Section 73 of Indian Contract Act 1872: Understanding its Significance

 
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Section 73 of the Indian Contract Act, 1872 deals with the compensation for loss or damage caused by a breach of contract. It states that when a contract has been broken, the party who suffers by such breach is entitled to receive compensation from the party who has broken the contract for any loss or damage caused to them thereby. This compensation is to be calculated based on the natural 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. However, compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Here's a breakdown of the section:

  • "When a contract has been broken" - This means that the contract has not been performed according to its terms.
  • "The party who suffers by such breach" - This is the party who has been harmed by the breach of the contract.
  • "Is entitled to receive compensation" - This means that the party who has been harmed is entitled to be paid money for the damage they have suffered.
  • "From the party who has broken the contract" - This is the party who has breached the contract.
  • "For any loss or damage caused to him thereby" - This means that the compensation is to be based on the actual loss or damage that the party who has been harmed has suffered.
  • "Which naturally arose in the usual course of things from such breach" - This means that the compensation is only to be for losses or damages that were foreseeable and within the contemplation of the parties when they entered into the contract.
  • "Or which the parties knew, when they made the contract, to be likely to result from the breach of it" - This means that the compensation can also be for losses or damages that were not foreseeable, but which the parties knew were likely to result from the breach of the contract.
  • "Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach" - This means that the compensation is not to be for losses or damages that are too far removed from the breach of the contract.

In summary, Section 73 of the Indian Contract Act, 1872 provides a framework for compensating parties who have been harmed by a breach of contract. The compensation is to be based on the actual loss or damage that the party has suffered, and it is not to be for losses or damages that are too far removed from the breach of the contract.

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