When a breach of contract occurs, the standard remedy is financial compensation, known as Damages under Section 73.
1. The Rule of Remoteness (Hadley v. Baxendale)
A breaching party is not liable for all consequences of their breach. They are only liable for damages that are not "too remote."
📜 Landmark Case: Hadley v. Baxendale (1854)
Hadley's mill stopped because a crankshaft broke. He sent the shaft to Baxendale (a carrier) to take to a manufacturer to make a copy. Baxendale delayed delivery. As a result, the mill remained closed for several extra days. Hadley sued for the lost profits during the delay. The court held that Baxendale was not liable for the lost profits because he did not know that the mill had no other crankshaft and would remain closed.
Hadley's mill stopped because a crankshaft broke. He sent the shaft to Baxendale (a carrier) to take to a manufacturer to make a copy. Baxendale delayed delivery. As a result, the mill remained closed for several extra days. Hadley sued for the lost profits during the delay. The court held that Baxendale was not liable for the lost profits because he did not know that the mill had no other crankshaft and would remain closed.
This case established the Two Branches of Damages:
- Ordinary Damages: Losses arising naturally in the usual course of things from the breach.
- Special Damages: Losses arising from special circumstances, which were communicated and contemplated by both parties at the time of making the contract.
2. Duty to Mitigate Loss
The injured party has a strict legal duty to take all reasonable steps to minimize (mitigate) their losses. They cannot sit back, allow damages to accumulate, and claim the full amount.
3. Quantum Meruit ("As much as earned")
Quantum Meruit is a remedy available when a contract is half-performed and then terminated. The performing party can sue to recover the value of the work they have already done, preventing the other party from enjoying free labor.