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What is the usual term for a genuine pre-estimate of loss agreed by the contracting parties when they…

A genuine pre-estimate of loss for breach is called liquidated damages. Section 74 of the Indian Contract Act, 1872 permits reasonable compensation up to the stipulated sum.…

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What is the usual term for a genuine pre-estimate of loss agreed by the contracting parties when they make their contract?

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Correct answer B

A genuine pre-estimate of loss for breach is called liquidated damages. Section 74 of the Indian Contract Act, 1872 permits reasonable compensation up to the stipulated sum. The stated sum is a ceiling, and its inclusion does not guarantee recovery in full.

Option feedback

Option A

Unliquidated damages are assessed without an amount fixed as a genuine pre-estimate in the contract.

Option B

Liquidated damages are a genuine advance estimate of the loss from breach.

Option C

Nominal damages vindicate a right with a small sum and do not describe a genuine estimate of loss.

Option D

A penalty is distinct from a genuine pre-estimate, though section 74 governs reasonable compensation for both named sums and penalties.

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