Builders may limit their liability for breach of contract: SC

The Supreme Court of India recently clarified that builders can limit their liability for breach of contract if they can portray that they have performed their obligation in a prudent manner even though it is well established that contractual damages are usually awarded to compensate an injured party to a breach of contract for the loss of his bargain.

Ruling that there was a deficiency of service on behalf of the builder by not delivering the possession of the flat within a reasonable period of time in the present case, the Court said that “the onus is on the seller [builder] to show his best efforts and bona fides in discharging the obligation. It may be noted that even in the absence of fraud, mere unwillingness to carry out the duty could constitute bad faith sufficient for the purchaser to claim damages.”

For the purpose of assessing the damages, the Court observed that, generally, the damages become due on the date of the breach of the contract and are normally assessed by the reference to the time of breach.

The courts, however, may deviate from the aforesaid rule and fix appropriate date in facts and circumstance of a case if aforesaid presumptions could not be established or it would not be reasonable to follow the rule, the Court opined. It may be noted that where there is non-delivery of the flat/house, and the developer has refused to provide alternative and equivalent accommodation, and the buyer lacks means to purchase a substitute from the market, then in such circumstances, damages would not be reasonable to be assessed on the breach date.

About DSLegal

A full service international law firm based in New Delhi with an office in Chicago, USA.
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