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

Ravi, a builder, contracts to finish a house by 1 January so that Sunil can let it to Tara, and Ravi is told of the contract with Tara. The house is so badly built that it collapses before 1 January and Sunil rebuilds it, loses the rent, and must compensate Tara. Which statement is correct under the Act's illustration?

Ravi must pay the rebuilding cost, the rent Sunil lost and the compensation Sunil paid to Tara. Because Ravi knew of the letting contract when contracting, those losses were known to be likely to result from the breach.

  1. ARavi pays only the cost of rebuilding the house
  2. BRavi pays the rebuilding cost and lost rent, but not the compensation paid to Tara
  3. CRavi pays nothing, since Tara was not a party to Ravi's contract
  4. DRavi pays the rebuilding cost, the rent lost and the compensation paid to TaraCorrect

Explanation

Illustration (l) to Section 73 makes the builder liable for rebuilding cost, lost rent and compensation to C because he was informed of the contract between B and C. Illustration (k) differs because the third-party contract was not communicated, so option B confuses the two.

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