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CMA Foundation · Fundamentals of Business Laws and Business Communication · Essential Elements of a Contract, Offer and Acceptance

Kapoor Textiles agreed to supply 500 metres of cloth to Desai Garments by 10 June. The parties did not intend time to be of the essence. Kapoor delivered on 15 June, and Desai lost ₹4,000 because of the delay. Which statement is correct under Section 55?

The contract is not voidable because time was not essential, but Desai can claim compensation for the ₹4,000 loss caused by the delay. Section 55 gives the promisee compensation for loss from late performance where time is not of the essence.

  1. ADesai may rescind the contract, but cannot claim compensation
  2. BThe contract becomes void and neither party has any rights
  3. CDesai must accept the cloth and cannot claim anything for the delay
  4. DThe contract is not voidable, but Desai is entitled to compensation for the loss caused by the delayCorrect

Explanation

When time is not of the essence, late performance does not make the contract voidable. The promisee is entitled to compensation for any loss caused by the failure. So Desai can recover the ₹4,000 loss. Saying Desai can only rescind is wrong because rescission arises only where time is essential.

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