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CMA Foundation · Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Meera contracts to supply cloth to Anil on 1 January. Without Meera's knowledge, Anil had earlier agreed to sell finished garments to a third party at a high profit. Meera delivers late, and Anil loses that profit and pays that third party damages. Under Section 73, what can Anil recover?

Anil can recover only the ordinary loss, being the difference between the contract price and the market price when delivery was due. The garment profit and third-party damages were not known to Meera when contracting, so they are remote losses and are not compensated.

  1. AThe lost profit on the garments and the damages paid to the third party
  2. BOnly the difference between the contract price and market price of the cloth at the time of delivery, but not the special profit or damages that were not communicated to MeeraCorrect
  3. CNothing, because late delivery is not a breach
  4. DThe damages paid to the third party only

Explanation

Losses arising from special circumstances not communicated at the time of contracting are remote, as in the illustration of the machinery and the third-party contract. Anil recovers only the ordinary market difference. Option A would be correct only if Meera had known of the sub-contract when contracting.

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