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

Which of the following situations falls within the Exception to Section 74, under which the person is liable to pay the whole sum mentioned on breach?

The Exception to Section 74 covers bail-bonds, recognizances and bonds for public duty. A person who forfeits a recognizance to appear in Court must pay the whole sum mentioned. Ordinary commercial contracts, including supply contracts with the Government, remain subject to reasonable compensation.

  1. AA supplier's contract with a private company states Rs. 20,000 payable on late delivery
  2. BA person gives a recognizance binding him in a penalty of Rs. 500 to appear in Court on a certain day, and forfeits itCorrect
  3. CA borrower gives a bond for Rs. 200 for a loan of Rs. 100 payable in instalments
  4. DA person contracts with the Government to supply stationery, with a stated sum payable on breach

Explanation

The Exception covers bail-bonds, recognizances and similar instruments, and bonds for performing a public duty. Illustration (c) shows that a person who forfeits a recognizance must pay the whole penalty. The Explanation states that merely contracting with the Government does not by itself involve a public duty, so the Government supply contract is excluded.

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