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

Under Section 74 of the Indian Contract Act, 1872, when a sum is named in a contract as payable on breach, the party complaining of the breach is entitled to:

Section 74 entitles the aggrieved party to reasonable compensation not exceeding the sum named in the contract, and this holds whether or not actual loss is proved. The named amount is only the upper limit, and the Court decides what is reasonable.

  1. AThe full named sum only if actual loss is proved
  2. BReasonable compensation not exceeding the named sum, whether or not actual loss is provedCorrect
  3. CAny amount the aggrieved party claims, regardless of the named sum
  4. DOnly the actual loss proved, and nothing if no loss is shown

Explanation

Section 74 allows the aggrieved party reasonable compensation not exceeding the amount named or the penalty stipulated, and it applies whether or not actual damage or loss is proved. The named sum is a ceiling, not an automatic entitlement. Requiring proof of loss contradicts the section's wording.

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