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Remedies of consumer under the civil laws

By Team Legal Helpline India, April 1, 2018

A brief write up by our legal experts on the available remedies of consumer under the civil laws:

Under the Sale of Goods Act a consumer of goods has the following remedies of consumer under the civil laws are available under the Indian laws:

(A) Damages for non-delivery.
(B) Remedy for breach of warranty.
(C) Remedy by way of specific performance of contract.

(A) DAMAGES FOR NON-DELIVERY

One of the Remedies of consumer under the civil laws is provided in Section 57 of the Act provides that where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue the seller for damages for non-delivery. The section lays down the method for the measure of damages by providing that damages will be assessed at the difference between the contract price and the available price in the market.

(B) REMEDY FOR BREACH OF WARRANTY

The remedy for breach of warranty is important remedies of consumer under the civil laws. In all cases where the buyer cannot reject the goods. The loss which he has suffered for the breach of warranty may be recovered by way of damages, or, if the price has not been paid, may be set off against the price. A lady purchased a second-hand typewriter and spent money on its repair. It was recovered from her by the police being a stolen property. Thus the warranty of quite possession was broken. She was allowed to recover compensation for her loss including the cost of repair.
Where the breach of warranty is due to inferior quality of the goods the buyer can recover compensation in terms of money which will make good that loss.

(C) REMEDY OF SPECIFIC PERFORMANCE

When the contract is for the sale of specific or ascertained goods, and the seller is refusing to deliver the goods, the buyer may ask the court to direct the seller to deliver the goods to the buyer. This is known as the remedy of specific enforcement of the contract of sale of goods it is also one of the remedies of consumer under the civil laws. One of the requirements for this remedy is that the sale must be that of specific goods. Where only a portion of the goods out of a big lot has been sold and that portion has to been identified, the remedy of specific performance is not available. Secondly, the power of the court to order specific performance is subject to the provisions of Chapter II of the Specific Relief Act, 1963. This chapter empowers the court to order specific performance only when damages would not be an adequate remedy. The buyer of a ship was allowed specific recovery of the ship because no other ship of the type was available. Similarly, in a sale of timber, the buyer was allowed to remove and take away the timber, because timber of parallel quality was not available in the market.

DAMAGES IN CONTRACT AND TORTS

Damages: Definition
Mayne defines damages as, “pecuniary satisfaction obtainable by success in an action”. He further says that damages may “rise to almost any amount’ or they may dwindle to a merely notional sum. They may be governed by rules so strict as to enable the judge to dictate their amount as a matter of law; or they may be left, within loose limits, to the discretion of the judge or jury.”
Mayne’s definition of damages, it will be noted, is wide enough to cover actions for the price of goods, amounts payable under insurance policies and all those cases where money is recovered otherwise than as compensation for wrong.

The object of the pecuniary compensation to be given for reparation of the damage suffered is to award as far as possible so much of money which will put the injured party in the same position as he would have been in if he had not sustained the wrong for which he is claiming damages. This principle is equally applicable to breach of contract and tort.

The practical aspect of this principle is different however, because in almost in every case damages do not prove to be complete compensation. An example will make this point clear. Presume that A lends Rs. 10,000/- to B and B promises to pay back the amount to A with interest at 6% pm a specified date. B fails to pay the amount due on specified date and also long after. Now by delay A may, apart from suffering mentally, might become insolvent and thus ruined for ever, or he may be compelled to borrow money at an exorbitant rate of interest. Even if he files a suit for recovery of the due amount against B, the cost taxed in the decree will be much less than he actually spends in the action. Thus it will be seen that damages are not complete compensation for the injury sustained.

Kinds of Damages

(i) Ordinary or general damages:- Actual losses are those which are sufficiently connected directly to the act. Such damages are generally awarded. They are known as ordinary or general damages as remedies of consumer under the civil laws.

(ii) Notional damages:- Where the plaintiff has suffered no actual loss, but his right has been violated, the court may award him a very small amount by way of damages. The amount serves as a token for the right violated and is known as notional damages, Ashby v. White is famous for such award. The returning officer was sued far denying the plaintiff her right to cast vote. She had lost nothing because the candidate whom she wanted to support had won. The court allowed her a token amount.

(iii) Special damages:- Special damages represent a sum which is awarded to a particular plaintiff for any extraordinary loss suffered by him on account of his special circumstances.

(iv) Exemplary damages:- They differ from ordinary damages. They are punitive in nature and while awarding such damages the aim is also to punish the person for the wrongful act. Exemplary damages are never awarded in case of contractual breaches except in case of a breach of contract to marry. In torts they are awarded according to circumstances.

Liquidated Damages and Penalty

The situation of liquidated damages or penalty can arise only in connection with a contract. The parties may fix beforehand the amount which shall be payable by one to the other in case of breach. If the amount so mentioned appears to the court to be reasonable in the circumstances, it is known as liquidated damages. If it is much more than that it will be viewed as a penalty.

The same sum may b a penalty though referred to as liquidated damages and vice versa. In other words, ‘penalty’ means the sum ascertained by the parties themselves which the one party making a breach will be liable to pay the other by way of compensation. The penalty is more punitive in nature. While awarding penalty, the court will consider the question of reasonableness.

Penalty or Liquidated Damages—A Question of Law

The question whether a sum mentioned in an agreement to be paid for a breach is a penalty or liquidated damages is a question of construction to be decided by the Judge upon the terms and inherent circumstances of each particular contract, judged as at the time of making of the contract, not at the time of the breach.

Ascertainment of Damages

In the case of Kingslay v. Secretary of State, the Calcutta High Court laid down the principal with regard to the ascertainment of damages: “Though every breach of duty arising out of a contract gives rise to an action for damages without proof of actual damage, the amount of damages recoverable as a general rule is governed by the extent of actual damage sustained in consequence of defendant’s act. In cases admitting proof of such damages the amount must be established with reasonable certainty. But this does not means that absolute certainty is required nor in all cases is there a necessity for direct evidence as to the amount. Damages are not uncertain for the reason that the loss sustained is incapable of precise measurement. Certainty to a reasonable extent only is required. It is necessary that the loss or damage suffered must be proved, so as to remove from a reasonable man’s mind the doubt that it was most likely to follow from the breach of the contract. In actions for breach of contract where there has undoubtedly been an infringement of a right, nominal damages are recoverable even though o actual damages can be proved.”

However, the present position of law as enunciated by the Supreme Court in Maula Bux v. Union of India is as follows:

(i) The words “whether or not actual damage or loss is proved to have been caused thereby” in Section 74, are hinted only to those cases where it it not possible to prove the exact value of loss in terms of money, and so the value fixed by the parties may be terms of money, and so the value fixed by the parties may be taken as reasonable measure of compensation.

(ii) Where loss in terms of money is determinable, the party claiming compensation must prove the loss suffered by him, otherwise no compensation would be awarded.

In this case the plaintiff was contractor for supplying potatoes, eggs, fish etc. for one year to the Military Headquarters, Uttar Pradesh Area. He had deposited Rs. 18,500/- as security for due performance of the contract. He failed n making a regular supply as contracted and the Government of India forfeited the deposit. The plaintiff challenged the forfeiture. The Supreme Court did not agree that the deposit was earnest money, nor did it agree with the contention that the deposit represented genuine pre-estimated loss. SHAH C.J. held the forfeiture to be in the nature of penalty. Union of India had did proved to have suffered any loss and so it was not entitled to any compensation.

Similar were the facts of Union of India v. Rampur distillery and Chemical Co. Limited also before the Supreme Court. In this case, the contractor had to supply ‘rum’ and had failed to supply as per contract. The Supreme Court did not allow the Government of India to forfeit the deposit as reasonable compensation, as no loss was shown on account of the breach of contract.

Measure of Damages

Damages are a sort of compensation in terms of money for the injury sustained. The sum of money which should be given for reparation of damages suffered should, as nearly as possible, be the sum which will put the inured party in the same position as he would have been in, if he had not sustained the wrong for which he is getting damages. As stated by the Supreme Court in Murlidhar Chiranjilal v. Harichandra Dwarkadas, the first principle on which damages in cases of breach of contract are calculated is that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a position as if the contract had performed; but this principle is qualified by another principle which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach and debars him from claiming any part of the damages which is due to his neglect to take such steps. On the facts of the case the difference between the price in Calcutta at the date of the breach and the contract price was considered as the measure of damages. In cases permitting proof of such damages the amount must be established with reasonable certainty. General principles for ascertaining damages have been clearly and lucidly laid down by the Calcutta High Court in the leading case of Frederick Thomas Kingsley v. Secretary of State. Damages should be calculated as on the date of breach and any subsequent change of circumstances tending to decrease the price cannot be taken into consideration.

DAMAGES IN CONTRACT

Remoteness of Damage
(i) Damages naturally arising from a breach of contract according to usual course of things are always recoverable.

(ii) Damages which would not arise in the usual course of things from a breach of contract but which do arise in circumstances peculiar and special to the case are not recoverable.

(iii) When, however, the special circumstances are known to the person who breaks the contract and the damages complained arose naturally from the breach of the contract, such special damages must be deemed to have been contemplated by the parties. They are, therefore, recoverable.
Implied knowledge—A presumptive basis of contemplation
Contemplation, therefore, must have some basis. The defendant must have the knowledge of facts. Knowledge, again, is of two kinds—
(i) actual knowledge of a fact,
(ii) implied knowledge which is to be implied only within reasonable bounds.

THE INDIAN CONTRACT ACT, 1872—SECTION 73

Compensation for loss or damage caused by breach of contract is one of the most imporant remedies of consumer under the civil laws.

When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it.

Such compensation is not to be given for any remote and indirect loss or damage sustained y reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract: When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured y the failure to discharge is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation:- In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance f the contract must be taken into account.

Rule in Section 73—Applicable to all contracts

The rule contained in Section of the Act is applicable in India to all kinds of contracts, whether they relate to movable or immovable property and whether they relate to any other contract relating to service, marriage or to any other personal relation.
Breach of marriage contracts.

The aggrieved party can maintain a suit for damages or compensation against the party who has broken or has brought about a breach of a contract of betrothal. Contracts of betrothal entered into on behalf of minors by their guardians and shown to be for their benefit are enforceable at the instance of the minors. Where a mother entered into an agreement for the marriage of her minor daughter with a boy, who was of age, the daughter was allowed to sue him for breach of the agreement. WADIA, J. pointed out that according to Hindu law a betrothal can be broken off if either party is found to be of a lower caste or to have an incurable disease or if the intended husband is found unfit, or the girl is unchaste, etc. Such an agreement cannot be specifically enforced and only damages can be recovered for its breach.

Where it is alleged that the contract of marriage was induct by fraud or deceit and damages are sought to be recovered for the same, it must be proved that there would have been no intention to marry but for the fraud. Where the parties to marriage agreement were Hindu related within prohibited degrees, the agreement being void under the Hindu Marriage Act, no claim for damages for breach of contract was maintainable.

Breach of contract of service

Generally the practice adopted between a master and servant is to give one month’s notice to terminate his contract of service or in lieu of this one month’s salary. In order to entitle a servant t one month’s notice, it is necessary for him to show that he was able to perform his part of the contract. Where a servant is unable to attend to his work he may be dismissed without a month’s notice. Where a contract of service is broken by the employer, damages are determined with reference to the usual terms of wages for the employment contracted for and the time that would be lost before similar employment can be obtained by the servant. In an action for wrongful dismissal from service, the damages are restricted to the actual loss suffered by the wrongful determination of the service; no damages are recoverable for injured feeling or probable difficulty of getting another service.

Where the tenure of a service is fixed in terms of an Act, any removal in violation of that Act does not put an end to the contract of service. The employee can claim salary, but not damages. But where there is no such operative statute and an employee is wrongfully dismissed, his contract of service ends. He can claim damages but not salary, though damages may be measured in terms of salary. This is another important remedies of consumer under the civil laws.

Breach of contract of sale

Remedies of consumer under the civil laws can be enforced in all cases of the contract of sale of goods, ordinarily, the damages must be assessed by finding out the difference between the contract rate and the market rate of the goods at the date of the breach. Whenever damages are awarded on any other basis, it is necessary to explain the circumstances why the criterion of market rate is not applicable to the facts of the case. Damages may be occasionally awarded on the basis of loss of profit if the other party had the knowledge of the circumstances. Where there was no open market for the purchase of cloth for export at the date of contract as well as the breach and the same was within the knowledge of sellers, damages for breach by the sellers were ascertained by relying upon the market rate for export contracts for the foreign country in question that were available at the date of breach.

The general principle of laws is that the loss of profits can only be claimed when the particular purpose is specifically communicated to the other party.

Statutory Damages

Where the amount of compensation payable is fixed by an Act, the tariff applicable will be the one which is in force at the time of the breach. This opinion has been expressed by the Supreme Court in Padma Srinivasna v. Premier Insurance Co. The case arose out of a claim for compensation under the Motor Vehicles Act, 1939 for the death of the claimant’s husband. The death was caused by a truck which was insured with the defendant company against third party risks. At the time of insurance the limit of insurer’s liability in such cases was Rs. 20,000 only. The accident took place on April 5, 1970. An amount before that, on March 2, 1970 the Motor Vehicles (Amendment) Act of 1969 came into force and this raised the compensation for loss of life to Rs. 50,000.

The insurer was held liable to pay the latter amount. The court said that if the parties to a contract agree that one shall pay to the other damages for breach of contract in accordance with the law contained in any particular statute, without pinpointing the particular provision of a particular law, then the law which is in force on the date of breach will be applicable. The date of the cause of action is important and not the date of insurance. This is an important remedies of consumer under the civil laws.

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