Question

Principles evolved in Hadley v. Baxendale are the basis of Section ..................... of the Indian Contract Act.

• A. 74
• B. 55
• C. 87
• D. 73

Hint:

Associate \textit{Hadley v. Baxendale} directly with Section 73 of the Indian Contract Act. This case is the foundation for the modern law of remoteness of damages in contract law, a very frequently tested topic.

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
The question asks which section of the Indian Contract Act, 1872, incorporates the legal principles regarding the measure of damages for breach of contract that were established in the famous English case of \textit{Hadley v. Baxendale}.
Step 2: Detailed Explanation:
The landmark case of Hadley v. Baxendale (1854) laid down the two main rules for determining the remoteness of damages in a breach of contract case:
1. Damages that arise naturally, i.e., according to the usual course of things, from the breach.
2. Damages that 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 the breach.
These principles are codified in Section 73 of the Indian Contract Act, 1872. The first paragraph of Section 73 provides for compensation for loss or damage which naturally arose in the usual course of things from the breach (Rule 1) or which the parties knew, when they made the contract, to be likely to result from the breach (Rule 2).
- Section 74 deals with compensation for breach of contract where a penalty is stipulated (liquidated damages).
- Section 55 deals with the effect of failure to perform at a fixed time in a contract in which time is essential.
- There is no Section 87 in the manner suggested; the numbering in that part of the Act is different.
Step 3: Final Answer:
The principles are the basis of Section 73 of the Indian Contract Act.