Skip to content

CMA Foundation · Fundamentals of Business Laws and Business Communication · Breach of Contract and Remedies for Breach of Contract

Anil borrows Rs. 10,000 from Bhatia and signs a bond stating that on default he will pay Rs. 25,000. Anil defaults, and Bhatia sues, proving no actual loss. Under the Indian Contract Act, 1872, what is Bhatia entitled to?

Bhatia is entitled to reasonable compensation not exceeding Rs. 25,000. Under Section 74, the named sum is only a ceiling, and the party complaining of breach can claim compensation even without proving actual loss. The court decides the reasonable amount.

  1. AThe full Rs. 25,000 automatically, as it is named in the contract
  2. BNothing, since no actual loss is proved
  3. CReasonable compensation not exceeding Rs. 25,000Correct
  4. DOnly specific performance of the loan

Explanation

Section 74 says that where a sum is named as payable on breach, the complaining party gets reasonable compensation not exceeding the named amount, whether or not actual loss is proved. So the amount is a ceiling, not an automatic entitlement. Awarding the full sum automatically ignores the word reasonable, and awarding nothing ignores the no-proof rule.

Did you get it right without looking?

One question tells you little. A timed set on Breach of Contract and Remedies for Breach of Contract shows your real accuracy, how long you take and where you lose marks.

Practise Breach of Contract and Remedies for Breach of ContractFree diagnostic mock

More Breach of Contract and Remedies for Breach of Contract questions