Nature of remedies under the ICA. When should the courts select one over the other?, Summaries of Contract Law

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Nature of remedies

under the ICA. When

should the courts select

one over the other?

16 April 2022 Law of Contracts I Nikita Mertia Prof. Malcolm Katrak

INTRODUCTION

As per the ICA 1872 a contract is “An agreement

enforceable by law” which can also be interpreted as, when

two or more parties enforce an agreement made within the

laws of the country, it is said to be a contract. When a

contract is breached, that is when one party refuses to

enforce the agreement made by him, the aggrieved party

comes in a state of loss. When a contract is breached, the

aggrieved party is compensated to bring him into a position

if the contract had been fulfilled.

Remedies are based on the Latin maxim of ‘Ubi jus, ibi remedium’ which means that ‘where there is a right, there is a remedy .’ Parties to an agreement are legitimately expected to play out their commitments, so normally, the law disapproves of a break by one or the other party. Along these lines, when one party commits a break of the agreement, the law awards to the next party three cures. He might try to get:  Suit for Damages  Specific Performance  Indemnity The regulations connecting with suit for damages are represented by the Contract Act, while the regulations connecting with orders and Specific performance are administered by the Specific 2 Nature of remedies under the ICA. When should the

A contract is when two or more parties, engage in an agreement which is justified by law. It creates an obligation on the parties to fulfill their end of the agreement. A contract can make enable a person to do something or restrain him from doing something. The different remedies that can be awarded to the promisee are:

 Specific Performance

The remedy of special performance can be used where damages are not an adequate compensation. It is used in cases where the subject matter of the case is unique. The Special performance remedy obliges and make it compulsory for the defaulter to conduct his part of the agreement. In recent times there has been amendments in the Specific Performance remedy. They are:  Specific Performance is now a remedy by choice  Supplying new remedy of substituted performance of the contract.  Restricting the court’s power to grant injunctions.

What is a breach of contract?

4 Nature of remedies under the ICA. When should the

A breach of contract is when two or more parties, engaged in a contract, the defaulter does not uphold his part of the agreement. When the parties do not honor their commitment in the contract, it is said to be breached. 5 Nature of remedies under the ICA. When should the

The comparison between Suit for damages and Specific Performance 7 Nature of remedies under the ICA. When should the

Suit for

damages

Suits for damages was first introduced in the Indian Contracts

Act in the year of 1872 by the britishers. Suits for damages under

the Indian contract act 1950 states that a suit must be brought

before a court within 24 hours of the act commencement or

within three months of the act commencement.

Suits for damages under the Indian contract act 2012, have been

held to be the best remedy for the suffering of the plaintiff.

However, the courts have held that in cases where the plaintiff

can show that their injuries are primarily caused by the

defendant’s breach of contract can only be compensated.

Suit for damages in the Indian Contract act has both advantages

and disadvantages

Disadvantages are:  That the contract should be in writing or any other form (for

e.g., a recording), so that it is easy to stipulate against.

 There are statutes and limitations that bar the plaintiff from

receiving suits for damages after the contract has ended or

the cooling period has lapsed.

 It is not available to an insurer per the surety clause. e.g., A

bank can be sued for damages but cannot sue the customer

on whose behalf it functioned as a surety.

8 Nature of remedies under the ICA. When should the

Specific

Performance

The remedy of specific performance was first provided by the

Indian contract act of 1773. This created a remedy to enforce

specific performance of contracts with Indians, but only if a court

determined that:

1) the contract was entered into with the full and adequate

consent of the Indian.

2) the terms of the contract should have been performed in a

reasonable time; and

3) the non-performance caused injury or harm to the Indian.

The remedy was limited to the specific performance of the

contract, so it was not available to enforce a promise to pay

money damages to the Indian after the contract term expired.

However, any parties to the contract could enforce the terms of

the contract against the non-performing Indian.

The remedy of specific performance was introduced into English

contract law by the Indian contract act of 1773. The doctrine of

specific performance is a fair remedy, available only in cases of

breach of contract, which makes a remedy available to a party

who has suffered loss because of breach of contract. The remedy

is available in cases where the contract has been breached and

that the party who has breached the contract is unjustly receiving

help from the breach. Unlike damages, specific performance does

not require the party seeking specific performance to prove any

form of loss.

10 Nature of remedies under the ICA. When should the

Specific performance as a remedy of the Indian contract act

1961, section 20: Specific performance is a fair remedy that

requires a party in breach of contract to perform the contract as

originally agreed. In other words, the court will order the party in

breach to perform the contract to the original terms. This remedy

is designed to give the Court the ability to enforce the agreement

with reasonable promptness.

Specific Performance in the Indian Contract act has both

advantages and disadvantages

Disadvantages are  Venders could need to perform even though it is costly and

offsets its worth to the purchaser.

 The possibility of these issues related with high creation cost

could lead merchants to take inefficient evasion

 The chance of merchants' paying gigantic sums for

discharges if exhibition would be costly (or more terrible, of

performing) sets up an unfortunate gamble for venders. That

is, regardless of whether unreasonable execution never

happens on the grounds that venders arrange discharges,

dealers bear critical gamble, a type of cost.

Advantages are  It is more efficient than money damages and supplies a more

certain remedy than an injunction.

 It is specific, allowing the court to tailor the remedy to the

wrongdoing. For example, if a contract specifies that a movie

is to be filmed at a particular location, and the movie was

filmed at a different location, the court can order a specific

performance and have the movie filmed at the original

location. This is more efficient than money damages because

it does not require a jury to decide how much money should

be awarded to the plaintiff.

11 Nature of remedies under the ICA. When should the

13 Nature of remedies under the ICA. When should the

AN EXAMPLE

We will understand by taking a fictitious example, Where the production cost is unknown. We will investigate a few aspects which determine which remedy will the defaulter consider better for himself.

Efficiency of performance

Under this scenario, the performance will naturally happen precisely at the point when it would be productive, to outline, assume that the worth of execution is $100,000, that a cost of $40,000 is to be paid at the hour of performance, and that there are two potential degrees of creation cost, a typical degree of $20,000, happening with probability 90%, and an uncommon degree of $200,000, happening with likelihood 10%. Under the assumption measure, the dealer would need to pay harms of $60,000 for a break (since execution would be worth would be $200,000, even though the purchaser's worth is $100,000 and execution is wasteful. $100,000 to the purchaser yet the value he would pay would be $40,000). Consequently, the merchant would be directed to perform when the expense would be $20,000 (procuring a benefit of $20,000 is better than paying harms of $60,000), however in the strange occasion that the expense would be $200,000, the merchant would be directed to submit break (experiencing a deficiency of $160,000 is more terrible than paying harms of $60,000). Thus, the merchant would perform when the creation cost would be not exactly the purchaser's worth of $100,000, which is efficient. Under unambiguous execution, conversely, the vender would continuously perform, expecting temporarily that there would be no post contractual discussion. Specifically, the vender would perform when creation cost would be $200,000, even though the buyer’s value is $100,000 and performance is inefficient. Use of specific performance would bring about a bringing down of joint anticipated esteem, risk- unbiased parties would pick the damages over specific performance 14 Nature of remedies under the ICA. When should the

Wasteful preventive expenditures

Let us next think about the issue of dealers taking part in inefficient preventive uses under unambiguous execution, to try not to be held up by purchasers when merchants face high creation cost. Realizing that he could confront a creation cost of $200,000 and have a commitment to perform and knowing excessively that the purchaser could separate as much as this sum, net of cost, in return for a delivery, the dealer has a rationale to take more time to enhance the misfortunes he would endure were $200,000 the creation cost. The dealer may, for instance, be directed to buy hardware that would just be of help were creation cost to be. Assume, as instance, that by burning through $5,000 on such gear, the dealer's high creation cost would tumble from $200,000 to just $125,000. The vender may find the $5,000 use worth making, since that would upgrade his bartering position with the purchaser assuming the creation cost were high - the purchaser's greatest interest in that occasion would fall by $75,000 Yet such robbery actuated consumption by the dealer would truly comprise a loss for the gatherings, since the joint worth amplifying result is for creation not to happen at whatever point the creation cost would surpass $100,000, which $125,000 does. One method for communicating this point is to say that, regardless of whether bartering was a costless interaction and prompted productive results - to discharges for dealers whenever the creation cost would be high, surpassing $100,000 - the burglary actuated use of $5,000 may be made, bringing down joint worth. As such, holdup induced preventive consumptions comprise another motivation behind why specific performance brings down joint worth and why the parties would be remembered to incline toward damages 16 Nature of remedies under the ICA. When should the

Risk imposition

Specific performance additionally may force a significant gamble on the vender in contrast with damages. Under Specific performance, the merchant is confronted with the gamble of bearing an expense as high as the misfortune he would endure were he to perform. Assuming the creation cost would be $200,000 and the cost $40,000, so that the merchant would lose $160,000 were he to play out, the vender could need to settle to this sum for a delivery from the purchaser, and if renegotiation somehow happened to come up short, the merchant would certainly need to bear this sum. Under damages, interestingly, the dealer's gamble is restricted to the $60,000, the worth of execution net of cost to the purchaser

Administrability

Considering the capacity of courts to authorize Specific performance versus damages. To implement Specific performance, the court should guarantee that the specified presentation is achieved, implying that the court must have the option to find out the nature of execution to prepare for its being deficient. In a few conditions, the errand could be troublesome, in others not. One more potential issue is stubbornness of the merchant. This may be an issue if Specific performance is strict yet ought to be unsettled assuming that execution is achieved by cover. To authorize damages, courts do not need to survey and direct the nature of execution, for by theory there is no presentation. Regardless, courts need to gauge the worth of execution and afterward to gather that sum. One could expect that the expenses and troubles of implementing Specific performance would ordinarily overwhelm those of upholding the assumption proportion of damages, particularly where Specific performance is exacting. However, situations where Specific performance would be more straightforward to authorize are not rare Conclusion 17 Nature of remedies under the ICA. When should the