CS Executive · Jurisprudence, Interpretation and General Laws · Contract Law
Seema, a money-lender's debtor, owes Prakash and undertakes to repay him by delivering 10 maunds of grain on a fixed date, stipulating that if she fails, she must deliver 20 maunds. She fails to deliver on time. What is Prakash entitled to under Section 74?
Prakash is entitled only to reasonable compensation. Illustration (e) to Section 74 treats the promise to deliver 20 maunds instead of 10 on default as a stipulation by way of penalty, so the agreed larger quantity is not enforced as written.
- A20 maunds of grain as agreed
- BOnly 10 maunds, with no further relief
- CReasonable compensation, because the stipulation is by way of penaltyCorrect
- DNothing, because the contract is void
Explanation
Illustration (e) to Section 74 states that doubling the quantity on default is a stipulation by way of penalty, and the creditor is only entitled to reasonable compensation on breach. Option A treats the penalty as enforceable in full, which the section does not allow.
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