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CMA Foundation · Fundamentals of Business Laws and Business Communication · Breach of Contract and Remedies for Breach of Contract

Ravi gives a bond to the State Government for the performance of a public duty, and promises to pay Rs. 20,000 if he breaches its condition. He breaches it. Under the Exception to Section 74, what is Ravi's liability?

Ravi is liable for the whole Rs. 20,000. The Exception to Section 74 says that a person giving a bond for the performance of a public duty, or an act in which the public are interested, must pay the entire sum mentioned on breach, rather than reasonable compensation.

  1. AReasonable compensation not exceeding Rs. 20,000
  2. BOnly the actual loss proved by the Government
  3. CThe whole sum of Rs. 20,000 mentioned in the bondCorrect
  4. DNothing, because a penalty cannot be enforced

Explanation

The Exception provides that a person giving a bond under a law or Government orders for performance of a public duty, or an act in which the public are interested, is liable on breach to pay the whole sum mentioned. The general reasonable-compensation rule therefore does not apply. Illustration (c) on a forfeited recognizance is the same.

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