M/s Janta Machine Tools & Co. contracted with M/s Ruchi Traders to make and deliver certain machinery by 31st July for 15 Lakhs. There was a…

Section 73 of the Indian Contract Act,1872, has laid down the rules as to how the amount of compensation is to be determined. On the breach of the contract, the party who suffers from such a breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him by breach. Compensation can be claimed for any loss or damage which naturally arises in the usual course of events. Further, compensation can also be claimed for any loss or damage which the party knew when they entered into the contract, as likely to result from the breach. That is to say, special damage can be claimed only on a previous notice. But the party suffering from the breach is bound to take reasonable steps to minimise the loss. No compensation is payable for any remote or indirect loss. In the instant case, M/s Ruchi Traders sued M/s Janta Machine Tools & Co. for recovery of compensation of 3Lakhs (i.e.18 Lakhs – 15Lakhs) plus 2Lakhs given to M/s Shiksha Technologies. As M/s Ruchi Traders informed M/s Janta Machine Tools & Co. about its contract with M/s Shiksha Technologies at the time of making the contract. Hence,2 Lakhs is a special damage which can be recovered with ordinary damages of 3Lakhs, which is the loss, caused to it.