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CS Executive · Jurisprudence, Interpretation and General Laws · Contract Law

Deepak, a contractor, executes a bond under the orders of a State Government, binding himself to pay Rs. 2 lakh if he breaches a condition of performing a public duty in which the public are interested. He breaches the condition. Which statement is correct under Section 74?

Deepak is liable to pay the whole Rs. 2 lakh stated in the bond. The Exception to Section 74 covers bonds given under Government orders for performance of a public duty in which the public are interested, so the reasonable compensation limit does not apply.

  1. AHe can be made liable only for reasonable compensation not exceeding Rs. 2 lakh
  2. BHe is liable to pay the whole sum mentioned in the bond under the Exception to Section 74Correct
  3. CHe is liable only if the State proves actual loss
  4. DHe is not liable because Government contracts are never penal

Explanation

The Exception to Section 74 says that a person who, under the orders of a State Government, gives a bond for performance of a public duty or act in which the public are interested is liable on breach to pay the whole sum mentioned. Option A applies the general rule, which the Exception displaces. Proof of loss is not required.

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