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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, so that the person is liable to pay the whole sum mentioned upon breach?

A person who forfeits a recognizance binding him in a penalty to appear in Court must pay the whole sum, because the Exception to Section 74 covers bail-bonds and recognizances. Ordinary contracts with Government or private loan bonds still get only reasonable compensation.

  1. AA contractor who signs a private supply contract with a Government department, which includes a stipulated sum for delay
  2. BA person who gives a recognizance binding himself in a penalty of Rs. 500 to appear in Court and forfeits itCorrect
  3. CA borrower who gives a bond for Rs. 200 against a loan of Rs. 100 repayable in instalments
  4. DA seller who agrees to deliver 20 maunds of grain instead of 10 maunds on late delivery

Explanation

The Exception covers bail-bonds, recognizances and bonds for public duty, with illustration (c) imposing the whole penalty. The Explanation says that merely contracting with Government does not create a public duty, so the first option is not covered. The last two are illustrations of ordinary penalties.

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