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

Under Section 73 of the Indian Contract Act, 1872, a party who suffers because the other party has broken the contract can claim compensation for which of the following losses?

The injured party can recover loss that naturally arose in the usual course of things from the breach, or loss which both parties knew, when making the contract, was likely to result from it. Remote and indirect losses are not compensated under Section 73.

  1. AAny loss whatsoever that the injured party can show, however remote
  2. BLoss that naturally arose in the usual course of things from the breach, or which the parties knew when contracting to be likely to result from itCorrect
  3. COnly loss that was expressly written into the contract as a penalty
  4. DOnly the loss of the price already paid, without any interest

Explanation

Section 73 allows compensation for loss that naturally arose in the usual course of things from the breach or that the parties knew, when they made the contract, to be likely to result from it. Remote and indirect loss is excluded, so option A is wrong. The section does not confine compensation to a stipulated penalty or to the price paid.

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