Section 73 - Compensation for loss or damage caused by breach of
contract : Indian Contract Act
What is Compensation for loss or damage caused by breach of
contract? Section 73 of Indian Contract Act
Section 73 of Indian Contract Act 1872 : "Compensation for loss
or damage caused by breach of contract"
73. When a contract has been broken, the party who suffers by
such breach is entitled to receive, from the party who has
broken the contract, compensation for any loss or damage caused
to him thereby, which naturally arose in the usual course of
things from such breach, or which the parties knew, when they
made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason of the breach.
Compensation for failure to discharge obligation resembling
those created by contract. When an obligation resembling those
created by contract has been incurred and has not been
discharged, any person injured by the failure to discharge it is
entitled to receive the same compensation from the party in
default, as if such person had contracted to discharge it and
had broken his contract.
Explanation. In estimating the loss or damage arising from a
breach of contract, the means which existed of remedying the
inconvenience caused by the non-performance of the contract must
be taken into account.
(a) A contracts to sell and deliver 50 maunds of saltpetre to B,
at a certain price to be paid on delivery. A breaks his promise.
B is entitled to receive from A, by way of compensation, the
sum, if any, by which the contract price falls short of the
price for which B might have obtained 50 maunds of saltpetre of
like quality at the time when the saltpetre ought to have been
(b) A hires B's ship to go to Bombay, and there take on
board, on the first of January a cargo which A is to provide and
to bring it to Calcutta, the freight to be paid when earned. B's
ship does not go to Bombay, but A has opportunities of procuring
suitable conveyance for the cargo upon terms as advantageous as
those on which he had chartered the ship. A avails himself of
those opportunities, but is put to trouble and expense in doing
so. A is entitled to receive compensation from B in respect of
such trouble and expense.
(c) A contracts to buy of B, at a stated price, 50 maunds of
rice, no time being fixed for delivery. A afterwards informs B
that he will not accept the rice if tendered to him. B is
entitled to receive from A, by way of compensation, the amount,
if any, by which the contract price exceeds that which B can
obtain for the rice at the time when A informs B that he will
not accept it.
(d) A contracts to buy B's ship for 60,000 rupees, but breaks
his promise. A must pay to B, by way of compensation, the
excess, if any, of the contract price over the price which B can
obtain for the ship at the time of the breach of promise.
(e) A, the owner of a boat, contracts with B to take a cargo
of jute to Mirzapur, for sale at that place, starting on a
specified day. The boat, owing to some avoidable cause, does not
start at the time appointed, whereby the arrival of the cargo at
Mirzapur is delayed beyond the time when it would have arrived
if the boat had sailed according to the contract. After that
date, and before the arrival of the cargo, the price of jute
falls. The measure of the compensation payable to B by A is the
difference between the price which B could have obtained for the
cargo at Mirzapur at the time when it would have arrived if
forwarded in due course, and its market price at the time when
it actually arrived.
(f) A contracts to repair B's house in a certain manner, and
receives payment in advance. A repairs the house, but not
according to contract. B is entitled to recover from A the cost
of making the repairs conform to the contract.
(g) A contracts to let his ship to B for a year, from the
first of January, for a certain price. Freights rise, and, on
the first of January, the hire obtainable for the ship is higher
than the contract price. A breaks his promise. He must pay to B,
by way of compensation, a sum equal to the difference between
the contract price and the price for which B could hire a
similar ship for a year on and from the first of January.
(h) A contracts to supply B with a certain quantity of iron
at a fixed price, being a higher price than that for which A
could procure and deliver the iron. B wrongfully refuses to
receive the iron. B must pay to A, by way of compensation, the
difference between the contract price of the iron and the sum
for which A could have obtained and delivered it.
(i) A delivers to B, a common carrier, a machine, to be
conveyed, without delay, to A's mill informing B that his mill
is stopped for want of the machine. B unreasonably delays the
delivery of the machine, and A, in consequence, loses a
profitable contract with the Government. A is entitled to
receive from B, by way of compensation, the average amount of
profit which would have been made by the working of the mill
during the time that delivery of it was delayed, but not the
loss sustained through the loss of the Government contract.
(j) A, having contracted with B to supply B with 1,000 tons
of iron at 100 rupees a ton, to be delivered at a stated time,
contracts with C for the purchase of 1,000 tons of iron at 80
rupees a ton, telling C that he does so for the purpose of
performing his contract with B. C fails to perform his contract
with A, who cannot procure other iron, and B, in consequence,
rescinds the contract. C must pay to A 20,000 rupees, being the
profit which A would have made by the performance of his
contract with B.
(k) A contracts with B to make and deliver to B, by a fixed
day, for a specified price, a certain piece of machinery. A does
not deliver the piece of machinery at the time specified, and in
consequence of this, B is obliged to procure another at a higher
price than that which he was to have paid to A, and is prevented
from performing a contract which B had made with a third person
at the time of his contract with A (but which had not been then
communicated to A), and is compelled to make compensation for
breach of that contract. A must pay to B, by way of
compensation, the difference between the contract price of the
piece of machinery and the sum paid by B for another, but not
the sum paid by B to the third person by way of compensation.
(l) A, a builder, contracts to erect and finish a house by
the first of January, in order that B may give possession of it
at that time to C, to whom B has contracted to let it. A is
informed of the contract between B and C. A builds the house so
badly that, before the first of January, it falls down and has
to be rebuilt by B, who, in consequence, loses the rent which he
was to have received from C, and is obliged to make compensation
to C for the breach of his contract. A must make compensation to
B for the cost of rebuilding the house, for the rent lost, and
for the compensation made to C.
(m) A sells certain merchandise to B, warranting it to be of
a particular quality, and B, in reliance upon this warranty,
sells it to C with a similar warranty. The goods prove to be not
according to the warranty, and B becomes liable to pay C a sum
of money by way of compensation. B is entitled to be reimbursed
this sum by A.
(n) A contracts to pay a sum of money to B on a day
specified. A does not pay the money on that day; B, in
consequence of not receiving the money on that day, is unable to
pay his debts, and is totally ruined. A is not liable to make
good to B anything except the principal sum he contracted to
pay, together with interest up to the day of payment.
(o) A contracts to deliver 50 maunds of saltpetre to B on the
first of January, at a certain price. B afterwards, before the
first of January, contracts to sell the saltpetre to C at a
price higher than the market price of the first of January. A
breaks his promise. In estimating the compensation payable by A
to B, the market price of the first of January, and not the
profit which would have arisen to B from the sale to C, is to be
taken into account.
(p) A contracts to sell and deliver 500 bales of
cotton to B on a fixed day. A knows nothing of B's
mode of conducting his business. A breaks his
promise, and B, having no cotton, is obliged to
close his mill. A is not responsible to B for the
loss caused to B by the closing of the mill.
(q) A contracts to sell and deliver to B, on the first of
January, certain cloth which B intends to manufacture into caps
of a particular kind, for which there is no demand, except at
that season. The cloth is not delivered till after the appointed
time, and too late to be used that year in making caps. B is
entitled to receive from A, by way of compensation, the
difference between the contract price of the cloth and its
market price at the time of delivery, but not the profits which
he expected to obtain by making caps, nor the expenses which he
has been put to in making preparation for the manufacture.
(r) A, a ship-owner, contracts with B to convey him from
Calcutta to Sydney in A's ship, sailing on the first of January,
and B pays to A, by way of deposit one-half of his
passage-money. The ship does not sail on the first of January,
and B, after being in consequence detained in Calcutta for some
time, and thereby put to some expense, proceeds to Sydney in
another vessel, and, in consequence, arriving too late in
Sydney, loses a sum of money. A is liable to repay to B his
deposit with interest, and the expense to which he is put by his
detention in Calcutta, and the excess, if any, of the
passage-money paid for the second ship over that agreed upon for
the first, but not the sum of money which B lost by arriving in
Sydney too late.