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CA Foundation · Business Laws · The Indian Contract Act, 1872

Anand Textiles agreed to supply 500 metres of cloth to Bhavna Boutique on 1 March at Rs 200 per metre. Anand failed to deliver. Bhavna bought equivalent cloth from the market at Rs 230 per metre, which was the market price on 1 March. Applying the rule on ordinary damages for breach, what is the amount Bhavna can claim?

Bhavna can claim Rs 15,000. Damages for breach compensate the natural loss, which is the gap between the market price and the contract price: Rs 30 extra per metre on 500 metres. She cannot recover the full purchase cost, since she would have paid the contract price anyway.

  1. ARs 15,000Correct
  2. BRs 1,15,000
  3. CRs 1,00,000
  4. DRs 30,000

Explanation

Ordinary damages equal the loss that naturally arises from the breach: the difference between market price and contract price. Here (230 - 200) x 500 = Rs 15,000. Rs 1,15,000 wrongly uses the full market cost, ignoring that Bhavna would have paid Rs 1,00,000 anyway.

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