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Y contracts to sell and deliver 500 bales of cotton to Z on a fixed day. Y knows nothing of Z’s mode of…

Z can recover proven ordinary loss from the non-delivery, but cannot recover the loss from closing the mill. Section 73 of the Indian Contract Act, 1872, allows compensation…

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Y contracts to sell and deliver 500 bales of cotton to Z on a fixed day. Y knows nothing of Z’s mode of conducting his business. Y breaks his promise and Z, having no cotton, is compelled to close his mill. What remedy is available to ‘Z’?

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Correct answer D

Z can recover proven ordinary loss from the non-delivery, but cannot recover the loss from closing the mill. Section 73 of the Indian Contract Act, 1872, allows compensation for loss that naturally arises from the breach or was within the parties’ contemplation when they contracted. In illustration (p), the seller’s lack of knowledge of how the buyer ran the mill makes the closure loss too remote. The contract price is not an automatic measure of damages.

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