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'X' agreed to supply 1,000 tons of iron at Rs. 100 per ton to 'Y' to be delivered not later than…

These facts are Illustration (j) to section 73 of the Indian Contract Act, 1872. Because 'A' was told that the iron was needed to perform the contract between 'X' and 'Y',…

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'X' agreed to supply 1,000 tons of iron at Rs. 100 per ton to 'Y' to be delivered not later than 31/1/2002. 'X' also entered into a contract with 'A' for purchase of 1,000 tons of iron at Rs. 80 per ton telling 'A' clearly that the iron is needed before 31/1/2002 for supply to 'Y' to fulfil the contract with Y. 'A' fails to supply the iron to 'X' who in turn failed to supply the same to 'Y'. In an action by 'X' against 'A':

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These facts are Illustration (j) to section 73 of the Indian Contract Act, 1872. Because 'A' was told that the iron was needed to perform the contract between 'X' and 'Y', the profit 'X' would have made on that contract is a loss that 'A' knew, when making the contract, would be likely to result from a breach. The illustration therefore makes 'A' pay 'X' that lost profit: Rs. 20 a ton, or Rs. 20,000 in all. Section 73 gives compensation for loss actually suffered, not a penalty, and the facts show no sum that 'X' has paid to 'Y', so compensation for such payments is not the measure here.

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