Sikkim Manipal University - MBA - MB0051 – Legal Aspects of BusinessSemester: 3 - Assignment Set: 1
When a contract has been breached, the party who suffers by such breach is entitled toreceive, from the party who has breached the contract, compensation for any loss or damagecaused to him thereby, being loss or damages which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract, to be likelyto result from the breach of it. Such compensation is not to be given for any remote andindirect loss of damage sustained by reason of the breach.A person who rightfully rescinds a contract is entitled to compensation for any damage, whichhe has sustained through non-fulfillment of the contract.
Liquidated damages and penal stipulations:
If a sum is named in the contract as the amount to be paid in case of breach of contract, or if the contract contains any other stipulation by way of penalty, the party complaining of thebreach is entitled, whether or not actual damage of loss is proved to have been causedthereby, to receive, from the party who has broken the contract, reasonable compensation, notexceeding the amount so named or the penalty stipulated for.A stipulation for increased interest from the date of default may be regarded as a stipulation by “way of penalty”. The court is empowered to reduce it to an amount which is reasonable in thecircumstances.
In certain special cases (dealt with in the Specific Relief Act, 1963), the court may directagainst the party in default “specific performance” of the contract, that is to say, the party maybe directed to perform the very obligation which he has undertaken, by the contract. Thisremedy is discretionary and granted in exceptional cases. Specific performance means actualexecution of the contract as agreed between the parties. Specific Performance of any contractmay, in the discretion of the court be enforced in the following situations
When there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or
When the act agreed to be done is such that monetary compensation for its non-performance would not afford adequate relief.
Instances where compensation would be deemed adequate relief are:
Agreement as a consequence of a breach by a landlord for repair of the rentedpremises;
Contract for the sale of any goods, for instance machinery or goods.
A contract which runs into such minute or numerous details or which is so dependent on thepersonal qualifications or volition of the parties, or otherwise from its nature is such, that thecourt cannot enforce specific performance of its material terms, cannot be specifically enforced.
Bhupinder Singh Reg. No. 521063004 Page 3 of 9
2. Prospective equity investors and lenders, to decide whether or not to invest.3. Investment analysts, money managers, and stockbrokers, to make buy/sell/holdrecommendations to their clients.4. Rating agencies (such as Moody's, Standard & Poor's, and Dun & Bradstreet), to assigncredit ratings.5. Major customers and suppliers, to evaluate the financial strength and staying power of thecompany as a dependable resource for their business.6. Labor unions, to gauge how much of a pay increase a company is able to afford in upcominglabor negotiations.7. Boards of directors, to review the performance of management.8. Management to assess9. Corporate raiders, to seek hidden value in companies with under priced stock.10. Competitors, to benchmark their own financial results.11. Potential competitors, to assess how profitable it may be to enter an industry.12. Government agencies responsible for taxing, regulating, or investigating the company.13. Politicians, lobbyists, issue groups, consumer advocates, environmentalists, think tanks,foundations, media reporters, and others who are supporting or opposing any particular publicissue the company's actions affect.14. Actual or potential joint venture partners, franchisors or franchisees, and other businessinterests who need to know about the company and its financial situation.