Where there is a dispute, there is a remedy. A dispute arises when there is any breach of contract that results in loss or injury. In nowadays’s high-powered commercial environment, majority of transactions are taking place through contracts. Contract is an agreement enforceable by law. The right kind of remedy lies in Claiming the damages successfully, which is in spotlight nowadays. This hot topic was very well covered by Hasit Seth and Vyapak Desai. I am sharing valuable insights from the webinar organized by that may help people not only from legal fraternity but people from all walks of life.
1. Damages is a form of compensation that one claims due to any breach, loss or injury. In a dispute there are two parties i.e. claimant (Non-defaulting party) and the person who cause breach, loss or injury (Defaulting party). Compensation protects 3 kinds of interest i.e. Expectation interest – Where you put claimant in a position as if the contract had been performed.
Reliance interest- Putting the claimant back in a position prior to the performance of contract.
Restitution expectation- where the party who has committed any breach has gained something out of it, then it has restituted to the claimant.
2. Contract law is not a mechanism to mint profit, rather it’s based around ‘Compensation’. Indian Contract Act, 1872 provides for the categories of damages. Section 73 of the Act provides for Direct damages and Consequential damages. It involves the damages claimed when the loss can be fairly and reasonably be considered arising naturally I.e. in the usual course of things and which may reasonably be in contemplation of both the parties. Consequential damages can be claimed when the special circumstances were brought to the knowledge of the party who committed breach at the time of executing the contract. The damages under Section 73 cannot be claimed for any remote and indirect loss or damage sustained by the claimant. On the other hand Section 74 of the Act provides for the Liquidated Damages that are specified by the parties themselves at the time of making contract. These are pre-decided damages.
3. The process of claiming the damages successfully does not start when the dispute arises, but at the time of drafting of the contract. It is the most crucial part of any contract. If you have identified and calculated the compensation right at the start of contract drafting then there is no need to actually prove or calculate the loss. You have to show reasonabilty that such amount was in contemplation of both the parties.
4. The terms ‘damages’ and ‘indemnity’ are closely related to each other but they are way different from each other. The damages can be claimed on the account of breach committed by parties to contract. Whereas, indemnity can be claimed merely on an action or inaction of third party ,who is not related to contract. In case of damages the aggrieved party has to show that there was a breach and he suffered loss. On the other hand, the indemnified parties need not to prove the actual losses or forseeablity of such losses. In case of damages there is duty on the part of innocent party to avoid the loss, whereas indemnity does not carry a duty to mitigate any losses.
Happy learning! 🙂
Nishta Grover
Advocate
