Section 73 -of-Indian-Contract-Act

What does ‘Section 73’ of the Indian Contract Act defines?

Compensation for loss or damage resulting from a breach of contract– Section 73 of the Act allows liability for losses or damages incurred as a result of a violation of the act.

When an agreement is broken, the person who loses as a result of the violation is entitled to compensate for the injury or harm caused by the infringement. Such compensation shall not be made available for any remote or indirect injury or harm incurred as a result of the violation.

When it is breached, the person who causes harm or injury as a result of the breach is entitled to liability. Any specific or indirect injury or harm incurred as a result of the violation will not be covered by this compensation.

Compensation for failure to perform contract terms-imposed obligations? (Section 73)

Anyone who refuses to waive a responsibility established in the contract is entitled to the same payment from the party in default as if the individual had agreed to discharge it and broken his contract.

In evaluating the loss or damage caused by an agreement breach, the means available to reduce the annoyance caused by the contract’s non-performance must be taken into account.

Furthermore, In most contract disputes, consequential damages are not recoverable, although they are in tort.

Explain Illustrations of  ‘Section 73’ of Contract Act?

  1. X’ agrees to rebuild Y’s house in a particular way and collects payment in advance. ‘x’ repair the building, but not in accordance with the deal. ‘Y’ is entitled to reimburse from ‘X’ the expense of doing the repairs in accordance with the deal.
  • A agrees to supply B with a certain amount of iron at a set price that is greater than the price at which A will purchase and sell the iron. B refuses to contemplate the iron, which is incorrect. B will compensate A for the difference between the iron’s contract price and the amount for which A should have purchased and delivered it.
  • A promises to pay B a specified sum of money on a specific day. A does not reimburse the money on a particular day. Since he did not get the money on the day, B is unable to cover his loans and is completely bankrupt. A is not obligated to make good to B anything more than the principal amount he agreed to pay, plus interest up to the date of payment.”

Damages? When the contract is breached. (Section 73)

According to fundamental contract law, where there is materially breached, the non-breaching party is entitled to liability for damages incurred as a result of the breach.

Compensation is given in the form of damages, which are classified into two types: Direct and Consequential damages;

In which, Direct, or general, penalties are those that offset injuries caused specifically by the infringement. Any charges incurred with the eventual execution or correction of the job are usually considered direct losses. Specifically, labor and manufacturing prices.

Furthermore, consequential damages occur when one party to a contract fails to meet its contractual commitments, causing the other party to suffer.  However, consequential damages go into the actual harm incurred.

What does the term “loss or damage” mean in the contract act? (section 73)

The loss or damage means in contract in various forms:

Injury to an economic position is the sum for which the applicant is worse off than he would have otherwise performed, and would entail lost earnings, losses accrued, fees, penalties charged to third parties, and,

Physical injuries, disabilities, lack of pleasure, loss of warmth, inconvenience or disappointment, hurt emotions, vexation, emotional illness, and loss of prestige are also examples of harm to people.

Property harm, i.e. property loss or destruction and so on.

Types of Damages Under ‘Section 72’ of the Indian Contract Act, 1872?

The types of damages in the contract are classified into several categories:
  • General & Special Damages,
  • Nominal & Substantial Damages,
  • Aggravated & Exemplary Damages,
  • Liquidated & Unliquidated Damages.

In the first category, General damages are those that arose spontaneously during the regular course of events. In terms of proof, it applies to damages, commonly but not always non-monetary, that is not precisely quantifiable in monetary terms.

Special damages are those that do not, result from the defendant’s breach and may only be obtained if they were in the parties’ equal contemplation at the time the agreement was signed. It applies to damages that can be measured financially.

In the second Category, If the defendant is held liable for the contractual obligation, even if no real injury is proved, the complainant is entitled to nominal damages. If there is a violation of a civil right and it does not result in actual damages, the right to a conviction is granted as a result of the infringement. Many prosecutors may claim substantial penalties in circumstances where a crime is proven, even if measuring the damages with accuracy or accuracy is not only difficult but also impractical.

In the third category, Aggravated damages, compensate a claimant for emotional trauma or damaged sensations in cases where the harm was induced or exacerbated by the defendant’s wrongdoing or the defendant’s actions after the wrongdoing.

Exemplary damages are meant to act as a barrier to the defendant; they are punitive in nature and are not intended to reward the defendant for injury, but rather to prosecute the defendant.

Damages are said to be liquidated in the fourth division before they have been agreed upon and resolved by the parties. It is the amount settled to by the parties of their settlement as payable in the event of one of them failing to perform; Section 74 extends to those penalties. The injury or liability is quantified or assessed by the court; those losses are Unliquidated.

In a contract act, what is the difference between consequential damage and incidental loss?

Consequential injury or loss typically refers to monetary harm as a result of physical damage, such as a loss of benefit suffered as a result of fire damage in a warehouse.

Another term for incidental loss is the loss suffered by the claimant after being aware of the violation and taking steps to prevent the loss, such as the expense of purchasing or returning faulty products.

However, Many construction contracts contain a provision for the termination of consequential damages. These are usually waived in lieu of liquidated losses for the benefit of the owner, and all lost income for the contractor is excluded.

How to Measure the Damage & Remoteness of Damage Caused under Section 72 of the Contract Act?

The contract act provides legal rules regulating recoverability are concerned with the measure of loss or measure of liability; the concept of the remoteness of damage limits the recoverability of damages.

Issues regarding measure of damages are only involved with the quantity of damages to be compensated and are therefore distinct from questions of calculation of damages; the latter requires interpretation of the statute. Furthermore,

 The legal measure used to assess which types of loss caused by contract violation may be recovered by awarding damages is referred to as the remoteness of damages.

It is distinct from the phrase sum of damages or quantification, which refers to a way of calculating monetary liability for a specific consequence or loss that has been assessed to be not too remote.

Reference- Indian Contract Act 1872
Tax laws

-Article by
Prabal Pratap Singh

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