1) Introduction : 

                 Damages means compensation for the loss suffered by the aggrieved party in a breach of contract. It is very important to note that the term damages is different from damage. There are five kinds of damages. 
        

2) Difference between Damage and Damages : 

        Damages are not the plural form of damage,. The damage means legal loss or violation of legal right, i.e. infringement of the legal right. And on the other hand, damages means it is a pecuniary, or monetary compensation in terms of money.


That means-

Damage - legal loss or violation of legal right.

Damages - compensation, compensation in terms of money.


3) Kinds of Damages :

There are 5 kinds of damages are as follows -

        (a) Ordinary Damages -


             It is also known as General damages or substantial damages. Ordinary damages are damages which actually arise in the usual course of things from the breach of a contract. Ordinary damages depend "on the knowledge which the parties are presumed to possess". for example, in Hadley V. Baxendale (1854),  the only circumstances communicated by the plaintiffs defendants at the time of the contract were that the article to be carried was the broken shaft of a mill and that the plaintiffs were the Millers of that mill. Since the defendants had only this knowledge plaintiffs we are entitled to recover only the general damages from the breach of the contract.


        (b) Special Damages - 


                  Special damages are awarded to the plaintiff in special circumstances for sustaining loss as a breach of the contract. Special damages may be successfully claimed only when they "may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of The breach of it."                


        (c) Nominal Damages -


                 Where the injured party has not in fact suffered any loss by reason of the breach of a contract, the damages recoverable by him are nominal viz. where is small, for example, a rupee or cent. These damages merely acknowledge that the plaintiff has improved his case and won.


        (d) Exemplary Damages - 


                     Exemplary damages are also known as positive or vindicated or compensatory or retributive damages. These Damages are allowed in case of breach of marriage or dishonor of a cheque by banker wrongfully.

        (e) Liquidated Damages - 

                  
             If the amount of damages, in the event of the breach is determined by parties at the time of entering into the contract, they are called "liquidated damages" for example non-payment, against promissory note.
            Liquidated damages represent a sum, fixed or ascertained by the parties in the contract,  which is a fair and genuine pre-estimate of the probable loss that might ensue as a result of the breach. A penalty is a sum named in the contract at the time of its formation, which is disproportionate to the damages likely to accrue as a result of the breach.  The courts in India allow only 'reasonable compensation'.

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