Section 73 The Indian Contract Act, 1872
🔹 Section 73 – The Indian Contract Act, 1872
"Compensation for loss or damage caused by breach of contract"
📘 Bare Text (Simplified):
When a contract is broken, the party who suffers by such breach is entitled to:
Compensation for any loss or damage caused to them:
Naturally arising in the usual course of things, or
Which the parties knew, at the time of contract, would likely result from the breach.
🔸 However:
No compensation is given for remote or indirect loss or damage.
✅ Key Points:
Direct losses are compensable.
Foreseeable consequences known to both parties are also compensable.
Remote or speculative damages are not recoverable.
Compensation may include costs incurred due to breach (e.g., substitute arrangements).
🧑⚖️ Illustration:
A contracts to deliver 100 bags of wheat to B by 1st July, for B to resell to C.
A fails to deliver.
B cannot supply C and loses ₹10,000 profit.
B can claim compensation if A knew this resale was part of the agreement.
🧑⚖️ Leading Case Law:
Hadley v. Baxendale (1854) – Basis of Section 73:
Damages can be claimed:
If they arise naturally from the breach, or
Were in the contemplation of both parties at the time of contract.
🔗 Related Sections:
Section 74 – Compensation for breach of contract where penalty is stipulated.
Section 75 – Compensation to a party rightfully rescinding the contract.
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