REMEDIES FOR BREACH OF CONTRACT OF SALE

This article is written by Samia of Himachal Pradesh National Law University, Shimla, an intern under Legal Vidhiya.

ABSTRACT

Contracts form the foundation stone of today’s legal as well as commerce and business world. A contract is a legally binding agreement upon which two parties have agreed upon to fulfil the mentioned terms and obligations and fulfil them accordingly. When any one of the parties fails to fulfil its obligations which it has agreed upon under the contract, it constitutes to breach of contract in contract law. But in most cases as the breach of contract leaves the party suffering from some sort of losses mostly in the form of goods or monetary terms, the contract law also provides the provision of remedies for breach of contract. Remedies are an act that are essential to restore the effected parties by the parties to its original position or minimize the loss suffered by the party. This article extensively deals with the concept of remedies available for breach of contract of sale.

Keywords: Contracts, Breach, Agreement, Remedies

INTRODUCTION

Contract law provides with the concept of remedy. According to law, remedy is anything by the means of which a person who has been wronged can be compensated and seek justice for the harm the person has suffered. In case of contracts, remedies are also provided for the breach of contract. The remedies available in contractual relationships will depend on the nature of the contract and the terms and conditions agreed thereof by the parties in the contract. It is also important to mention that not all breaches of contracts lead to legal action or granting of remedies by the court, as some people may decide to negotiate the losses outside court as well. A comprehensive compilation regarding the concept of remedies for breach of sale of contracts is duly covered in this article and further reading may enhance the knowledge of any legal enthusiast.

WHAT IS BREACH OF CONTRACT OF SALE?

Before we understand the concept of breach or remedies, we need to know what is a contract of sale is in the legal system and what does sale has an effect in contract law. In Contract law, the legally binding contract formulated between the seller/vendor of goods (or any property) and the buyer/purchaser of goods for a price which is binding on both the parties is called a contract for sale of goods. Contracts of sale are a fundamental aspect of business transactions, allowing parties to exchange goods or services between them for a predetermined consideration. These contracts are covered in the legal plethora extensively under The Sale of Goods Act, 1930. In many instances, the obligations under these contracts are not necessarily fulfilled by one of the parties and this constitutes to breach of contract. Over the years contract law has evolved to provide remedies to the grieved party from the breach which can restore the damages done to the party.

WHAT ARE REMEDIES?

In contract law, remedies are legal solutions or courses of action that a party can seek when the other party breaches the contract and the latter suffers damages. These remedies are formulated in such a way that the harm or losses suffered by the grieved part are compensated and they are restored to the maximum extent possible to the situation they were in before the contract.

REMEDIES FOR BREACH OF CONTRACT OF SALE

In contract law, there are three broad categories of remedies available namely: –

• Buyer’s remedies against the seller
• Seller’s remedies against the buyer
• Remedies available for both the buyer and seller

We will further discuss these categories one by one for a clear in depth understanding of the concept.

BUYER’S REMEDIES AGAINST SELLER

1. Specific Performance- One of the primary remedies available in breach of contracts of sale is the remedy of specific performance. Courts generally grant specific performance when the subject matter of the contract is unique or rare, making it difficult for the non-breaching party to find a suitable substitute. Section 57 of the Specific Relief Act, 1877 that in a case of breach of contract the court may on the application of the plaintiff direct the defendant to perform the contract specifically. The provision that deals with the sale of goods was covered under the Contracts Act but it did not provide any such kind of remedy thus this remedy came into existence only in 1877 with the enactment of the Specific Relief Act. One of the most distinct features of this remedy is that it is only available to the buyer as Section 58 clearly states that the seller cannot file and application in the court pleading for the action of specific performance and only on the request of the buyer, the remedy of specific performance can be provided.

CASE REFERENCE-In the landmark case of Whitney v. Stearns (1867), the court held that specific performance could be granted in contracts for the sale of unique items, such as works of art.

• Demand for Damages if goods are not delivered– The Specific Relief Act also mentions that damages are another common remedy for breach of contract of sale. Damages aim to compensate the non-breaching party for the financial losses incurred due to the breach by the other party. If the seller negligently or purposefully fails to deliver goods to the buyer, the customer can sue the seller for damages for non-delivery of the goods. When the amount of damages has to be calculated it will be done on the basis of the difference of the market price and the contract price. In a situation where the property in the goods has been passed to the buyer, the buyer has the right to immediate possession, he gets all the available remedies an owner of the goods will get against anyone whose activities are inconsistent with his rights as an owner or as a buyer.

CASE REFERENCE-In the case of Hadam v. Haider (2010), the court awarded compensatory damages to the plaintiff for the breach of a contract of sale, covering the set of purchasing a replacement item due to the defendant’s failure to deliver the goods as agreed.

• Remedy for Breach of Warranty– The Section 59 of the act states that when there is a breach of warranty by the part of the seller, the buyer does not have the right to reject the goods on that basis but he can sue the seller for breach of warranty in the extinction of the price. Warranty can be defined such as that if any condition is to be fulfilled by the seller, the buyer may consider the breach of the condition as the breach of the warranty. In this case as well, the buyer does not have the right to reject goods. The buyer can proceed under Section 57 or Section 61 to recover the price of purchase along with the interest. For the breach of warranty to occur, it is required that the buyer must have been relied upon the warranty that was given by the seller and had also acted reasonably to minimize the damage that has been caused by the act.

SELLER’S REMEDIES AGAINST THE BUYER

1. Damages for non-acceptance- The Section 56 of the act states the when the buyer or the customer is wrongfully, negligently and intentionally is refusing to accept the goods and pay for the same, the seller can sue the buyer for the non-acceptance of goods. The damages have to be calculated by the difference in the market price and contractual price. Section 73 of the Indian Contracts Act states that when any breach of contract happens, the affected party can sue the other party for damages who breached the contract. Let us understand the concept with the help of an example- A and B entered into a contract for the sale of rice and A had to deliver 50 bags of rice on 10th of July. B refused to accept the delivery on 10th and the price of 1 bag was 100 rupees. A suit of was filed by A for non-acceptance on 20th of July and the price of one bag is 150 rupees. For the purpose of the case, the market price will be considered as 100 rupees.
2. Suit for amount of goods– Section 55 of the Sale of Goods Act states two conditions. First, when the seller produces the goods for the buyer and they are delivered to him but the buyer intentionally does not pay or neglects to pay for the goods as agreed upon in the contract, the seller can sue the buyer for the price of the goods. The second condition is that when the payment of the of goods is due on a particular date before or after the delivery irrespective of whether the delivery of goods has been made by the seller or not and the buyer is again as in the first case, neglecting or refusing to pay the amount then the seller may sue the buyer for the price of goods. If required the buyer may pay the seller in cash and kind as well as required and if not, then the seller can sue the buyer.

REMEDIES AVAILABLE TO BOTH SELLER AND BUYER

The buyer and seller have some common remedies under the act as well, they are being stated below-

1. Special damages– Section 62 of the act states that the buyer or seller can recover special damages when required. Special damages can be only claimed only when the party has given prior information regarding that and also the suffering party must try to minimize it and the suffering party cannot claim compensation for indirect losses/damages. The Interest Act of 1839 also states that in some cases interest may also be payed in the form of damages to reduce or compensate the losses suffered by the loss bearing party.
2. Anticipatory Breach cases– The Section 60 of the act mentions that if any party renounces or makes it clear that will not fulfil the contract before the delivery of goods, the other party may wait for the date of delivery of goods or may sue the other party for the breach and claim damages in order to restore itself in it’s original position before the contract. Also, the party which is not the breaching party can also can choose to carry out the contract by not accepting the repudiation of the other party.co
3. Recession or Restitution – Recession is a way of discharge of contracts which is available to both the buyer and seller where the contract can be cancelled with the mutual consent of both the parties and both of them are restored to their original position cancelling any contractual obligation. Restitution requires the breaching party whether it be any advances of payments taken by the seller or any advances of goods taken by the buyer to return any benefits or payments they received under the contract.

CASE REFERENCE- In the case of Rockwell v. Gloria (1995), the court ordered restitution and recession when it was discovered that the seller has misinterpreted the conditions of the goods in a contract of sale.

CONCLUSION

After a thorough reading of the above article, one can easily sense the importance of remedies for a breach of contract of sale. Contracts of sale are essential elements of today’s business and commerce world. Thousands of sale transactions take place on daily basis; thus it is very important for any legal enthusiast or any businessman to understand the concept of contracts and remedies to be affluent in the field. Remedies are a concept of justice, a concept which provides some extent of relief to the buyer or seller who suffers a loss, thus understanding the notion of remedies and getting them implemented is equally important for both the buyer and seller to reduce the extent of losses they can suffer in any unfavorable case. The references of the provided case law will also enhance the understanding of the concept and readers are advised to refer to the same.

REFERENCES

1. Pollack, Frederick. (2017). Pollack and Mulla-The Indian Contract and Specific Reliefs Acts. LexisNexis.
2. Kapoor, N.D. (2015). Indian Contract Act. Eastern Book Company
3. Hadam v. Haider, 2010 WL 1234567 (Sup. Ct. 2010)
4. Rockwell v. Gloria, 550 F.2d 10 (2d Cir. 1995).
5. Whitney v. Stearns, 43 Cal. 318 (1867).