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A agrees to deliver 500 bales of cotton to B on a fixed date. A knows nothing about how B runs the…

Section 73 allows compensation for loss arising naturally in the usual course or known by the parties to be likely when they contracted. Illustration (p) treats the…

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A agrees to deliver 500 bales of cotton to B on a fixed date. A knows nothing about how B runs the business. A fails to deliver, and B has to close the mill for lack of cotton. Under the Indian Contract Act, 1872, can B recover the loss from the closure from A?

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Answer and explanation

Correct answer B

Section 73 allows compensation for loss arising naturally in the usual course or known by the parties to be likely when they contracted.

Illustration (p) treats the mill-closure loss as too remote on these facts because the seller did not know the buyer’s business arrangements.

Option feedback

Option A

Section 73 excludes remote and indirect loss, even where it follows the breach.

Option B

The stated facts match illustration (p), which excludes recovery for the mill closure.

Option C

The quantity alone does not establish notice of the buyer’s particular business risk.

Option D

Proof of the amount does not cure remoteness.

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