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

Rohit gives the court a bail-bond for Rs. 20,000, binding himself to appear in court on a fixed day. He fails to appear and the bond is forfeited. Which statement is correct under Section 74?

Rohit must pay the whole Rs. 20,000. The Exception to Section 74 says that on breach of the condition of a bail-bond, recognizance or similar instrument, the person is liable for the whole sum mentioned, rather than merely reasonable compensation.

  1. AHe is liable to pay the whole sum mentioned in the bond, under the Exception to Section 74Correct
  2. BHe is liable only for reasonable compensation not exceeding Rs. 20,000
  3. CHe is liable only if the State proves actual loss
  4. DHe is not liable because a bail-bond is not a contract

Explanation

The Exception to Section 74 covers bail-bonds, recognizances and similar instruments, and makes the person liable to pay the whole sum on breach of the condition. Illustration (c) shows the same. The reasonable-compensation rule applies to ordinary penalty clauses, not to such bonds.

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