LEGAL PRINCIPLE 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 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. Such compensation is not given for any remote or indirect loss or damage sustained by reason of the breach. Decide, whether and to what extent B is entitled to damages in the following situation.
FACTUAL SITUATION A contracts with B to sell him 1000 tonnes of iron at ₹ 100 per tonne. B tells A that he needs the iron for export purposes, and that he would be selling the iron at ₹ 200 per tonne. A breaks the contract. When the question comes about damages, A says he will pay only ₹ 5000 as damages because the same variety of iron was available in the market at ₹ 105 per tonne. B however contends that he should be given ₹ 100000 because that was the profit which )he would have made had A fulfilled tbe contract B had actually bought the iron at ₹ 110 and had exported it. B is
not entitled to damages
entitled to ₹10,000 as damages
entitled to ₹5.000 as damages
entitled to ₹1,00,000 as damages
entitled to ₹5000 as damages
According to the law of the Law of Contract---Remoteness of Damage refers to the consequence of breach may be endless but there must be an end to the liability. The defendant cannot be held liable for all that follows from his breach. There must be a limit to the liability and beyond that limit, the damage is said to be remote and not recoverable. Therefore as per the given legal principle which naturally arose in the usual course of things from such breach' stands firm in this case. The original contract 1,000 tonnes of iron at Rs. 100 per tonne, when broken by A, should be compensated with the same amount as per the contract. Therefore B is entitled to Rs. 10,000 as damages.