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.

Answer 2

The question asks which section of the Indian Contract Act codifies the principles on remoteness of damages laid down in the English case of Hadley v. Baxendale. Let's check what each numbered section actually covers.

1. 74: Section 74 deals with compensation for breach of contract when a penalty or a stipulated sum, like liquidated damages, has been fixed in advance by the parties, this is about pre-agreed damages, not the general rules on what damages naturally flow from a breach.
2. 55: Section 55 addresses what happens when a party fails to perform at a time fixed in a contract where time is of the essence, a provision about the effect of delay, unrelated to the measure of damages recognised in Hadley v. Baxendale.
3. 87: there is no provision in the Indian Contract Act at this numbering dealing with damages in the manner described, this option does not correspond to any real section relevant to the question.
4. 73: Section 73 lays down the general rule for compensation for loss or damage caused by breach of contract, covering damages that arise naturally in the usual course of things, and damages that both parties knew, at the time of contracting, were likely to result from a breach. These two limbs mirror precisely the two rules established in Hadley v. Baxendale.

Since Section 73 is the provision that mirrors, almost word for word, the two-part test from Hadley v. Baxendale on how damages are measured.

Therefore, the correct answer is 73.