DAMAGES

&

MEASURE OF DAMAGES

Submission of project for Bachelor of Law

I semester

Submitted by

ANUPAMEnroll. No.: A3221509048Batch: 2009-14Amity Law SchoolAUUP

NEHA SRIVASTAV Lecturer Amity Law School

CERTIFICATE

This is to certify that ANUPAM, student of Bachelor of Business Administration, Bachelor of Laws (Hons.), Amity Law School, AUUP has satisfactorily prepared this project as Damages and Measure of Damages under my supervision & guidance. The present work incorporates the result of his independent study and research.

Supervisor

(i)

ACKNOWLEDGEMENT

I wish to extend my thanks to my teacher for her informative and illuminative guidance. I take this opportunity to express my deep sense of gratitude and whole hearted thanks to my teacher for her valuable guidance and support.

At last my sincere thanks to all those who have directly or indirectly helped me during the making of the project.

ANUPAM

(ii)

TABLE OF CONTENTS

CERTIFICATE (i)

ACKNOWLEDGEMENT (ii)

TABLE OF CASES (iv)

LIST OF ABBREVIATIONS (v)

INTRODUCTION 1

DAMAGES FOR BREACH.........................................................................................................................2

SECTION 73 0F CONTRACT ACT………………………………………………………………………………………………………6

MEASURE OF DAMAGES………………………………………………………………………………………………………………..9

BIBLIOGRAPHY…………………………………………………………………………………………………………………………….12

(iii)

TABLE OF CASES

Hadley v Baxendale

Sunrise Associates v Govt NCT of Delhi, (2006) 5 SSC 603

Sudesh Prabhakar Volvoikar v Gopal Babu Savolkar, (1996) 5 Bom CR 1

Ram Kumar v Lakshmi Narayan, AIR 1947 Cal 157

Plasgraf v Long Island R. R. Co

Horne v Midland Railway Co

British Columbia Saw Mill Co v Nettleship

Ghaziabad Development Authority v Union of India, (2000) 6 SCC 113

Sarvaraya Textiles Ltd v Pavan T. Punjabi, (2004) 1 Bom CR 551

Chief Secy, State of Gujrat v Kothari Associates, (2003) 1 Guj CD 372 (Guj)

State of Rajasthan v Nathulal, AIR 2006 Raj 19

Draupadi Devi v Union of India, (2004) 11 SSC 425

Cotton Corp. of India Ltd v Nand Kishore Parasramka, AIR 2001 Cal 137

Dhamudhar Prasad Verma v State of A.P., (2003) 2 BC 351 (Gau)

Maharashtra State Electricity Board v Sterlite Industries (India) Ltd, (2002) 1 ICC

178 (SC)

Pannalal Jankidas v Mohanla, AIR 1951 SC 145, 149

Food Corporation of India v Laxmi Cattle Food Industries, (2006) 2 SCC 699

Bombay Motor Sports v Union of India, (2000) 1 BLJR 23 (Pat)

(iv)

LIST OF ABBREVIATIONS

i.e. …………………………………………that is SCC ………………………………………Supreme Court Cases AIR ……………………………………....All India Reporter v. …………………………………………versus NCT …………………………………………..National Capital Territory

Ltd ……………………………………………Limited Co. …………………………………………...Company

(v)

INTRODUCTION

Oxford dictionary defines damages as “financial compensation for loss or injury”.

In law, damages are money claimed by, or ordered to be paid to, a person as compensation for loss or injury Black's Law Dictionary.

In context of the Indian Contract Act, 1872 damages are referred in context to breach of contract i.e. a party's failure to perform some contracted-for or agreed-upon act, or his failure to comply with a duty imposed by law which is owed to another or to society.

Breach of contract is a legal concept in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance

On a breach of contract by a defendant, a court generally awards the sum that would restore the injured party to the economic position they expected from performance of the promise or promises (known as an "expectation measure" or "benefit-of-the-bargain" measure of damages).

When it is either not possible or not desirable to award damages measured in that way, a court may award money damages designed to restore the injured party to the economic position they occupied at the time the contract was entered (known as the "reliance measure"), or designed to prevent the breaching party from being unjustly enriched ("restitution").

Parties may contract for liquidated damages to be paid upon a breach of the contract by one of the parties. Under common law, a liquidated damages clause will not be enforced if the purpose of the term is solely to punish a breach (in this case it is termed penal damages). The clause will be enforceable if it involves a genuine attempt to quantify a loss in advance and is a good faith estimate of economic loss. Courts have ruled as excessive and invalidated damages which the parties contracted as liquidated, but which the court nonetheless found to be penal.

Damages are likely to be limited to those reasonably foreseeable by the defendant. If a defendant could not reasonably have foreseen that someone might be hurt by their actions, there may be no liability. This is known as remoteness.This rule does not usually apply to intentional torts (e.g. deceit), and also has stunted applicability to the quantum in negligence where the maxim Intended consequences are never too remote applies – 'never' is inaccurate here but resorts to unforeseeable direct and natural consequences of an act.

DAMAGES FOR BREACH

A contract is not a property. It is only a promise supported by some consideration upon which either the remedy of specific performance or that of damage is available.1 The party who is injured by the breach of a contract may bring an action for the damages. “Damages” means compensation in terms of money for the loss suffered by the injured party. Burden lies on the injured party to prove his loss.2 Every action for damages raises two problems. The first is the problem for “remoteness of damage” and the second that of “measure of damages”.

Remoteness of Damage

Every Breach of contract upsets many a settled expectations of the injured party. He may feel the consequences for a long time and in variety of ways. A person contracts to supply to a shopkeeper pure mustard oil, but he sends impure stuff, which is a breach. The oil is seized by an inspector and destroyed. The shopkeeper is arrested, prosecuted and convicted. He suffers the loss of oil, the loss of profits to be gained on selling it, the loss of social prestige and of business reputation, not to speak of the time and money and energy wasted on defence and mental agony and torture of prosecution.3

Thus theoretically the consequences of a breach may be endless, but there must be an end to liability. The defendant cannot be held liable for all that follows from his breach. There must be a limit to liability and beyond that limit the damage is said to be too remote and, therefore, irrecoverable.4 The problem is to where to draw the line.

The rule in Hadley v Baxendale

A very noble attempt was made as early as (1854) in the well known case of Hadley v Baxendale5 to solve the problem by laying down certain rules.

ALDERSON B laid down the following rule:Now we think about the proper rule in such a case as the present is this:Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the 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 the breach of it.

1 Sunrise Associates v Govt NCT of Delhi, (2006) 5 SSC 603.2 Sudesh Prabhakar Volvoikar v Gopal Babu Savolkar, (1996) 5 Bom CR 1.3 See Ram Kumar v Lakshmi Narayan, AIR 1947 Cal 157.4 See judgment of ANDREWS, J in Plasgraf v Long Island R. R. Co, Court of Appeals of New York, (1928) 284 NY 339.5 (1854) 9 Ex 340.

The decision in the above case has always been taken as laying down two rules.

(i) General DamagesGeneral damages are those which arise naturally in the usual course of things from the breach itself. Another mode of putting this is that the defendant is liable for all that which naturally happens in the usual course of things after the breach.

(ii) Special DamagesSpecial damages are those which arise on account of the unusual circumstances

affecting the plaintiff. 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. No recovery of Special Damages when Special Circumstances not known

Lack of knowledge of special circumstances once again prevented recovery of special damages in Horne v Midland Railway Co.6

For the same reason loss of profits was not allowed to be recovered in British Columbia Saw Mill Co v Nettleship.7

Special Circumstances already within Knowledge of Contract Breaker

But in the subsequent case of Simpson v London & North Western Railway Co8 the above suggestion was qualified to this extent that if the special circumstances are already within knowledge of the party breaking the contract, the formality of communicating them to him may not be necessary.

In another case9 a fragmentiser was purchased by the plaintiff under hire-purchase agreement. Its rotor broke down before normal life. The plaintiff had no means to replace it at cash price. He had to arrange it again a hire-purchase price and claimed the same as damages. The defendant contended the plaintiff had to pay hire- purchase price because of his lack of means. This contention was rejected. The fact that in the present circumstances of economy the business has to depend upon hire-purchase system, was held to be within the contemplation of the parties.

6 (1873) LR 8 CP 131.7 (1868) LR 3 CP 499: 18 LT 604.8 (1876) 1 QBD 274.9 B.P. Exploration & Co v Heent, (1982) 2 QBD 925. Where the lessor knew the purpose for which the lessee required the premises, he was held liable for the loss of that purpose during the delayed period. Jaques v Millar, (1877) 6 Ch D 153.

Relationship between Two Rules Re- examined

The relationship between the rules was re-examined in Victoria Laundry (Windsor) Ltd v Newman Industries Ltd10 LORD ASQUITH worked out a number of propositions from a consideration of the leading authorities. The judgment emphasised that both the rules are based upon the principles of “forseeability”.11

This gives a “new look for Hadley v Baxendale”. Now it has been clearly so stated by DIPLOCK LJ in C. Czarnikow Ltd v Koufos.12

“That there are not two rules formulated in Hadley v Baxendale but only two different instances of the application of a single rule.”

To the same effect is the decision of the House of Lords in Monarch Steamship Co Ltd v Karlshmans Oljefabriker (A/B).13

House of Lords Restore Original Vitality of Two Rules

The interpretation put upon the Hadley v Baxendale principles by the Court of Appeal in the Victoria Laundry case had virtually replaced the expression “contemplation of the parties” with “reasonable man’s foresight” and this being the principle in law of torts also, hardly any distinction remained between tort and contract principles relating to remoteness of damages. But the House of Lords in their decision in the Heron II, Koufos v C. Czarnikow Ltd14 have restored the distinction by again laying emphasis upon the “contemplation of the parties”.

Lord HODSON also presented the same view of Hadley v Baxendale.

Physical Injury Resulting from Breach

The wisdom of the distinction between tort and contract principles, at any rate in reference to physical injury caused by breach, has again been questioned by Lord DENNING in Parsons v Uttley Ingham & Co.15

In the opinion of the Court of Appeals it was held that the principle of Hadley v Baxendale should be confined to economic loss and for physical injuries the principle of forseeability which operates in torts should apply.16

10 (1949) 2 KB 528 CA: (1949) 1 All ER 997.11 Also so observed by DEVLIN J in Biggin & Co v Permanite Ltd, (1951) 1 KB 422.12 (1966) 2 WLR 1397, 1497; on appeal. Heron II, the Koufos v C. Czarnikow Ltd, (1969) 1 AC 350: (1967) 3 All ER 99713 (1949) AC 196.14 (1967) 3 All ER 686: (1969) 1 AC 350: (1967) 3 WLR 149115 (1978) 1 All ER 525.16 Distinction between tort and contract is breaking down at many points. See Fridman, (1977) LQR 482.

Damages for Negligent Survey Report

The applicable principles have been stated by the Court of Appeals in Watts v Morrow. The plaintiffs purchased a country home for £177,500 in reliance on a survey prepared by the defendant surveyor in which he stated that overall dwelling house was sound, stable and in good condition although there were minor defects which could be dealt with as part of ordinary ongoing maintenance repair. After taking possession the plaintiffs discovered substantial defects not mentioned in the defendant’s report which required urgent repair, including the renewal of the roof, windows and floor boards. The plaintiff carried out repairs to remedy the defects at a cost of £ 33,691 and sought to recover this amount. The surveyor admitted liability but pleaded that it should not be more than £ 15,000 being the difference between the price paid and the price that the home was worth if the defects were taken into account. The court held that the proper measure of damages was the diminution in value rather than cost of repairs. Applying the principle of restitution to the terms of the contract, the amount required to put the plaintiff in the position in which he would have been if the surveyor had carried out the contract of survey properly was the amount by which he was caused to pay more the value the house in its true condition.17

Section 73 of the Contract Act

17 The court followed Philips v Ward, (1956) 1 A11 ER 874 and Perry v Sidney Philips & Son (a firm), (1982) 3 A11 ER 705

The same principles are applicable in India. The Privy Council, for example, observed in Jamal, A.K.A.S. v Moola Dawood Sons & Co18 that Section 73 is declaratory of the common law as to damages. Similarly, PATANJALI SASTI J (afterwards CJ) of the Supreme Court observed in Pannalal Jankidas v Mohanla19 “that the party in breach must make compensation in respect of the direct consequences flowing from the breach and not in respect of the loss or damage indirectly or remotely caused”.20 The section provides:

73. Compensation for loss or damage caused by breach of contract.—When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual coarse 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.

Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.

Compensation for failure to discharge obligation resembling those created by contract.—When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract.

Explanation.— In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.

Section 73 incorporates Two Rules of Hadley v Baxendale

18 (1916) 43 IA 6: ILR 1916 43 Cal 493: (1916) 1 AC 175: 43 IA 619 AIR 1951 SC 144, 153: 1950 SC R 979: 53 Bom LR 472: (1951) 21 Comp Cas 120 Pannalal Jankidas v Mohanla, AIR 1951 SC 145, 149

The section declares that compensation is not to be given for any remote or indirect loss or damage sustained by reason of the breach.21The section also provides that the same principles will apply where there has been a breach of a quasi-contractual obligation.

The section thus clearly lays down two rules. Compensation is recoverable for any loss or damage—

(i) arising naturally in the usual course of things from the breach, or(ii) which the parties knew at the time of the contract as likely to result from breach.

The first rule is “objective” as it makes the liability to depend upon a reasonable man’s foresight of the loss that will naturally result from the breach of the contract. The second rule is “subjective” as, according to it, the extent of liability depends upon the knowledge of the parties at the time of the contract about the probable result of the breach.22 The burden of proof lies on the plaintiff to show that damage has been sustained and what shall be the measure of converting the loss into money. A claim for damages becomes liable to be rejected where this burden is not discharged.23

Liability in ordinary cases

The extent of liability in ordinary cases is what may be foreseen by “the hypothetical reasonable man”, as arising naturally in the usual course of things. One illustration is the decision of the Madras High Court in Madras Railway Co v Govinda Rau.24

Fazal Ilahi v East Indian Railway Co25 is another illustration of the same kind.

In a claim for general damages the plaintiff has to assert that he has suffered such loss but for the purpose of claiming special damages he has specifically to plead and prove that he has sustained such special loss.26

Building Contracts

21 State of Rajasthan v Nathulal, AIR 2006 Raj 1922 See Murray Pickering, The Remoteness of Damages in Contract, (1968) 31 Mod LR 203.23 Draupadi Devi v Union of India, (2004) 11 SSC 425.24 (1898) 21 Mad 172Damages cannot be recovered by a person who does not do his duty under the contract.25 (1921) ILR 43 All 623.26 Chief Secy, State of Gujrat v Kothari Associates, (2003) 1 Guj CD 372 (Guj).

Since works and building contracts are undertaken only with a view to earn profits, the party committing the breach would be liable for the contractor’s loss in terms of expected profits. The Supreme Court came to this conclusion in A.T. Brij Pal Singh v State of Gujrat.27

Some earlier cases on the subject were also decided either on the basis of cost of cure or difference in value depending on whether in the circumstances of the case, cure would be reasonable or whether recovery on the basis of difference in value would be reasonable. The latter would be more reasonable where the building, though defective, is nevertheless substantially useful. The cost of rectification even if recovered, may not be so used.28

Delay suffered by builder

The builder was required to complete the work within 18 months but by reason of delays caused by the Department, it took 27 months to be complete. The builder suffered itemized damages which he proved by leading oral evidence. The amount claimed being reasonable was decreed.29

Scheme for allotment of plots

Damages for mental pain and anguish cannot be awarded in a case in which there is a breach on the part of the development authority in delaying the completion of the scheme. It is not a head of damages in ordinary commercial contracts. The court, however, allowed interest at the rate of 12% on the refundable amount though there was no provision in the contract to that effect. It was justifiable on equitable grounds. The brochure of the scheme clearly excluded the liability of the authority to pay interest in cases of refund of consideration. It was held that this clause would apply only to cases in which the claimant himself was brought about the circumstances of refund.30

Difference between market price and contract price [Sale and Supply transactions]

In a sale transaction, damages are generally awarded on the basis of difference between the contract price and market price. If the seller defaults, the buyer may have to buy elsewhere at an extra cost. If the buyer defaults, the seller may have to make a forced sale which may bring him less money than what he would have under the contract. Such damages difference is recoverable as damages. The fact that because of the seller’s default, the buyer could not carry out production in his factory and suffered losses, such losses were held not to be recoverable being a remote consequence. The buyer was under duty to keep his loss to minimum by buying his material elsewhere so as to keep his business going.31

Whether actual purchase or sale of goods necessary

27 (1948) 4 SSC 59: AIR 1984 SC 1703.28 See East Ham B.C. v Bernard Sunley & Sons Ltd, (1965) 3 All ER 619 HL.29 Chief Secy, State of Gujrat v Kothari Associates, (2003) 1 Guj CD 372 (Guj).30 Ghaziabad Development Authority v Union of India, (2000) 6 SCC 113.31 Sarvaraya Textiles Ltd v Pavan T. Punjabi, (2004) 1 Bom CR 551.

The High Court of Delhi was of view in Union of India v Commercial Metal Corp. that it is not necessary that on default by the seller to deliver, the plaintiff should have actually bought the goods elsewhere and only than claim the difference. The court said that the damages could be claimed on market basis. The same ruling was repeated in Saraya Distillery v Union of India, the court saying that the injured party can recover compensation on the basis of the difference between the contract and market prices without actually purchasing the goods. All that is to be proved is the buying price at which the injured party can obtain substitute goods.

Getting work done through other sources

The contractor failed to complete the work within 4 months from the date of contract. The delay was the result of his own doings and not that of other party. The corporation had to get the work completed by inviting fresh tenders. Extra amount paid to the other contractor was allowed to be recovered. The consequences of delay were compensated by allowing interest at 6% on the amount of extra payment.

Award of interest on difference

Where because of the purchaser’s breach, the supplier had to resell the goods elsewhere and became entitled to recover the differences, the court allowed future interest @ 20% p.a. from the date of suit till the date of judgment and 6% from date of judgment till realization.32

Loss of profit is a special loss

Thus, loss of profits which are to accrue upon resale cannot be recovered unless it is communicated to the other party that the goods are for resale upon a special contract. This is borne out by the decision of the Supreme Court in Karsandas H. Thacker v Saran Engineering Co. Ltd.

Meaning of market price

In almost all sales transactions which fail to go through the normal yardsticks for working out the sum of money to which the aggrieved party is entitled is the difference between the contract and market prices.33 This rule presupposes the existence of a market and the possibility of ascertaining the price of goods in that market. Both these concepts were the subject-matter of some explanation in a case where the buyer refused to accept the goods.34

MEASURE OF DAMAGES

32 Cotton Corp. of India Ltd v Nand Kishore Parasramka, AIR 2001 Cal 137.33 Hajee Ismail & Sons v Williams & Co. (1918) 41 Mad 709.34 Shearson Lehman Hutton Inc. v Maclaine Watson & Co Ltd, (1990) 3 All ER 723 QBD.

Once it is determined whether general or special damages have to be recovered they have to be evaluated in terms of money. This is the problem of measure of damages and is governed by some fundamental principles.

Claim for damages is not debt

A claim for damages arising out of breach of contract, whether for general or liquidated damages, remains only a claim till its adjudication by the court and become a debt only after courts award it. Till then and on the basis of the claim alone, the claimant is not entitled to present a winding up petition of the defendant company on the ground of its inability to pay debts.35

Damages are compensatory, not penal

In the words of ASQUITH J: “It is well settled that the governing purpose of damages is to put the party whose rights have been violated in the same position, so far as money can do so, as if his rights have been observed.”36

Robinson v Harman37 is an apt illustration of the above principle.

Inconvenience caused by breach

But the inconvenience caused by the breach may be taken into account. Thus, for example ,in Hobbs v London & South-Western Rly Co, where a train pulled its passengers to a wrong direction and consequently the plaintiff and his wife, finding no other conveyance, nor a place to stay, had to walk home at midnight, the jury allowed £ 8 as damages for inconvenience suffered by the plaintiffs in being obliged to walk and £ 20 in respect of the wife’s illness caused by catching cold. On appeal, the court of Queen’s Bench held that the £ 8 was properly awarded but not £ 20.

This was critcised in the subsequent case of Mc Mohan v Fields.

Nominal damages (No loss situation)

Where the plaintiff suffers no loss the court may still award him nominal damages in recognition of his right. But this is in the discretion of the court. The court may altogether refuse to award any damages or may award even substantial damages.”The court is competent to award reasonable compensation in case of breach, even if no actual damage is proved or shown to have been suffered in consequences of breach of contract.”38

Refund on partial cancellation of contract

35 Greenhills Exports(P) Ltd v Coffee Board,(2001) 4 Kar LJ 158 (DB).36 In Victoria Laundry (Windsor) Ltd v Newman Industries Ltd (1949) 2 KB 528 CA.37 (1848) 18 LJ Ex 202.38 T.A. Choudhary v State of A.P., (2004) 3 ALD 357 (DB).

The agreement for sale of damaged food grains. The purchaser deposited a certain amount with the Food Corporation. An application was made for cancellation of a certain part of the agreement which was not capable of being performed. This was conceded and some refund was made. The purchaser was not allowed to sue the corporation for breach of contract in the matter of refund. There was no proof of any such breach.39

Agreement to provide scientific process

The agreement was for setting up a project for converting menthons to menthol. The agreement showed that the requisite technical knowhow was to be provided by the Indian Institute of Petroleum (IIP). A huge expenditure was incurred in setting up the plant. But IIP failed in its experiments of converting the material even up to five years. It was something which had to be done under the contract in five months. The arbitrator awarded compensation of Rs 90 lacs for the loss suffered in setting up the plant. The court said there was nothing against public policy in the award.40

Injunctions for restraining breach of contract

A supply system to the army which had been going on since 1960was not allowed to be scrapped all of a sudden by blacklisting the supplier. A person dealing with the government in matters of sale and purchase develops legitimate interest and expectations. The order of blacklisting amounted to denial of equality of opportunity. Before issuing such an order some explanation should be called for. The court would not interfere in the matter if it is decided again by giving opportunity to the supplier.41

Writ remedy against termination of dealership

A dealership agreement was terminated by reason of breaches on part of the dealer. He applied for a writ against the order expecting that contractual obligations should be decided on the basis of affidavit evidence. The court found that the termination had become necessary in public interest. There was no violation of Article 14 and, therefore no scope of interference.42

Waver and writ remedy Waiver of credit guarantee commission charges, rebate and concessional rates of interest were held to be a part of the term of loan. They were contractual matters between the parties. Any dispute as to such matters could be resolved through a civil suit and not under writ jurisdiction.43

Non performance of its contract by Government and writ remedy

39 Food Corporation of India v Laxmi Cattle Food Industries, (2006) 2 SCC 699.40 CSIR v Goodman Drug House(P) Ltd, AIR 2007 Utt’1 5841 Bombay Motor Sports v Union of India, (2000) 1 BLJR 23 (Pat).42 O.J.S. Corp. Transstory v Govt of Karnataka, AIR 2005 Kant HCR 1492.43 Devi Prasad Steels (P) Ltd v A.P. State Financial Corp. (1999) 1 BC 497 (AP).

On the completion of a Government contract, the Government becomes liable for payment of the amount accrued to the contractor. He gets a legal right to invoke the jurisdiction of the writ court praying for mandamus for direction to the Government to make payment for the admitted outstandings.44

Non performance of Government contract by contractor and writ

A foreign company contracting with the Government failed to complete the road building projects within the stipulated periods. Sufficient time and opportunities were afforded to the company to amend defaults. But it could not do so. Termination of the contract by the Government in according with the contract stipulations was held to be justified in public interest. There was no violation of Article 14 and no occasion of issuing a writ.45

Recovery of damages as arrears of land revenue

The Supreme Court has upheld the validity of a clause in a Government contract which authorized the State to recover damages as arrears of land revenue.46 Where there was no such clause recovery of dues under a contract by way of arrears of land revenue was not allowed.47

Exclusion of Section 73: Arbitration Clause

Whether in the context of terms and conditions of a contract it is permissible to provide that Section 73 would not apply and the special terms of the contract should be applied for making out recoverable loss, the court said that it depends upon the appreciation of the facts of case and if the arbitrator had followed the special provision, no fault in his award could be found for that reason alone.48

BIBLIOGRAPHY

44 Dhamudhar Prasad Verma v State of A.P., (2003) 2 BC 351 (Gau).45 O.J.S. Corp. Transstory v Govt of Karnataka, AIR 2005 Kant 351.46 State of Karnataka v Shree Rameshwara Rice Mills, (1987) 2 SCC 160 47 Mohd Umar v Nagar Palika,Khatima, AIR 1988 All 227.48 Maharashtra State Electricity Board v Sterlite Industries (India) Ltd, (2002) 1 ICC 178 (SC).

CONTRACT & SPECIFIC RELIEF by Avtar Singh

INDIAN CONTRACT ACT

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