CMA Foundation · Fundamentals of Business Laws and Business Communication · Breach of Contract and Remedies for Breach of Contract
Anil undertakes to repay Bharat a loan of Rs. 1,000 in five equal monthly instalments. The contract provides that if any instalment is not paid, the whole amount becomes due. Anil defaults on the second instalment. According to the illustrations to Section 74, what is the position?
Under illustration (f) to Section 74, a stipulation that the whole loan becomes due on default of any instalment is not a penalty. The contract can be enforced according to its terms, so Bharat may demand the entire outstanding amount from Anil.
- AThe stipulation is a penalty, and only reasonable compensation can be claimed
- BThe stipulation is not a penalty, and the contract may be enforced according to its termsCorrect
- CThe stipulation is void, because it is against public policy
- DBharat can claim only the defaulted instalment
Explanation
Illustration (f) to Section 74 says that such an acceleration stipulation is not by way of penalty, and the contract may be enforced according to its terms. Bharat can therefore demand the whole outstanding amount. Treating the clause as a penalty would be wrong.
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.
More Breach of Contract and Remedies for Breach of Contract questions
- Anil undertakes to repay a loan of Rs. 1,000 to Bhaskar by five equal monthly instalments. The agreement says that if any instalment is not …
- Meera Traders borrows Rs. 1,000 from Kiran Finance and gives a bond for repayment with interest at 12 per cent at the end of six months. The…
- Arjun gives a bond to a State Government, under the orders of that Government, for the performance of a public duty in which the public are …
- Ravi Traders borrows Rs. 1,000 from Meena under a bond carrying interest at 12 per cent, with a stipulation that on default interest will be…
- A contract with a Government department does not necessarily bring a party within the Exception to Section 74 (whole sum payable). What does…
- Anil agrees to repay a loan of Rs. 1,000 to Bharat in five equal monthly instalments, with a stipulation that if any instalment is not paid,…