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

Ravi Traders agrees to pay Meena Finance Rs. 1,000 if it fails to pay Rs. 500 on a given day. Ravi Traders fails to pay Rs. 500 on that day. What can Meena Finance recover?

Meena Finance can recover reasonable compensation fixed by the court, not exceeding Rs. 1,000. Under Section 74 the amount named in the contract is only an upper limit for compensation on breach, so the court need not award the full stipulated sum.

  1. AExactly Rs. 1,000 as agreed
  2. BSuch compensation as the court considers reasonable, not exceeding Rs. 1,000Correct
  3. COnly Rs. 500, with no further compensation
  4. DRs. 1,500, being the sum of both amounts

Explanation

This mirrors the position in Section 74: the named Rs. 1,000 is the maximum, and the court awards reasonable compensation up to that limit. Option A is wrong because the full amount is not automatic. Option D exceeds the ceiling of the named sum.

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