The Law on Compensation for Breach of Contract III

Every breach of contract gives rise to an action for damages. Innocent party is to be placed, so far as money can do so, in the same position as if the contract had been performed. The aforesaid proposition remains to hold the field. This rule is more qualified when it comes to the real estate sector. Onus is on the seller to show his best efforts and bona fides in discharging the obligation. A person cannot be made to wait indefinitely for the possession of the flats allotted to them and they are entitled to seek the refund of the amount paid by them, along with compensation. Even under The Consumer Protection Act, 1986, the damages for commercial contracts need to be determined as per The Indian Contract Act. No fixed formula for fixing damages [Ghaziabad Development Authority, (2004) 5 SCC 65]. Whenever the builder has refused to perform the contract without valid justification, the buyer is entitled for compensation as he has been deprived of price escalation of the flat. As per the settled law, the damages become due on the date when the breach of contract takes place. The aforesaid rule is based on the principle that the injured party is presumed to be in knowledge of the breach as soon as it is committed and at that time he can take appropriate measures of mitigation to control the loss flowing from the breach. Courts may deviate from the aforesaid rule. In facts and circumstances of this case, the damage need not be determined from the date of breach of contract. Damages awarded should not be excessive and a Court/Tribunal needs to take a balanced approach to ensure right compensation.”

Hon’ble Justice N.V. Ramana, M/s. Fortune Infrastructure v. Trevor D’Lima, [Civil Appeal Nos. 3533-3534 of 2017].