Skip to content

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

Under the Indian Contract Act, 1872, a contract names a sum payable if either party breaks it. When the contract is broken, what is the party complaining of the breach entitled to receive from the defaulting party?

The aggrieved party gets reasonable compensation not exceeding the sum named in the contract. Under Section 74 this applies whether or not actual loss is proved, so the named sum is a ceiling rather than an automatic entitlement.

  1. AThe full named sum in every case, without any court review
  2. BReasonable compensation not exceeding the named sum, whether or not actual loss is provedCorrect
  3. COnly the actual loss proved, with no regard to the named sum
  4. DNothing, because a named sum is always void

Explanation

Section 74 allows the aggrieved party to receive reasonable compensation not exceeding the named amount, and this is so whether or not actual damage or loss is proved. The full named sum is not automatic, as the court decides what is reasonable. Limiting recovery to proved loss ignores the words 'whether or not actual damage or loss is proved'.

Did you get it right without looking?

One question tells you little. A timed set on Breach of Contract and Remedies for Breach of Contract shows your real accuracy, how long you take and where you lose marks.

Practise Breach of Contract and Remedies for Breach of ContractFree diagnostic mock

More Breach of Contract and Remedies for Breach of Contract questions