Damages are a monetary compensation allowed to the injured party for the loss or injury suffered by him as a result of the breach of contract. The fundamental principle underlying damages is not punishment but compensation.
By awarding damages the court aims to put the injured party into the position in which he would have been, had there been performance and not breach and not to punish the defaulter party.
As a general rule, “compensation must be commensurate with the injury or loss sustained, arising naturally from the breach.” “If actual loss is not proved, no damages will be awarded.”
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Assessment of damages:
We will now consider the extent to which a plaintiff is entitled to demand damages for breach of contract. The rules in this regard have been laid down by Section 73. Accordingly, an injured party is entitled to receive from the defaulter party:
(a) Such damages which naturally arose in the usual course of things from such breach. No compensation is to be given generally for any remote or indirect loss sustained by reason of the breach (Ordinary Damages).
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(b) Such damages which the parties knew when they entered into the contract, as likely to result from the breach (Special Damages).
(c) In estimating the loss or damage caused to a party by breach, the means which existed of remedying the inconvenience caused by the breach must also be taken into account (Explanation to Sec. 73). (Duty to mitigate damage suffered.)
With a view to making the study of the quantum of damages easily comprehensible, the above rules, as enunciated in Section 73 may now be considered in some more details under appropriate heads.