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A seller agrees to deliver 500 bales of cotton to a mill owner on a fixed day. At contracting the…

Section 73 permits recovery of losses arising naturally in the usual course of things or that the parties knew to be likely when contracting. Illustration (p) excludes the…

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A seller agrees to deliver 500 bales of cotton to a mill owner on a fixed day. At contracting the seller does not know how the buyer runs the mill or that non-delivery could shut it down. The seller fails to deliver, and the buyer must close the mill for want of cotton. Is the seller liable for the loss caused by the shutdown under section 73 of the Indian Contract Act, 1872?

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Answer and explanation

Correct answer B

Section 73 permits recovery of losses arising naturally in the usual course of things or that the parties knew to be likely when contracting. Illustration (p) excludes the mill’s shutdown loss on these facts. The question concerns only the shutdown loss.

Option feedback

Option A

Section 73 excludes remote and indirect loss.

Option B

The statutory cotton illustration excludes this shutdown loss on the stated facts.

Option C

The statutory illustration itself uses 500 bales without treating quantity as notice of the shutdown risk.

Option D

Proving the amount does not make a remote loss compensable.

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