VARIOUS KINDS OF DAMAGES UNDER

INDIAN CONTRACT ACT

SUBMITTED BY: SUBMITTED TO:

MANJEET KUMAR MS. LOVEPREET

SUPERVISOR
ROLL NO. 18106

GROUP NO. 16

RAJIV GANDHI NATIONAL UNIVERSITY OF LAW,

PUNJAB

10 SEPTEMBER 2019
 ACKNOWLEDGEMENT

On completion of this project it is my present privilege

to acknowledge my heartfelt gratitude and indebtedness
towards my teachers for their valuable suggestion and
constructive criticism. Their precious guidance and
unrelenting support kept me on the right path
throughout the whole project and very much thankful to
my teacher in charge and project coordinators for giving
me this relevant and knowledgeable topic.

I wish to express my sincere gratitude to my teacher

Honey Sir for their guidance and encouragement in
carrying out this project work.

I also wish to express my thanks to my group members and

my friends for their ideas because of which this project
became more captivating. I am also thankful to my institution
library for providing a broad range of books to learn more.
RAJIV GANDHI NATIONAL UNIVERSITY OF
LAW, PUNJAB

SUPERVISOR’S CERTIFICATE

Dr Manpreet kaur Patiala

(Punjab)
Date:12
April

Rajiv Gandhi National University of Law

Punjab

This is to certify that the Dissertation titled Changing

family structure : a current discourse , submitted to Rajiv
Gandhi National University of Law, Patiala in partial
fulfilment of the requirement of the B.A.LLB (Hons.).
Course is an original and bona fide research work carried
out by Mr. Manjeet Kumar under my supervision and
guidance. No part of this project has been submitted to any
University for the award of any Degree or Diploma,
whatsoever.

Dr Manpreet Kaur
 CONTENTS
1. INTRODUCTION ……………….……………………………

2. WHAT IS CONTRACT AND ITS ESENTIALS……….……

3. MEANING OF DAMAGES……………………………………

4. BREACH OF CONTRACT.…………………….…………….

5. REMEDIES OF BREACH CONTRACT……………………

5.1 GENERAL DAMAGES…………………………………..

5.2 SPECIAL DAMAGES…………………………………….

5.3 NOMINAL DAMAGES…………………………………..

5.4 EXEMPLARY DAMAGES……………………………….

5.5 LIQUIDATED DAMAGES……………………………….

5.6 PENALTY …………………………………………………

5.7 REMOTE DAMAGES…………………………………….

6. CONCLUSION…………………………………………………
 1.INTRODUCTON
In practical terms, there isn’t much difference and compensation is often used to refer to
damages as well. Moreover, the Contact Act 1872, uses the term “compensation” in the
sections referring to liquidated and unliquidated damages, which shall be discussed
subsequently.1 Damages have gained much significance especially among commercial
transactions, and as punitive measures for violation of rights of concerned persons. The
nature of damages granted across various areas varies significantly. For example, with
respect to damages granted under indemnity contracts, it is pertinent to understand the
significant differences between the two.4 Indemnity is a kind of protection from third party
losses, which is ensured by an indemnity agreement between the claimant (indemnified) and
the indemnifier.5 A claim for indemnity arises from the original contract of indemnity while a
claim for damages arises on breach of a contract. Unlike damages under ordinary contracts
where the defendant has the primary liability to pay the damages, under indemnity contracts,
the risk of future losses and liability to pay damages shifts to the indemnifier. Damages are
popularly granted in cases of tort or on breach of contract. This paper broadly covers
damages in cases of contractual breaches in India, with a brief overview of claim and grant of
damages in cases of torts, indemnity contracts, arbitral proceedings, sale of goods, consumer
law and intellectual property rights (copyrights, trademarks and patents).

Indian Contract Act, 1872 speaks of consequences of breach, rather than remedies for breach.
Breach of contract is a legal cause of action in which a binding agreement is not honoured by
one or more of the parties to the contract by non-performance or interference with the other
party’s performance. If the party does not fulfil his contractual promise, or has given
information to the other party that he will not perform his duty as mentioned in the contract
or if by his action and conduct he seems to be unable to perform the contract, he is said to
make a breach the contract. The breach of contract may be: A) actual or B) anticipatory.2

 The actual breach may take place either at the time the performance is due, or when
actually performing the contract.
 The anticipatory breach, i.e., a breach before the time for the performance has arrived.

When a breach of contract takes place, the remedy of damages is the logical consequence of
breach. The aggrieved party may seek compensation from the party who breaches the
contract. When the aggrieved party claims damages as a consequence of breach, the court
takes into account the provisions of law in this regard and the circumstances attached to

1
Pandia – Principles of Mercantile Law, 8th edition, by Ramkrishna R.Vyas.
2
https://www.dezshira.com/library/legal/contract-act-india.html
the contract. The fact is that both damages and penalty are a form of economic gain which are
payable by the defaulter to the innocent party that has suffered a loss due to the breach.
This can be observed by:
I. Analysis of what damages mean and ought to mean under Section 73.
II. Analysis of what penalties mean and ought to mean under Section 74.
III. Critically analysing as to the reason why penalty and damages are confused to mean the
same and what is that point of difference between the two words and there usage. So, for the
clear understanding of the above mentioned concepts, one should do intensive study of the
meaning of these under law of contract as well.

2. What is contract
A contract is basically an agreement between two parties creating a legal obligation for both
of them to perform specific acts. Each party is legally bound to perform the specified duties
such as rendering a payment or delivering goods.

In order for the contract to be enforceable, each party must exchange something of value
(called “consideration”).

A contract may be used for various transactions, including the sale of land or goods, or the
provision of services. They may be either oral or written, though courts prefer that
agreements be put in writing.

Essentials of Contract
1. Offers and Acceptance
For an agreement there must be a lawful offer by one and lawful acceptance of that offer
from the other party. The term lawful means that the offer and acceptance must satisfy the
requirements of Contract Act. The offer must be made with the intention of creating legal
relations otherwise, there will be no agreement.

Example:
A say to B that he will sell his cycle to him for Rs.2000. This is an offer. If B accepts this
offer, there is an acceptance.
2. Legal Relationship
The parties to an agreement must create legal relationship. It arises when parties know that if
one for the failure of a contract. Agreements of a social or domestic nature do not create legal
relations and as such cannot give rise to a contract. It is presumed in commercial agreements
that parties intend to create legal relations.

Example:
1. A father promises to pay his son Rs.500 every month as pocket money. Later, he refuses to
pay. The son cannot recover as it is a social agreement and does not create legal relations.

2. A offers to sell his watch to B for Rs.200 and B agrees to buy it at the same price, there is a
contract as it creates legal-relationship between them.

3. A husband promised to pay his wife a household allowance of 30 pounds every month.
Later, the parties separated and the husband failed to pay. The wife used for allowance. Held
that the wife was not entitled for the allowance as the agreement was social and did not create
any legal obligations.

3. Lawful Consideration
The third essential of a valid contract is the presence of consideration. Consideration is
“something in return.” It may be some benefit to the party. Consideration has been defined as
the price paid by one party for the promise of the other. An agreement is enforceable only
when both the parties get something and give something. The something given or obtained is
the price of the promise and is called consideration.

Example:
1. A agrees to sell his house to B for Rs.10 Lac is the consideration for A’s promise to sell the
house, and A’s promise to sell the house is the consideration for B’s promise to pay Rs.10
Lac. These are lawful considerations.

2. A promise to obtain for B employment in the public service, and B promise to pay 10,000
rupees to A. the agreement is void, as the consideration for it is unlawful.

4. Capacity of Parties:
An agreement is enforceable only if it is entered into by parties who possess contractual
capacity. It means that the parities to an agreement must be competent to contract. According
to Section 11, in order to be competent to contract the parties must be of the age of majority
and of sound mind and must not be disqualified from contracting by any law to which they
are subject. A contract by a person of unsound mind is void ab-initio (from the beginning).

If one of the parties to the agreement suffers from minority, madness, drunkenness etc., the
agreement is not enforceable at law, except in some cases.

Example:
1. M, a person of unsound mind, enters into an agreement with S to sell his house for Rs.2
lac. It is not a valid contract because M is not competent to contract.

2. A, aged 20 promises to sell his car to B for Rs.3 Lac. It is a valid contract because A is
competent to contract.

5. Free Consent:
It is another essential of a valid contract. Consent means that the parties must have agreed
upon the same thing in the same sense. For a valid contract it is necessary that the consent of
parties to the contact must be free.

Example:
1. A compels B to enter into a contract on the point of pistol. It is not a valid contract as the
consent of B is not free.

6. Lawful Objects:
It is also necessary that agreement should be made for a lawful object. The object for which
the agreement has been entered into must not be fraudulent, illegal, immoral, or opposed to
public policy or must not imply injury to the person or property of another. Every agreement
of which the object or consideration is unlawful is illegal and the therefore void.

Example:
A promise to pay B Rs.5 thousand if B beats C. The agreement is illegal as its object is
unlawful.
7. Writing and Registration:
According to Contract Act, a contract may be oral or in writing. Although in practice, it is
always in the interest of the parties that the contract should be made in writing so that it may
be convenient to prove in the court. However, a verbal contract if proved in the court will not
be considered invalid merely on the ground that it not in writing. It is essential for the
validity of a contact that it must be in writing signed and attested by witness and registered if
so required by the law.

Example:
1. A Verbally promises to sell his book to y for Rs.200 it is a valid contract because the law
does not require it to be in writing.

2. A verbally promises to sell his house to B it is not a valid contract because the law requires
that the contract of immovable property must be in writing.

8. Certainity:
According to Section 29 of the Contract Act, “Agreements the meaning of which are not
certain or capable of being made certain are void.” In order to give rise to a valid contract the
terms of the agreement, must not be vague or uncertain. For a valid contract, the terms and
conditions of an agreement must be clear and certain.

Example:
1. A promised to sell 20 books to B. It is not clear which books A has promised to sell. The
agreement is void because the terms are not clear.

2. A agrees to sell B a hundred tons of oil. It is not clear what is the kind of oil. The
agreement is void because of it uncertainty.

3. O agreed to purchase a van from S on hire-purchase terms. The price was to be paid over
two years. Held there was no contract as the terms were not certain about rate of interest and
mode of payment.

9. Possibilty of Performance:
The valid contract must be capable of performance section 56 lays down that. “An agreement
to do an act impossible in itself is void.” If the act is legally or physically impossible to
perform, the agreement cannot be enforced at law.

Example:
1. A agrees with B to discover treasure by magic, the agreement is not enforceable.

2. A agrees with B to put life into B’s dead brother. The agreement is void as it is impossible
of performance.

10. Not Expressly Declared Void:

An agreement must not be one of those, which have been expressly declared to be void by
the Act. Section 24-30 explains certain types of agreement, which have been expressly
declared to be void. An agreement in restraint of trade and an agreement by way of wager
have been expressly declared void.

Example:
A promise to close his business against the promise of B to pay him Rs.2 lac is a void
agreement because it is restraint of trade.

3.Meaning of Damages: -
The theory of damages is that they are a compensation and satisfaction for the injury
sustained, i.e. the sum of money to be given for reparation of the damages suffered should as
nearly as possible, be the sum which will put the injured party in the same position as he
would have been if he had not sustained the wrong for which he is getting damages.
Definitions:-
• Black’s law dictionary: “Damages are the sum of money claimed by or ordered to be paid to
a person as compensation for loss or injury.”
• Acc. to Frank Graham: “Damages are the sum of money which a person wronged is entitled
to receive from the wrong doer as compensation for the wrong.”
Judicial interpretation of damages:-
In Sohm v. Dixie Eye,3 Justice Greenwood of the Court of Appeals of Utah adopted these
words: “damages” generally refers to money claimed by, or ordered to be paid to, a person
as compensation for loss or injury. “The term injury is sometimes used in the sense of
damage, as including the harm or loss for which compensation is sought, and has been
defined as damage resulting from an unlawful act; but in strict legal significance, there is,
properly speaking, a material distinction between the two terms, in that injury means
something done against the right of the party, producing damage, whereas damage is the
harm, detriment, or loss sustained by reason of the injury.”

4. Breach of contract
“Breach of contract” constitutes the pre-condition for a claim of damages, be it liquidated,
unliquidated or otherwise. Thus, irrespective of the extent to which the defendant profits
from the contractual arrangement, there can be no claim for damages unless there is a breach
of the contract. Further, the party committing the breach is liable to compensate by way of
damages. To establish a breach, it has to be adjudicated upon and be proved, and not merely
decided by the parties.4 A contract is said to be breached in case of contravention with the
terms of the contract or when the promise made is broken. It may so happen that the terms
are not complied in a manner which had been contemplated in the contract. For example, if a
party contracts with another for repairing the other’s house in a certain manner, and the repair
was not done in the manner which was decided, then the aggrieved party in entitled to
damages to the extent of costs of making repairs in conformity with the contract. Damages
may also be claimed in case of anticipatory breach of contract. An anticipatory breach is said
to have been committed when a party refuses to perform, or has disabled himself from the
performance of the promise in its entirety. In such a scenario, the other party may acquiesce
to the continuation of the contract or rescind it. In case of an anticipatory breach of contract,
the plaintiff would be entitled to claim damages on establishing the intention to perform the
contract prior to rescission of the contract.

5. Remedies for Breach of Contract

The nature of damages used or sought for depends on the objective for which damages are
being claimed for. Thus, damages can be categorized into one or more of the following kinds:

3
https://www.courtlistener.com/opinion/2623789/sohm-v-dixie-eye-center/
4
https://www.dezshira.com/library/legal/contract-act-india.html
1. General damages
Damages which arise in the normal course of events are known as general damages while
special damages refer to those that arise under circumstances which were reasonably
anticipated by the parties when they entered into the contract. Once a damage is proven,
general damages are presumed to follow such damage, while specific proof of such damage
is necessary for which special damages are claimed.

Section 73 of the Indian Contract Act deals with Direct Damages; It means damages 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.

2. Special damages

Special damages arise on account of the unusual/ special circumstances affecting the plaintiff
and resulting into the consequential damage; They are not recoverable unless the special
circumstances were brought to the knowledge of the defendant, so that the possibility of the
special loss was in contemplation of the parties. Special damages do not mean serious
damage in the sense of irreparable loss but damage affecting the plaintiff individually (or
damage peculiar to the plaintiff) or beyond what is suffered by him in common with orders.
(Halsbury Laws of India Volume 9 Page 160 as referred by National Green Tribunal in The
Forward Foundation, A Charitable Trust and Ors. vs. State of Karnataka and Ors5

Difference between General and Special Damages

Liability Aspect: In the context of liability for loss (usually in contract), general damages are
those which arise naturally and in the normal course of events, whereas special damages are
those which do not arise naturally out of the defendant’s breach.6

5
http://opencity.in/documents/forward-foundation-ors-vs-state-of-karnataka-ors-2014
6
Halsbury Laws of India Volume 9 Page 16 as referred by National Green Tribunal in The Forward Foundation, A
Charitable Trust and Ors. vs. State of Karnataka and Ors., MANU/GT/0075/2016
Recovery Aspect: Claim Special Damages are recoverable only where they were not beyond
the reasonable contemplation of the parties (for example, where the plaintiff communicated
to the defendant prior to the breach the likely consequences of the breach).

Quantification Aspect: General damages are losses, usually but not exclusively, non-
pecuniary, which are not capable of precise quantification in monetary terms. For example,
damages for harm to reputation in actions for defamation and damages for pain and suffering
in actions relating to personal injury. Special damages, in this context, are those losses which
can be calculated in financial terms. These are generally pecuniary losses calculable at the
time of trial, for example, claims for loss of earnings, whether past or future, or the cost of
care in personal injury actions.

Pleading Aspect: Special damage refers to those losses which must be specifically pleaded
and proved7 by evidence, and particulars of the special damage claimed must be specified in
the plaint, whereas general damage is that which will be presumed to be the natural or
probable consequences of the wrong complained of, with the result that the plaintiff is
required only to assert that such damage has been suffered and quantification is left to the
court.

3. Nominal damages
When a party approaches the court for claiming damages, the court has the discretion to
award nominal damages. This may be awarded even when there is no actual loss or injury
caused to a party against whom a breach has been caused, or in cases where there has been a
violation of a legal right, without any actual damage being proved. Thus, in cases where a
party fails to prove actual loss resulting from a breach of contract, nominal damages may be
granted. Additionally, nominal damages may be awarded where a technical breach of contract
has been committed or when the breach has taken place due to an external reason which is
not attributable to the defendant. Indian Oil Corporation Vs. Messrs Lloyds Steel
Industries Limited; 2007 (144) DLT 659)8

4. Aggravated and exemplary damages

7
VIACOM 18 Media Pvt . Ltd . vs . MSM Discovery Pvt . Ltd. at para 164; See also A. Valliammal vs. Chitra Travels
and The Branch Manager, United India Insurance Co. Ltd., MANU/TN/3715/200
8
https://indiankanoon.org/doc/779005/
These damages are of such nature that they exceed the damages ascertained, mostly resulting
from the mala fide conduct of the defendant. Aggravated damages gain significance where
the damage caused to the plaintiff are aggravated due to the motives, conduct or manner of
inflicting injury, whereby the plaintiff’s feelings and dignity are adversely affected resulting
in mental distress. Aggravated damages are mostly compensatory in nature since they aim at
compensating the plaintiff for the aggravated loss suffered. On the other hand, exemplary
damages are punitive in nature since they intend to punish the defendant and not merely
compensating or depriving the defendants of the profits made.8 Since damages under
contractual breaches do not consider the motive and conduct of defendants, it is to be
understood that aggravated and exemplary damages are more prominent in torts and not
under contractual breaches. This is primarily because of the fact that the objective behind
contractual remedies is to compensate the promisee for the breach rather than compelling
performance on the promisor However, punitive damages may be granted in certain
exceptional cases.

The Canadian Supreme Court’s finding in this respect is of utmost relevance, wherein it was
observed that: “Punitive damages are very much the exception than the rule, imposed only if
there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that
departs to a marked degree from ordinary standards of decent behaviour. Where they are
awarded, punitive damages should be assessed in an amount reasonably proportionate to such
factors as the harm caused, the degree of the misconduct, the relative vulnerability of the
plaintiff and any advantage or profit gained by the defendant, having regard to any other fines
or penalties suffered by the defendant for the misconduct in question. Punitive damages are
generally given only where the misconduct would otherwise be unpunished or where other
penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence
and denunciation. Their purpose is not to compensate the
plaintiff, but to give a defendant his or her just desert (retribution), to deter the defendant and
others from similar misconduct in the future (deterrence), and to
mark the community collective condemnation (denunciation) of what has happened. Punitive
damages are awarded only where compensatory damages, which to some extent are punitive,
are insufficient to accomplish these objectives, and they are given in an amount that is no
greater than necessary to rationally accomplish their purpose.”
Nevertheless, courts in U.K. and India have been strict regarding grant of punitive damages
in case of contractual breaches. For example, in a recent case, the England and Wales High
Court (Chancery Division), in an obiter, agreed with the claimants that: “i) The first is that
exemplary damages, otherwise known as punitive damages, are awarded against a defendant
as a punishment, so that the assessment goes beyond mere compensation of the claimant.
Whilst such damages are capable of being awarded in tort (albeit only in very limited
circumstances), there is no right to recover exemplary damages for breach of contract. If any
right to damages arises in the present case, it would be founded upon (or by analogy with) a
cause of action in contract. Therefore, as a matter of principle, exemplary damages would not
be recoverable in the present case. ii) The second answer is that, even if such an award is
available in principle, it should be by reference to the principles developed in tort and subject
to the restrictions laid down in Rookes v. Barnard [1964] AC 1129. The facts of the present
case do not fall within those principles.” Similarly, in India, courts have held that the nature
of compensation should be such that the award of compensation for damages cannot be
considered either punitive or in the nature of a reward.

5. Liquidated damages
In case of contracts, parties may agree to payment of a certain sum on breach of the contract.
When such stipulations are made in the contract, they are known as liquidated damages. On
the other hand, unliquidated damages are awarded by the courts on an assessment of the loss
or injury caused to the party suffering such breach of contract. Under the Indian Contract Act
1872, unliquidated and liquidated damages are given under sections 73 and 74 respectively,

which shall be discussed in the subsequent chapter of this paper.

Kemble v. Farren9 , Farren (defendant) contracted with Kemble (plaintiff), the director of
Covent Garden Theater, to perform as the foremost comedian for four seasons. The parties
went into an agreement stipulating that £1,000 would be the damages should any party
breach the agreement in full in any capacity or breach any part thereof. The agreement
expressed that this amount constituted liquidated damages and not a penalty. Farren declined
to act during the second season. Kemble sued and the jury granted him £750.

6. Penalty

9
130 Eng. Rep. 1234 (1829)
Penalty under law of contract does not mean punishment to the wrong doer. It is used in quite
different sense. It is totally different from punitive damages. As punitive damages means
monetary compensation awarded to an injured party that goes beyond which is necessary to
compensate the individual for losses and that is intended to punish the wrongdoer. The
purposes of punitive damages are to punish the defendant for outrageous misconduct and to
deter the defendant and others from similar misbehaviour in the future. While it is not so, in
case of penalty stipulated for under sec. 74 of Indian Contract Act 1872. The Indian Contract
Act, 1872 uses the words penalty under section 74 as: “Compensation of breach of contract
where penalty stipulated for :-When a contract has been broken, if a sum is named in the
contract as the amount be paid in case of such breach, or if the contract contains any other
stipulation by way of penalty, the party complaining of the breach is entitled, whether or not
actual damage or loss or proved to have been caused thereby, to receive from the party who
has broken the contract reasonable compensation not exceeding the amount so named or, as
the case may be, the penalty stipulated for.” In section 74 the words that have to be
emphasized upon are “sum is named”. The term ‘sum is named’ gives out the clear meaning
that the amount that becomes payable in the event of any breach is pre- estimated and is
provided for in the contract. It is determined in the form of either damages or a stipulated
penalty. Further, they sum that is so specified is the reasonable compensation for the breach
and in no case the amount can be exceeded from what has been specified in the contract.
Thus, in short section 74 talks about liquidated damages and not other kind of damages.
Liquidated damages: (not defined in the Indian Contract act, 1872) If the sum fixed
represents a genuine pre-estimate of the probable damages that is likely to result
from the breach, it is liquidated damages.
Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd 10 Dunlop sued its tyre
retailer, New Garage, for breaching an agreement to not resell Dunlop tyres at a price lower
than that listed in the contract. The agreement then said if that did happen, New Garage
would pay £5 per tyre ‘by way of liquidated damages and not as a penalty’.

The judge held the £5 sum was liquidated damages and enforceable. The Court of Appeal
held the clause was a penalty and Dunlop could only get nominal damages. Dunlop appealed.

7. Remote Damages

10
http://www.bailii.org/uk/cases/UKHL/1914/1.html
Section 73 of the Contract Act is lays down the provision relating to damages. It provides that
the party, who breaches a contract, is liable to compensate the injured party for any loss or
damage caused, due to the breach of contract.11
The rule relating to remoteness of damage was found in Hadley vs. Baxendale12 wherein it
was held that where two parties have made a contract which one of them has broken, the
damages the other party ought to receive in respect of such breach of contract should be
either such as may fairly and reasonably be considered as arising naturally i.e. in accordance
with usual course of things from such breach of contract itself or such as may reasonably be
supposed to have been in the contemplation of both parties at the time they made the contract
as the probable result of breach of it. Where the special circumstances under which the
contract was actually made were communicated by one party to the other and was thus
known to both parties, the damages resulting from such breach which they would reasonably
contemplate would be amount of injury which would ordinarily follow from breach of
contract under the special circumstances so known to the parties or communicated. Where the
special circumstances are wholly unknown to the party breaking the contract, he at the most
can only be supposed to have had in his contemplation the amount of injury which would
arise generally and in great multitude of cases not affected by any special circumstances from
such breach of contract.

In M Licha Setty & Sons Ltd. vs. Coffee Board Bangalore 13 the Supreme Court held that
the principle of mitigation does not give any right to a party in breach of contract but is a
concept that has to be borne in assessing damages. In this case it was held that the plaintiff
must take all reasonable steps to mitigate the loss and if he fails to do so he cannot claim such
loss which could have been avoided. The plaintiff is only required to act reasonably and
whether he has done so or not is not a question of law but a question of fact in each case. He
must act reasonably not only in his own interest but also in the interest of the defendant and
lower the damages by acting reasonably in the matter. In case of breach of contract, the
plaintiff is required to do more than act in ordinary course of business and where he is placed
in embarrassment, the measures he takes to extricate himself ought not to be weighed in nice
scales at the instance of party in breach. The plaintiff is under no obligation to destroy his
property or to injure himself or his commercial reputation to reduce the damages payable by
defendant.
11
https://www.dezshira.com/library/legal/contract-act-india.html
12
http://www.bailii.org/ew/cases/EWHC/Exch/1854/J70.html
13
1981 AIR 162, 1981 SCR (1) 884
 6.CONCLUSION

Due to the aggressive growth in the field of technology, the parties entering into commercial
transactions are more cautious than ever, thus making the parties deliberate even on the
minute details or specifications so as they can best secure their interest. Therefore, contents
of a contract have become highly detailed and elaborate. Particularly, as a measure of
safeguarding, securing and protecting their respective interests in an event of breach of the
terms of the contract, parties generally negotiate and agree upon the various remedies that
the injured party can invoke to mitigate and compensate for the losses it may suffer on
account of such breach. Therefore, with regard to liquidated damages and penalties, the
primary conclusions of the court appear to be that liquidated damages should be regarded as
reasonable compensation, while penalties should not. Further, it also appears to have
concluded that in case of a penalty, damages will have to be proved. The courts in India
should interpret the above mentioned sections i.e. sec.73 and 74 very carefully, so that the
ordinary man can be benefited by these principles. Moreover, the law is made to facilitate the
people, not to harass them. So, these principles should be used, not misused.