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Performance of Contracts Discharge of Contract

Eleven ways (secs 37-39,56,62-64,67)
Breach of contract and legal remedies
Principle of assessment of Damages in case of breach of contract By Performance
Brahmaputra Tea Co vs Scarth Performance is dispensed with or excused
Refusal of tender of performance
M/S. Kailash Nath Associates vs Delhi Development Authority & One party refusing to perform
Anr on 9 January, 2015
Act becoming impossible or unlawful
M/s Construction & Design vs Delhi Development Authority 4th Novation, Rescission or Alteration of contract
February 2015 ,Supreme Court
By Waiver
The basic principle on the award of damages can only be given By Accord and Satisfaction
for damage or loss suffered, the law does not provide for a Rescission of a voidable contract
windfall profit.
Promisee failing to accord facilities for performance
Understanding the implications of breach of contracts and the Operation of law
principles of compensating the affected party and Judicial trends
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Discharge of Contract Essentials of a Valid Tender of

By Performance performance
 Both parties have performed their parts, their
promises.
• contract is discharged. Offer to perform is unconditional
 Performance of obligation by parties to the contract
• puts an end to the contract.
Made at proper time
By Death Made at proper place
 Contract is :
• personal in character
Give opportunity to ascertain that it will be
• personal skill is involved performed wholly then and there
• death of the promisor discharges the contract. Reasonable opportunity to ascertain that it is the
- A promises to perform at a theatre.
But dies before the performance. same as promised
By Refusal If there are joint promisees, offer to any one has
By refusing tender of performance

 The refusal to accept “offer of performance” same legal consequences as an offer to all of
• discharges the party making the offer. them
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Performance of Contract By whom contracts should be performed

 Obligation of parties to perform (sec 37-39)
 By whom contracts should be performed (sec 40-45)
Time, place, manner of performance (sec 46-50,55)
By the promisor

 Performance of reciprocal promises (sec 2, 51-54, 57)
 Performance of alternative promises (sec 58) By his agent
Obligation of parties to perform
Who must perform? - the parties - unless dispensed with or By his legal representatives
contrary intention
 person’s promises are binding upon his representatives and By a third person
assignees
 Assignment can be by operation of law or act of parties
Operation of law
 By purchase
 By lease
 By death
 By bankruptcy
Act of parties
 Liability/burden cannot be assigned without consent
 If obligation is not of personal nature, can be assigned to agent,
worker, employee etc…. Vicarious liability then exists
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When Time is the essence

Performance of joint promises
 Several joint promisors – single promisee Party promises to do something at or before a specified time – fails –
 Single promisor – several joint promisees  Whole or so much undone of the cont is voidable at option of other
 Several joint promisors – several joint promisees party – if intention is that Time is of essence
 If intention is not that Time is of essence, cont not voidable, but party
-A borrows from B and C, promises to B & C jointly to repay them
entitled for compensation for any loss
before a date. B dies. Right to claim performance rests with B’s
Stipulation of time is not always regarded as a rigid condition and party not
representative jointly with C and after C’s death with
always allowed to rescind the cont. due to failure of timely perf.
representatives of B & C jointly.
Mercantile transactions – as a rule time is generally deemed to be
How devolution works (sec 45) essence.- Shipping contracts, etc
Claim performance rests with joint promisees, Sale of land etc.. Time generally not considered to be essence unless
specific contrary intention of parties reflects in the contract
unless contrary intention
 After death of any one of them – representative of If cont is voidable due to failure of timely perf, but promisee accepts the
perf at any other time than that agreed upon –
deceased jointly with survivor or survivors  Promisee then cannot avoid cont
 After death of last survivor – representative of all  Cannot claim compensation, unless at the time of such acceptance he

jointly gives notice to promisor of his intention to do so.

- Time of essence for delivery of goods, seeks extension of time for delivery to another date, delivers
after that new fixed date.
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Performance of Reciprocal promises Mutual and Independent

 Promises which form consideration for each
 Each party must perform his promise
independently
other are reciprocal promises.  Without waiting for performance or
 Commercial and business contracts will willingness to perform of the other
always indicate reciprocal promises - Bilateral  Mutually independent of each other’s perf
contracts - Delivery of goods on a date specified and payment for it to be made
on an earlier date specified failing which interest chargeable – even
 In reciprocal promises, there is an if payment not received on the specified date, delivery to be done.
obligation upon each party to perform their Mutual and Dependent
 Perfof one party depends on prior perf of
promise and to accept the performance of another party
the other’s promise  Party to first perform fails
 Mutual and independent  Cannot claim perf from the other
 Mutual and dependent  Must compensate the other for any loss
 Mutual and concurrent - A to deliver some goods, B to pay within 1 month of delivery. A does
not deliver, B need not pay.
 Consequences when a party prevents - A to develop something for B, B to supply some materials for the
same, B does not deliver materials, A need not develop, B must
performance 84 compensate A for any loss
85
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Mutual and Concurrent Performance of Alternate promises

 Two promises to be simultaneously performed  Alternate promise – offers one of two alternate things
 Promisor need not perform unless the  Where one branch being illegal – legal alone can be enforced
- the illegal branch is – void agreement
promisee is also ready and willing to perf - Promises to execute a reversionary property in sale and an
- A to deliver something to B who is to pay on delivery – A need not deliver
if B is not ready and willing to pay, B need not pay if A is not ready and alternative of another zamindari property. The reversionary
willing to deliver them on payment. is illegal being void under Transfer of property Act.
- Same for instalment cases too-unless the 1st instalment is paid, etc.
Contracts which need not be performed
Consequences of preventing perf  If parties agree to Novation, Rescission or Alteration, the
 One party preventing perf of reciprocal original contract need not be performed.
promise  If parties to contract agree to dispense with or remit
 Contact voidable at option of other performance wholly or in part, the original contract stands
discharged
 Entitled to compensation
 When a party at whose option contract is voidable rescinds it,
 Preventing party cannot claim perf from the the party need not perform
other  If any promisee refuses or neglects to afford the promisor
- A to perform some work for B for a price, B prevents A from performing, A facility to perform the promise, such promisor is excused from
entitled to compensation for any loss incurred
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Rescission of a voidable contract

Sec 64,65 Remission
 Remit wholly or in part
 Contract is voidable at option of one party
 Accepting a lesser value
 That party decides to rescind the contract
 Lesser value is taken for full satisfaction
 Other party need not then fulfil his promise
 Promise is fulfilled
 Other party discharged from liability/obligation
 Promisor is discharged
 Party rescinding to return/restore benefit received
 Cannot sue after remission
 Cannot keep benefit received and rescind it
 No consideration for remission
 Any contract that is avoided, party recvd benefit
 Extension of time can also be considered as
must return/restore it
- Receiver of part goods delivered, should pay remission
for it - A agrees to accept lesser amount as full
satisfaction of claim-promise is enforceable-no
suit for recovery lies.

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 Deliberate abandonment
Waiver Novation
 Giving up a right entitled to Sec. 62
 Other party released from the obligation  Parties to a contract agree to substitute a new contract /
 It is a discharge under mutual consent to rescind / alter it
 It is a kind of remission • the original contract need not be performed.
- A to perform something, other party later forbids it. Meaning
Accord and Satisfaction  Wiping out of the original contract and creating of a new
 One party to obtain release, agrees to do something other than valid contract in its place
what he is bound  When a new contract is substituted for an existing
 When he has discharged that obligation
 When he is set free/released
contract
* Contract is said to discharged by accord and Satisfaction between the same parties
•
- Performance of contract is not A&S between different parties
•
- Mutual consent Nature of obligation changes
•
- Party gives something different Old obligation is extinguished
•
- Other accepts in satisfaction ‘Novation’ occurs.
•
- A builds house for consideration, after construction he is A owes B, agree that C will be debtor henceforth. Old debt of A has
offered a plot of land instead, which he accepts. ended and new debt from C is contracted.

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 Suit on old contract – not maintainable Alteration

 Substitution of new terms  Change in one or more material terms of
 Parties to contract may also change the contract
 New agreement should be capable of being  Mutual consent
enforced by law  Original contract discharged by alteration
 If required Registration and not done, then  New one in altered form takes its place
does not operate as novation.  Cannot enforce the old terms
 Promisor should not disable himself from  New terms should be enforceable by law

performing promise  Material alteration – alters the legal effect of

- On a bond between A & B, decide to change amount and the contract

terms - term not fulfilled - fresh bond not executed - No  Correcting a clerical error is not material
Novation alteration

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Operation of Law Violation of Contract / Breach

 By Merger  Promisor of a contract has
 Any alteration of contract
 By insolvency • refused to perform
Merger • refusing from performing
 Merger gives a higher efficacy
 Legal operation must be different • his promise in its entirety
 Parties must be the same • the promisee may put an end to the contract.
(ordinary debt – right of action merged with right to sue on mortgage for
same debt)  It occurs when one party refuses to perform
Alteration
 Already discussed his part of the promise.
Insolvency
Indian Limitation Act
 Person becomes insolvent - causes discharge of contract  The period of time limit
 After insolvency enters into contract - is void
 Before insolvency contract – vests with official assignee and • for bringing an action for breach of contract
benefits too • 3 years - from the date of breach.
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Anticipatory Breach of Contract Remedies

 Anticipation of breach  Elect to rescind the contract
 Anticipation of its repudiation  Elect not to rescind and treat the
(rejection/renunciation of duty/obligation)
 Before time fixed for its performance contract as operative
 When one party has such anticipation, Both will have its consequences
he may seek remedies under the law  Rescind the contract – contract comes
 Anticipatory breach of Contract can to an end
happen due to:  Elects not to rescind – contract remains
 Repudiation of contract operative and alive
 Impossibility of its performance

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MMTC Ltd Vs H.J. Baker & Bros. Inc. – 27/7/2009 - Del HC

Measure of Damages in ABC  Buy sulphur of US origin – did not lift the consignment
If contract ended at once-  Grounds – Govt decanalised import – cheaper options in

 Measured by difference in price prevailing gulf.

on Date of Breach Holding
Elects not to rescind  Hardly any reason to depart from the normal and accepted
rule of calculating damages at the difference between the
 Measured by difference in price from date contract price and the market price.
fixed for performance  It is undoubted law - plaintiff who sues for damages owes
- What is price of commodity in market on date of the duty of taking all reasonable steps to mitigate the loss
anticipatory breach, or what is price of commodity in consequent upon the breach. Cannot claim as damages
market as on date fixed for performance any sum which is due to his own neglect.
 Measure of damages suffered by a party in consequence of
a breach - can only be the difference of the price which he
paid and the price which he would have received if he had
98 resold them in the market forthwith. 99
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“Sec 73. Compensation for loss or damage caused by breach of Reliance was placed on: M/s. Murlidhar Chiranjilal
Contract. - When a contract has been broken, the party who suffers by vs. M/s. Harishchandra Dwarkadas & Anr
such breach is entitled to receive, from the party who has broken the
contract, compensation for any loss or damage caused to him thereby, The two principles on which damages in such cases
which naturally arose in the usual course of things from such breach, are calculated are well-settled.
or which the parties knew, when they made the contract, to be likely to
result from the breach of it.
The first is that, as far as possible, he who has
Such compensation is not to be given for any remote and indirect
proved a breach of a bargain to supply what he
loss or damage sustained by reason of the breach. contracted to get is to be placed, as far as money can
Compensation for failure to discharge obligation resembling those do it, in as good a situation as if the contract had
created by contract. - When an obligation resembling those created by been performed;
contract has been incurred and has not been discharged, any person but this principle is qualified by a second, which
injured by the failure to discharge, it is entitled to receive the same
compensation from the party in default, as if such person had
imposes on a plaintiff the duty of taking all
contracted to discharge it and had broken his contract. reasonable steps to mitigate the loss consequent on
Explanation - In estimating the loss or damage arising from a breach the breach, and debars him from claiming any part
of contract, the means which existed of remedying the inconvenience of the damage which is due to his neglect to take
caused by non-performance of the contract must be taken into such steps
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McDermott International Inc. v Burn Standard Co.

Ltd(2006) 11SCC 181
Breach of Contract
 Promisor of a contract has
Holding
 sections 35 to 73 • refused to perform
• of the Indian Contract Act, 1872 • refusing from performing
• do not lay down the mode and manner as to how and in what • his promise in its entirety
manner the computation of damages or compensation has to • the promisee may put an end to the contract.
be made  It occurs when one party refuses to
• The method used for computation of damages will
depend upon the facts and circumstances of each case
perform his part of the promise.
• In the assessment of damages, the Court must consider Indian Limitation Act
only strict legal obligations and not expectations.
Works contract - Party entrusting the work - commits breach -
 The period of time limit

Contractor entitled to claim the damages for loss of profit which
he expected to earn. (A.T Brij Pal Singh Vs State of Gujarat) • for bringing an action for breach of contract
• 3 years - from the date of breach.
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Remedies SUIT FOR INJUNCTION

 Injunction is a preventive relief
 Rescission of contract  Where damages would not be adequate relief
 Suit for injunction  Judicial Order
 Suit for specific performance • restraining a person
• from beginning
 Suit for damages
• or continuing an action
 Suit upon quantum meruit • threatening or infringing
• the legal right of another
• compelling a person to carry out a certain act
For damages, monetary compensation may • Forbearing a person to do a particular act
be allowed – assess and determination of the • Restitution/Restoration to an injured party.
• A mode of securing the specific performance of the negative
damages terms of the contract (abstain from doing)
 Court can restrain a party by an order of injunction
from committing the breach.
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- An artist enters into a contract with a theatre Suit for Damages

to perform. The contract restrains the artist
 Damages -> for the loss suferred
from performing in another theatre during
the period of contract.
 Affected parties can claim damages for loss
- The artist absents themself.
sustained by the breach of contract.
- The theatre may sue for an injunction
seeking restraint against the artist.

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M/s Trojan & Co v M/s R.M.N.N Nagappa Chettair

Measure of Damages In the absence of any special circumstances the
 Parties to be put in same situation in which they measure of damages suffered by a party in
consequence of a breach of contract to supply goods
would have been if the contract had been can only be the difference of the price which he paid
performed. and the price which he would have received if he had
 Purpose of contract to earn profits. resold them in the market forthwith after the
purchase provided that there was a fair price then
 Breach of contract results in loss of profit. McDermott International Inc. v Burn Standard Co
 Loss of profit is awarded as damages in  Held that the sections 35 to 73 of the Indian
commercial contracts Contract Act, 1872 do not lay down the mode and
manner - the how and what manner the
 Measure of damages is the difference between computation of damages or compensation has to be
the contract price and the market price at the made.
The method used for computation of damages will
date of the breach. 
depend upon the facts and circumstances of each
case. In the assessment of damages, the Court
must consider only strict legal obligations and not
expectations.
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Liquidated Damages PENALTY :Reasonable

 When the damages are pre determined in the  Section 74
contract it is Liquidated damages  Compensation for breach of contract where
 Stipulated damages. penalty stipulated for
 The purpose of awarding damages is to put  Affected party is entitled ,whether or not
affected party in the same position as if the actual damage or loss
contract was not breached.
 To receive reasonable compensation not
 Anything in excess of damages is penalty . exceeding the amount so named or the
 To penalise individuals is a task of the state. penalty stipulated.
Unliquidated Damages
 Such damages as are required to be assessed.

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Makkala Narsimlu v Gunalal Ragunandan Rao

Maula Bux v Union of India
 When there is a breach of contract and when the  The court should assess the actual damages
contract itself has provided that an amount of even in case of contracts where damages are
compensation has to be paid, the Court has power to
award either the entire amount so fixed or a reasonable
stipulated.
portion thereof, whether or not the actual loss is  Actual damages, not exceeding the stipulated
proved. amount should be awarded.
Dharam Chand v Sunil Ranjan  Any amount exceeding the actual damages
Measure of damages are in two classes of cases shall be penalty.
 1. Where the contract fixes an amount to be paid in
case of its breach.
 2. Where the contract provides for any other stipulation
by way of penalty.
 In the second class of cases,the measure of damages is
reasonable compensation ,not exceeding the stipulated
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Pannalal Jankidas v Mohanlal M/S. Kailash Nath Associates V Delhi Development

 General damages –damages arising naturally in normal Authority - 9 Jan 2015
course of things Facts:
 Special Damages-They are not communicated. Delhi Dev Auth auctioned some plots, Appellant bid for 3.12
 In such a case it would not be fair or reasonable to hold crores and paid 78 lakhs as earnest.
the defendant responsible for losses which he could not Due to general recession in 1982, they applied for extension of
be taken to contemplate as likely to result from his period to pay balance amount.
breach of contract. DDA set up a High Power Committee which recommended the
 Where two parties have made a contract which is later extension with varying rates of interests payable to all such bid
broken, consequential damages should be limited to winners and letter was also issued thereto.
whose that could fairly and reasonably be considered as Another HPC was again set up, for further extensions.
naturally arising or reasonably contemplated by both Despite several letters from Appellant, DDA did not respond
parties. until 1987 when DDA asked consent of the appellant for
Judicial Pronouncement payment of balance 75% amount with 18% interest, and further
 If we hold defendants accountable for consequences they
schedules shall be given as per directions of UOI.
might not have known about, we impose on them the In 1993,DDA sent a letter cancelling the transaction, forfeiting
risk of failing to investigate all aspects of the deals in the earnest money, and re-auctioning the plot for 11.78 Crs.
which they're involved. It would be unjust to penalize The UOI had stated that as it is non-nazul land, they have no
defendants for the effects of special circumstances say in the matter.
wholly unknown to them.
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Holding: Under Sec 55 of the Indian Contract Act, the promisee is

As time had been extended several times, time was no given the option to avoid the contract where the promisor
fails to perform the contract at the time fixed in the contract. It
longer the essence of the contract. is open to the promisee not to exercise the option or to
Mistake of fact – that DDA was mistaken that this was exercise the option at any time, but it is clear to my mind that
Nazul land and UOI had to approve extension – so the promisee cannot by the mere fact of not exercising the
extension was given – mistake of fact makes this void – option change or alter the date of performance fixed under
Argument Rejected by court the contract itself.
Judgment in Webb v. Hughes, 1870 - But if time be made the Under Sec 63 of the Indian Contract Act, the promisee may
make certain concessions to the promisor which are
essence of the contract, that may be waived by the conduct advantageous to the promisor, and one of them is that he may
of the purchaser; and if the time is once allowed to pass, extend the time for such performance. But it is clear again
and the parties go on negotiating for completion of the that such an extension of time cannot be a unilateral extension
purchase, then time is no longer of the essence of the on the part of the promisee. It is only at the request of the
contract. But, on the other hand, it must be borne in mind promisor that the promisee may agree to extend the time of
that a purchaser is not bound to wait an indefinite time; and performance and thereby bring about an agreement for
if he finds, while the negotiations are going on, that a long extension of time. Therefore it is only as a result of the
time will elapse before the contract can be completed, he operation of s. 63 of the Indian Contract Act that the time for
the performance of the contract can be extended and that time
may in a reasonable manner give notice to the vendor, and can only be extended by an agreement arrived at between the
fix a period at which the business is to be terminated. promisor and the promisee
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The true legal position in regard to the extension of time for It would be arbitrary for the DDA to forfeit the earnest
the performance of a contract is quite clear under s. 63 of the money on two fundamental grounds
Indian Contract Act.
First, there is no breach of contract on the part of the
Every promisee, as the section provides, may extend time appellant as has been held above.
for the performance of the contract.
There can be no doubt, we think, that both the buyer and the and Second, DDA not having been put to any loss, even if
seller must agree to extend time for the delivery of goods. DDA could insist on a contractual stipulation in its favour, it
It would not be open to the promisee by his unilateral act to would be arbitrary to allow DDA as a public authority to
extend the time for performance of his own accord for his appropriate Rs.78,00,000/without any loss being caused.
own benefit. The measure of damages in the case of breach of a stipulation
In Citi Bank N.A. v. Standard Chartered Bank – 2004 - held by way of penalty is by Section 74 reasonable compensation
Under Section 63, a promisee can act unilaterally and may not exceeding the penalty stipulated for. In assessing
(i) dispense with wholly or in part, or damages the Court has, subject to the limit of the penalty
(ii) remit wholly or in part, the performance of the promise stipulated, jurisdiction to award such compensation as it
made to him, or deems reasonable having regard to all the circumstances of
(iii) may extend the time for such performance, or the case.
(iv) may accept instead of it any satisfaction which he thinks The aggrieved party is entitled to receive compensation from
fit the party who has broken the contract, whether or not actual
118 damage or loss is proved to have been caused by the breach. 119
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It merely dispenses with proof of "actual loss or Section 73, when a contract has been broken, the party
who suffers by such breach is entitled to receive
damages"; compensation for any loss caused to him which the
It does not justify the award of compensation when parties knew when they made the contract to be likely
to result from the breach of it. This section is to be read
in consequence of the breach no legal injury at all with Section 74, which deals with penalty stipulated in
has resulted, because compensation for breach of the contract, inter alia (relevant for the present case)
contract can be awarded to make good loss or provides that when a contract has been broken, if a sum
is named in the contract as the amount to be paid in case
damage which naturally arose in the usual course of of such breach, the party complaining of breach is
things, or which the parties knew when they made entitled, whether or not actual loss is proved to have
the contract, to be likely to result from the breach. been caused, thereby to receive from the party who has
broken the contract reasonable compensation not
Referred to Maula Bux case exceeding the amount so named.
Jurisdiction of the court to award compensation in Section 74 emphasizes that in case of breach of contract,
the party complaining of the breach is entitled to
case of breach of contract is unqualified except as to receive reasonable compensation whether or not actual
the maximum stipulated; and compensation has to loss is proved to have been caused by such breach.
be reasonable Therefore, the emphasis is on reasonable compensation.
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(1) Terms of the contract are required to be taken into Section 74 will apply to cases of forfeiture of earnest
consideration before arriving at the conclusion whether the party
claiming damages is entitled to the same. money under a contract.
(2) If the terms are clear and unambiguous stipulating the
liquidated damages in case of the breach of the contract unless it is Where, however, forfeiture takes place under the
held that such estimate of damages/compensation is unreasonable terms and conditions of a public auction before
or is by way of penalty, party who has committed the breach is
required to pay such compensation and that is what is provided in agreement is reached, Section 74 would have no
Section 73 of the Contract Act. application
(3) Section 74 is to be read along with Section 73 and, therefore, in
every case of breach of contract, the person aggrieved by the breach There has been no breach of contract by the appellant
is not required to prove actual loss or damage suffered by him
before he can claim a decree. The court is competent to award Refund of earnest money with 9% was directed
reasonable compensation in case of breach even if no actual damage
is proved to have been suffered in consequence of the breach of a
contract.
(4) In some contracts, it would be impossible for the court to assess
the compensation arising from breach and if the compensation
contemplated is not by way of penalty or unreasonable, the court
can award the same if it is genuine pre-estimate by the parties as
the measure of reasonable compensation."
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M/s Construction & Design vs Delhi Development There is no dispute that the appellant failed to execute
the work of construction of sewerage pumping station
Authority 4th February 2015 ,Supreme Court within the stipulated or extended time. The said
Constructing a sewerage pumping station pumping station certainly was of public utility to
maintain and preserve clean environment, absence of
When and to what extent can the stipulated which could result in environmental degradation by
liquidated damages for breach of a contract be stagnation of water in low lying areas. Delay also
resulted in loss of interest on blocked capital.
held to be in the nature of penalty in absence of
In these circumstances, loss could be assumed, even
evidence of actual loss without proof and burden was on the appellant who
To what extent the stipulation be taken to be the committed breach to show that no loss was caused by
delay or that the amount stipulated as damages for
measure of compensation for the loss suffered breach of contract was in the nature of penalty. Even if
even in absence of specific evidence technically the time was not of essence, it could not be
presumed that delay was of no consequence.
Liability claim was to pay Rs.20,86,446/- The party complaining of breach can certainly be
allowed reasonable compensation out of the said
amount if not the entire amount
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Applying the above principle to the present case, it Brahmaputra Tea Co Vs Scarth - 1885
could certainly be presumed that delay in This appeal raises questions under Sections 27 and 74 of the Contract Act.
executing the work resulted in loss for which the Undertook to serve the Company as assistant tea-planter for a term of three
respondent was entitled to reasonable compensation. years, to be computed from the date of the termination of his fourth year's
service under a prior agreement. - gave notice of his intention to leave - he
Evidence of precise amount of loss may not be
actually did leave the Company's service without their consent after 6
possible but in absence of any evidence by the party months.
committing breach that no loss was suffered by the As, however, the agreement has long since expired, no injunction can now
party complaining of breach, the Court has to issue
proceed on guess work as to the quantum of The contract in the 10th Clause is void, so far as it restrains the defendant
compensation to be allowed in the given from taking service, or from engaging in, or promoting directly or
indirectly, the cultivation of tea for a period of five years from the date of
circumstances. Since the respondent also could have the termination of his agreement
led evidence to show the extent of higher amount The case clearly falls within Section 74 of the Contract Act, the effect of
paid for the work got done or produce any other which was to do away with the distinction between liquidated damages
specific material but it did not do so, we are of the and a penalty, and to leave it to the Court in all cases in which a sum is
named in the contract as the amount to be paid, to award against the party
view that it will be fair to award half of the amount who has broken the contract reasonable compensation not exceeding the
claimed as reasonable compensation. sum named.
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The agreement was deliberately entered into and as

deliberately broken
No doubt the Court has a discretion to fix what it considers
reasonable compensation; but when the parties have already
agreed among themselves as to what the penalty should be,
we think the Court should not, in fixing the compensation,
wholly ignore the amount agreed on, unless this is, on its
face, wholly unreasonable with reference to the position of
the parties and the breach provided against.
The sum of £250 was entered in the agreement by the
defendant himself, so he knew full well what he was doing
and what risk he was incurring, and, so far as we can see,
there was no reasonable or sufficient ground for his act.
We are clearly of opinion that the amount awarded by the
Judge was unreasonably small; and having a discretion in the
matter, which we exercise in favour of the defendant, we
think a sum of Rs.2,000 would be a proper sum to allow.
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