The concept of contract damages is as old as contractual ties themselves. Damages have become increasingly important in economic transactions, as well as as punitive measures for violations of the rights of the parties involved. Damages are a type of monetary compensation that an aggrieved party can seek from the defaulting party when there is a breach of contract that causes the aggrieved party to suffer a loss or injury. In simple terms, it’s a type of remuneration for a breach, loss, or injury. Damages may seek protection of “expectation interest,” “dependence interest,” or “restitution interest,” according to Fuller and Perdue. Liquidated Damages are awarded in the absence of prescribed Liquidated Damages in the contract and are controlled by Section 73 of the Act. Unliquidated Damages are awarded in the absence of prescribed Liquidated Damages in the contract and are governed by Section 73 of the Act.

Liquidated damages, also known as stipulated damages, are dealt with in Section 74. In order for the plaintiff to recover damages, there must be a breach of contract. The claim for damages should not arise in circumstances where the contract can be rescinded reasonably without any infringement of the contract’s provisions since there is no breach per se. Both the complainant and the defendant may file claims for liquidated damages under Section 74. There is compensation guarantee in the case of liquidated damages since an adequate compensation is determined. As a result, it would be expected that damages are already established because the risks of a party initiating a violation are smaller.

Essentials for liquidated damages-

• Breach of contract– A breach of contract is a requirement for claiming damages. Regardless of how much the defendant earns from the contractual arrangement, there can be no claim for damages unless there is a breach of contract.
• Proof of damage– In the event of a breach, appropriate compensation agreed upon as liquidated damages is in consideration of some loss or injury. As a result, the occurrence of a loss or injury is required for such a claim of liquidated damages.
• Causation-To bring a claim for damages and assign blame, there must be a causal link between the breach and the loss or injury incurred. If the defendant’s breach of contract is the only “real and effective” cause of the injury or damage for which damages are sought, this causal relationship is established.
• Mitigation– It’s worth noting that a party seeking damages for breach of contract must have done or be prepared to perform the contract’s required component. As a result, before claiming damages, it is necessary to mitigate losses

Section 73 deals with actual damages resulting from contract infringement and the injury resulting from such infringement, which are unliquidated damages since they are awarded by the courts based on an assessment of the loss or injury caused to the person against whom the infringement occurred. Unliquidated Damages are compensation claims for unforeseen losses. In circumstances involving a breach of contract, these damages are frequently awarded. Any breach of contract that does not include a liquidated damages clause is subject to these penalties. It is, however, difficult to determine the amount of compensation that the complainant will seek because the amnesty period has expired.

Advantages or disadvantages- Including a clause in a contract for liquidated damages will almost probably be advantageous. It aids the customer in recovering losses that were unexpected or difficult to quantify prior to the contract breach. This, however, leaves the contractor with an unknown liability. Furthermore, the client must demonstrate his or her actual loss at the time of the breach. The client will also have to show that the damages are “natural” and not “remote” as a result of the breach of contract.

To sum it up, A pre-agreed amount of money is put out in advance in the contract as liquidated damages. It establishes the amount payable as damages if the contractor breaches the contract, which commonly occurs when the contractor fails to complete the construction work by the contract’s completion date. Damages are assessed on a daily or weekly basis for liquidated damages.
Unliquidated damages are those that are due as a result of a breach but the amount of which has not been agreed upon in advance. The amount to be paid as compensation is known as the “at large” amount, and it is set by a Court after the breach occurred.

Aishwarya Says:

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