Contract Law · Remedies and Quasi-Contracts

Damages for Breach of Contract

Apply Sections 73 and 74 to ordinary, special, nominal and stipulated damages while controlling remoteness and proof.

6 min readReviewed by Advocate Aditya Sharma
Sections 73 and 74

In one line

Contract damages place the claimant, so far as money can, in the position proper performance would have produced, without creating a windfall.

After this note, you should be able to

  • Classify the recoverable head of damages.
  • Apply the two limbs of Section 73.
  • Calculate reasonable compensation under Section 74.

Damages under Section 73

The section permits foreseeable compensation and excludes remote loss.

Ordinary or general
Loss that naturally arises in the usual course from the breach.
Special
Unusual loss recoverable when the relevant special circumstances were communicated or known at formation.
Nominal
A small award may recognize breach where substantial financial loss is not proved.
Exemplary
Contract damages are generally compensatory. Punitive awards are exceptional and should not be presented as the normal rule.

Named sums and penalties under Section 74

The contractual figure is a ceiling, not an automatic award.

Breach required
Section 74 operates when the contract has been broken.
Reasonable compensation
The court awards a reasonable amount not exceeding the named sum or penalty.
Proof and genuine estimate
Where loss can be proved, evidence remains important. Where exact proof is difficult, a genuine pre-estimate can guide reasonable compensation.
No windfall
A forfeiture or penalty cannot become automatic profit unrelated to compensable loss.

Work through the facts

Illustration

Facts

A venue contract fixes Rs 10 lakh as payable for any delay, even one hour. A delays access by one hour, causing proved loss of Rs 40,000.

Likely result

The venue does not automatically receive Rs 10 lakh. Section 74 permits reasonable compensation up to that ceiling, assessed from the actual circumstances.

What to learn

Always separate the contractual maximum from the amount reasonably recoverable.

Cases with a purpose

Landmark judgments

Learn the rule and where to use it. A case name without its legal function adds very little to an answer.

Fateh Chand v. Balkishan Das

Further reading

AIR 1963 SC 1405

Principle: Section 74 creates a uniform rule of reasonable compensation for named sums and penalties, subject to the stipulated maximum.

Use in an answer: Use it as the starting authority for forfeiture and penalty clauses.

Kailash Nath Associates v. Delhi Development Authority

Further reading

(2015) 4 SCC 136

Principle: Reasonable compensation follows breach and compensable loss; a named amount is not automatically recoverable, especially where loss can be proved or no loss occurred.

Use in an answer: Use it to explain proof, genuine pre-estimate, forfeiture and the no-windfall principle.

Read primary judgment

For a 10-mark answer

Answer structure

  1. Establish breach, causation and the claimed loss.
  2. Classify ordinary, special or nominal damages.
  3. Apply remoteness and mitigation under Section 73.
  4. If a sum is named, apply Section 74 and calculate reasonable compensation.

Common mistakes

  • Awarding every amount written in a penalty clause.
  • Claiming special loss never communicated to the defendant.
  • Using damages to punish rather than compensate.

Before you close the tab

Quick revision

  • Section 73 covers natural and contemplated loss.
  • Remote and indirect loss is excluded.
  • Section 74 awards reasonable compensation within the stated ceiling.
  • A genuine pre-estimate helps when exact loss is difficult to prove.

Test yourself

  1. When are special damages recoverable?
  2. Is the Section 74 sum automatically payable?
  3. Why does proof of loss still matter?

Short answers

Frequently asked questions

Are liquidated damages automatically awarded?

No. Section 74 permits reasonable compensation up to the named amount. The court examines breach, loss, proof and whether the figure was a genuine estimate.

Can remote business losses be recovered?

Not ordinarily. Special loss must have been within the parties' contemplation when the contract was made and must be proved.

Primary sources

This is an educational study note. Always read the bare provision and the full judgment before relying on a proposition in research or practice.