was respectively less or more thanthe contract price.

In fixing the amount of damages,the courts will usually deductthe tax (if

any) which would have been payable bythe claimant ifthe contract had

not been broken. Thus if damages are awarded for loss of earnings,they

will normally be by reference to net,not gross, pay. Difficulty in assessing

the amount of damages does not preventthe injured party from receiving

them: Chaplin v Hicks.


12/33


In general, damages are not awarded fornon-pecuniary loss such as

mental distress and loss of enjoyment. Exceptionally, however, damages

are awarded for such losses where the contracts purpose is to promote

happiness or enjoyment, as is the situation with contracts for holidays

Jarvis v Swan Tours. The innocent party musttake reasonable steps to

mitigate (minimize) his loss, for example, bytrying to find an alternative

method of performance ofthe contract: Brace v Calder.

Liquidated damages clauses and penalty clauses:

If a contract includes a provisionthat, on a breach of contract, damages of

ascertain amount or calculable at a certain rate will be payable,the courts

will normally acceptthe relevant figure as a measure of damages. Such

clauses are called liquidated damages clauses.

The courts will uphold a liquidated damages clause even ifthat means that

The injured party receives less (or more as the case may be)than his actual

loss arising onthe breach. This is because the clause setting outthe

damages constitutes one ofthe agreed contractual terms Cellulose

Acetate Silk Co Ltd Widnes Foundry Ltd.


13/33


However, a court will ignore a figure for damages put in a contract if it is

Classed as a penalty clause that is, a sum which is not a genuine pre-

estimate ofthe expected loss on breach.

This could be the case where:

1.The prescribed sum is extravagant in comparison with the maximum

loss that could follow from a breach.

2.The contract provides for payment of a certain sum but a larger sum

is stipulated to be payable on a breach.

3.The same sum is fixed as being payable for several breaches which

would be likelyto cause varying amounts of damage.

All ofthe above cases would be regarded as penalties, eventhough the

clause might be described inthe contract as a liquidated damages clause.

The court will not enforce payment of a penalty, and ifthe contract is

broken onlythe actual loss suffered may be recovered (Ford Motor Co

(England) Ltd v Armstrong).


14/33


Equitable remedies: Pabitra

Specific performance

This is an order ofthe court requiring performance of a positive

contractual obligation.

Specific performance is not available inthe following circumstances:

Damages provide an adequate remedy.

Where the order could cause undue hardship.

Where the contract is of such a nature that constant supervision by

the court would be required, e.g. Ryan v Mutual Tontine Association.

Where an order of specific performance would be possible against

one partyto the contract, butnotthe other.

Where the party seeking the order has acted unfairly or

unconscionably. He is barred bythe maxim He who comes to

Equity must come with clean hands.


15/33


Where the order is not sought promptlythe claimant will be barred by

the maxims Delay defeats the Equities and Equity assists the

vigilant butnotthe indolent.

In general the court will only grant specific performance where it would

be just and equitable to do so.

Injunction:

An injunction is an order ofthe court requiring a personto perform a

negative obligation.

Injunctions fall into two broad categories:

Prohibitory injunction, which is an orderthat something mustnot be done.

Mandatory injunction, which is an orderthat something must be done, for

example to pull down a wall which has been erected in breach of contract.

Like specific performance it is an equitable remedy and the court exercises

Its discretion according to the same principles as with specific

performance, e.g.Page One Records Ltd v Britton and Warner Brothers v


16/33


Nelson.

CASE STUDY OF BREACH OF CONTRACTS:

Mrs Bryne was sacked as a human resources director of a drug

company in January 2001, two months before giving birth. She had

complained that male directors were paid more than female directors in

the company. This was based on the fact that on promotion from human

resources managerto director she had expected a pay rise in line with the

other four directors. In fact, she was awarded a pay increase that brought

her salaryto Rs.52, 500.

All of the other directors, who were men, were earning more than

Rs.60,000 each. One such director,the finance director, had been given a

36.8% pay rise when he became a director, which meantthat his pay was

Rs.65, 000. Mrs. Bryne sent a memo to her boss highlighting the


17/33


differences and was told that she wanted too much too soon and that she

should have ignored what other people were earning.

The Claim:

Mrs. Bryne brought her claim for breach of contract and for sexual

discrimination because her boss made a comment that all women who

were of child-bearing age should be sterilized. She was sacked after

sending the memo and only giventhree months notice ratherthanthe six

months to which she was entitled under her contract. This resulted in her

not being able to claim for unfair dismissal.

At the Tribunal:

Another employee confirmed the bosss comment about female

sterilization, adding that she was told that if she wanted to progress in her

career with the company it was best never to get pregnant. When Mrs.


18/33


Bryne was recruited, the recruitment consultant was asked to find out

whether she intended to start a family ornot. She told the tribunal that she

was shocked to be asked this question, which is not something that should

be asked during the recruitment process or at all by an employer. The

recruitment consultanttold herthat if she brought up the subject of having

children, she should reassure her future employers that she was not

planning on running off and having millions of babies.

The tribunal found that the way in which she had been dismissed after

sending her boss the email about her salary did constitute unfair dismissal.

This was because she would have been entitled to claim damages if she

had been giventhe notice period that was contracted. The boss in question

stated that he liked to crackjokes and to make the working environment

less serious. He did however state that he realized that the quip he had

made inthis instance had been severely off-key. He told the tribunal that

he regretted making the remark, and said that it was so grotesque that it

could not actually be his opinion.


19/33


The Tribunal's Findings:

Mrs. Brynes sexual discrimination claim was dismissed at the

employmenttribunal. The tribunal chairman said that the comment made

by the boss was just part of the humour that was used in the

pharmaceutical industry, and that it did not constitute the bosss view or

that of the company. Mrs. Bryne was awarded damages for successfully

proving breach of contract.

Although Mrs. Brynes sexual discrimination claim failed, she did receive

an award of damages forthe breach of contract by her employer.

Breach of Contract - Supplying Food to AllergySufferer:

A Sikh couple wentto a wedding party held in August 2003. Mr.

Bhamra, a research chemist, and his wife had travelled from Birmingham

to Forest Gate in Londonto the Sikh wedding atthe Ramgarhia Temple.

Mr. Bhamra was allergic to eggs, and knew of his allergy. Egg allergies

only affect 0.1% of the population, but as Sikhs do not eat eggs he


20/33


considered that any of the food he would have eaten was safe. Eggs are

strictly forbidden at Sikh temples, and the caterer knew this.

The Extra Food:

Unfortunately, more people attended the wedding than had been expected,

and as the guests swelled to over five hundred in number, the caterer

realised that he was going to have to bring in extra food. The caterer, who

was also a Sikh, sent out for extra supplies from external sources. One of

the dishes supplied was ras malai, which is a dessert made of sugary

balls of paneer soaked in clotted cream. The recipe forthe dessertthat was

supplied, afterthe food beganto run short, contained eggs.

The Allergic Reaction:

Mr. Bhamra ate some of the ras malai, and had an allergic reaction.

Although he had been prescribed adrenalin pens inthe event of a reaction,


21/33


he had not broughtthem with him to the wedding. He collapsed, fell into a

coma and was admitted to hospital where he died three days later. He was

fortynine years old. The case was brought onthe basis ofnegligence:

y that the caterer knew that no one would have expected any of the

food would have contained eggs

y that as the caterer he should have knownthat if he used external food

suppliers some recipes for ras malai contained eggs

The County Court Case:

The caterer who had supplied the ras malai denied that he had used

another supplierto supply extra food. The court of appeal, however, found

that he had done exactlythis. The court also found that as a caterer he was

aware that some recipes for ras malai contained eggs, but that it was not

necessary for him to have issued warnings to the wedding guests because

so few of the population suffer from the allergy. Some Sikh sects are

vehemently against the consumption of meat and eggs, although they do


22/33


eat milk, butter and cheese. The allergy sufferer had therefore been

entitled to feel that there would not be any eggs in the food that was

supplied atthe wedding.

The Court of Appeal Case:

The court of appeal upheld the original judgment at Oxford County Court,

which was that the caterer was ordered to pay damages in the sum of

Rs.415,000 for negligently supplying food that contained eggs. As the

caterer had appealed and because of the delay in time from the original

incidentto the court of appeal hearing, interest was awarded inthe sum of

Rs.35, 000.

Caterers, and others supplying services and goods to the public, have a

duty of care to those that consume their products. This case highlights

what can go wrong whenthat duty of care is not properly observed.

Breach of Warranty:


23/33


A Warranty is basically a guarantee given bythe sellerthat a product is

reliable and free from known defects and thatthe seller will, without

charge, repair or replace defective parts within a giventime limit and

under certain conditions.

Abreach of warranty occurs whenthe promise is broken, i.e., a product is

defective ornot as should be expected by a reasonable buyer.

In business and legal transactions, a warranty is an assurance by one party

to the other partythat certain facts or conditions are true or will happen ;

the other party is permitted to rely onthat assurance and seek some type

of remedy if it is nottrue or followed.

A warranty may be express or implied.

Express warranty:

Anexpress warranty is a guarantee from the seller of a productthat

specifies the extentto which the quality or performance ofthe product

that specifies the extentto which the quality or performance ofthe

product is assured and states the conditions under which the product can

be returned, replaced or repaired. It is often given inthe form of a

specific, written warranty document. For example, an advertisement

describing a product is often full of express warranties; the product must

substantially conform to what is advertised. A warranty may also applyto


24/33


services that are sold. For example, an automobile repair shop may

guarantee its repair for a period of 90 days.

The misuse of famous trademark may also create an express warranty,the

violation of which is called passing off ; the source and quality ofthe

goods is misrepresented.

Implied Warranty:Ashish

Animplied warranty is one that arises from the nature ofthe transactions,

and the inherent understanding bythe buyer, ratherthan from the express

disclaimed byname, orthe sale is identified with the phrase as is or

with all faults.

For example, a fruitthat looks and smells good but has hidden defects

would violate the implied warranty of merchantability if its quality does

not meetthe standards for such fruit as passes ordinarily in the trade.

The warranty of fitness for a particular purpose is implied when a buyer

relies uponthe sellerto selectthe goods to fit a specific request. For

example,this warranty is violated when a buyer asks a mechanic to

provide snow tires and receives tires that are unsafe to use in snow.

Lifetime warranty: Ashish

A lifetime warranty is usually a guarantee onthe lifetime ofthe product in

the market ratherthanthe lifetime ofthe consumer. Ifthe product has


25/33


been discontinued and is no longer available inthe market,the warranty

may last a limited period longer.

For example,the Cisco Limited Lifetime Warranty currently lasts for five

years afterthe product has been discontinued.

Second-hand product warranty:

Second-hand productincludes the products that have already been used by

an end user or consumers. The importance ofthe used or second handproduct market as a fraction ofthe total market has been increasing since

the beginning ofthe 21st century. The sale ofnew product oftentied to a

trade-in, resulting in a market for second hand products.

For instance, in France, used car unit sales increased from 4.7 millionto

5.4 million between 1990 to 2005, atthe same time as new car sales

declined from 2.3 millionto 2.07 million units.

A warranty is violated whenthe promise is broken; when goods are not as

should be expected, atthe time the sale occurs, whether ornotthe defect isapparent. The seller should honourthe warranty by making a timely

refund or a replacement. The sale starts the time underthe statute of

limitations for starting a court complaint for breach of warranty ifthe


26/33


seller refuses to honourthe warranty. This period is often overlooked

where there is an extended warranty in which a seller or manufacturer

contracts to provide the additional service of replacing or repairing goods

that fail withinthe extended period. However, ifthe goods were defective

atthe time of sale, and the relevant statute of limitations has not expired,

and then existence or duration of any extended warranty is secondary:

there was a breach of a primary warranty for which the seller may be

liable.

For example, a consumer buys an item that was discovered to be broken or

missing pieces before it was eventaken out ofthe package. This is a

defective product and can be returned to the seller for refund or

replacement, regardless of whatthe sellers returns policy might state,

even ifthe problem wasn't discovered until afterthe extended warrantyexpired. Similarly, ifthe product fails prematurely, it may have been

defective when it was sold and could then be returned for a refund or

replacement. Ifthe seller dishonors the warranty,then a contract claim

can be started in court.

Remedies Of The Buyer

Action for Converting or Detaining Goods:

Where the property in the goods has passed to the buyer and the


27/33


sellerwrongfully neglects or refuses to deliver the goods, the buyer may

maintain any action allowed by law to the owner of goods of similar kind

when wrongfully converted or withheld.

Action for Failing to Deliver Goods :

Where the property in the goods has not passed to the buyer, and the

seller wrongfully neglects or refuses to deliver the goods, the buyer

may maintain an action against the seller for damages for non delivery.

The measure of damages is the loss directly and naturally resulting in

the ordinary course of events, from the seller's breach of contract.

Where there is an available market for the goods in question, the

measure of damages, in the absence of special circumstances showing

proximate damages of a greater amount, is the difference between the

contract price and the market or current price of the goods at the time

or times when they ought to have been delivered, or, if no time was

fixed, then at the time of the refusal to deliver.

Specific Performance:

Where the seller has broken a contract to deliver specific or

ascertained goods, a court having the powers of a court of equity may,


28/33


if it thinks fit, on the application of the buyer, by its judgment or decree

direct that the contract shall be performed specifically, without giving

the seller the option of retaining the goods on payment of damages.

The judgment or decree may be unconditional, or upon such terms and

conditions as to damages, payment of the priceand otherwise, as to

the court may seem just.

Interest and Special Damages:

Nothing in this act shall affect the right of the buyer or the seller to

recover interest or special damages in any case where by law interest or

special damages may be recoverable, or to recover money paid where the

consideration for the payment of it has failed.

Implied Conditions and Warranties:

In accordance with various provisions of the Sale of Good

Act, conditions and warranties may be implied in a contract of sale.

Where any right, duty or liability would arise under a contract of sale by

implication of law, it may be negative or varied by express agreement or

by the course of dealing between the parties, or by usage, if the usage be

such as to bind both parties to the contract. The Sale of Goods Act provide

In a contract of sale, unless the circumstances of the contract are such as


29/33


to show a different intention, there is:

(a) an implied condition on the part of the sellerthat in the case of a

sale he has a right to sell the goods, and that in the case of an

agreement to sell he will have a right to sell the goods at the time

when the property is to pass;(b) an implied warranty that the buyershall have and enjoy quiet

possession of the goods; and

(c) an implied warranty that me goods shall be free from any charge or

encumbrance in favour of any third party, not declared or known to

the buyer before or at the time when the contract is made.

The rule stated in accordance with the better opinion prevailing prior

to the passing of the statute namely, that by a contract of sale the seller

impliedly undertakes that he has or in the case of an agreement to sell,that he will have a right to sell the goods, unless the circumstances are

such as to show that the seller is transferring only such property as he may

have in the goods. There is usually no implied undertaking, for instance,

where the seller is selling in a special character, such as a mortgagee or

pledgee, or a sheriff under an execution.

The distinction between the condition as to title and the warranty of quiet

possession is similar to that between a covenant for title and one for quiet

enjoyment. The former is an assurance by the grantor that he has the very


30/33


estate in quantity and quality which he purports to convey; the latter is an

assurance to the grantee against consequences of a defective title and of

any disturbance thereupon. Thus if the title is defective, the buyer may,

under the Sale of Goods Act, reject the goods, but if he has accepted them

and is afterwards disturbed, he has his remedy by action forbreach of

warranty. In the United States the similar section of the Uniform Sales Act

contains the following additional provision:

Litigation: A Last Resort

The Civil Procedure Rules came into force in April 1999 and govern the way in

which civil litigation is carried out in this country. The rules have been amended

and developed overthe years and there are now approximately fifty amendments. In

April 2006, an amendment was made to the effect that litigation always had to be

regarded as a weapon of last resort. This means that both parties should make

serious efforts to tryto settle the dispute before lodging proceedings.

What if I Just go Ahead and Lodge Proceedings?

Failure to be able to demonstrate efforts to avoid litigation can have catastrophic

consequences financially. This is why there are pre-action protocols that are in

place for various types of litigation such as judicial review, professional negligence


31/33


and housing repair claims against landlords. Even if your ty pe of claim is not

governed by one of the pre-action protocols,you are expected to follow a similar

procedure in any event.

ThePre-Action Protocols

The pre-action protocols are designed to encourage the early exchange of

information about the claim, so that both sides have an opportunity to avoid

litigation through settlement. If litigation then becomes unavoidable,you and the

other side have exchanged information so thatthe claim can be managed efficiently

once it reaches court.

How to Comply with thePre-Action Protocols

You should try to negotiate first, and if that fails, sending a pre-action letter. The

pre-action letter sets out what is in dispute, whatyou want done, and the timescale

within which you want it completed. You should then give the other side a

reasonable period within which to respond (usually fourteen days.)Ifthe response

you receive is unsatisfactory, oryou receive no response at all,thenyou can lodge

proceedings.


32/33


Failing to Try to Settle the Claim Before Litigation

Ifthe other side askyou to mediate with them, or make whatthe court later deems

to be a reasonable settlement, and you decline you can be penalized on costs. The

general rule in civil claims is that costs follow the event i.e. the loser pays the

other sides costs. If, however,you have acted unreasonably innot agreeing to go to

mediation or arbitration, the court will more often thannot penalize you when it

comes to costs. Of course,you dont have to enter into alternative dispute resolution

unless you want to you cant be forced into it but to fail to consider it as an

option could have devastating consequences later on.

Ifyour breach of contract claim has gotto a stage at which you have tried to resolve

it using other methods and have either reached stalemate, orthe other side is acting

unreasonably, then you are probably at the point at which you can lodge

proceedings. A general rule to remember, ifyou are acting as a litigant in person, is

neverto fill out a claim form and send itto the court in a fit of rage. You may regret

it later on!


33/33

dil warranties and contract

Documents