SUBMITTED BY :- Tisa Agarwal

ASSIGNMENT

PROBLEM

Mr. E, a supplier of raw materials, enters into a contract with Mr. F, a manufacturing
company, for the supply of 1,000 units of a specific type of steel. According to the terms, the
delivery was to be made within 30 days, and payment was to be completed within 15 days of
receipt. However, Mr. E delays the delivery by 45 days due to unexpected supply chain
issues. Mr. F claims that this delay has caused them substantial financial loss due to halted
production, and demands compensation for the breach under Section 73 of the Indian
Contract Act, 1872. Mr. E acknowledges the delay but argues that it was due to circumstances
beyond his control (force majeure), and that no compensation is due. The dispute centers
around whether the delay constitutes a breach of contract and if

LEGAL QUESTIONS

Is Mr. F entitled to claim damages under Section 73 of the Indian Contract Act, 1872,
for the losses incurred due to the delay?

ANALYSIS

Entitlement to Damages under Section 73 of the Indian Contract Act, 1872

To determine if Mr. F is entitled to claim damages under Section 73 of the Indian Contract
Act, 1872, for the losses incurred due to the delay, we must analyze the provisions of the Act
and relevant case law.
Section 73 of the Indian Contract Act, 1872
Section 73 states that when a contract has been broken, the party who suffers by such breach
is entitled to receive, from the party who has broken the contract, compensation for any loss
or damage caused to him thereby, which naturally arose in the usual course of things from
such breach, or which the parties knew when they made the contract to be likely to result
from the breach of it.
Application to the Present Case
In the present case, Mr. F claims that the delay in delivery has caused substantial financial
loss due to halted production. To succeed in his claim, Mr. F must demonstrate that:

● The delay constitutes a breach of contract: The delay of 45 days exceeds the
agreed-upon delivery time of 30 days, potentially constituting a breach unless justified
by circumstances.
● The loss or damage was caused by the breach: Mr. F must show that the financial loss
incurred was a direct result of the delay in delivery.
● The loss or damage naturally arose in the usual course of things from the breach: The
loss must be of a kind that was foreseeable at the time of contracting.
● The parties knew when they made the contract to be likely to result from the breach of
it: If the contract specifically contemplated the possibility of such losses in the event
of a breach, Mr. F's claim may be stronger.

Force Majeure and Its Impact on Liability

Mr. E's argument that the delay was due to circumstances beyond his control (force majeure)
may affect his liability for damages. If the force majeure clause in the contract (if present) or
the doctrine as recognized under Indian law applies, Mr. E may be able to avoid liability for
the breach.
Relevant Case Law
Indian courts have addressed the issue of damages for breach of contract in various cases. For
instance, in Murlidhar Chiranji Lal vs. Harish Chandra, the court held that the plaintiff is
entitled to recover such damages as can be ascertained to have been really caused by the
breach of contract.
Conclusion
Mr. F's entitlement to claim damages under Section 73 of the Indian Contract Act, 1872,
hinges on proving that the delay in delivery constituted a breach of contract, that the loss or
damage was caused by this breach, and that such loss was foreseeable. The application of the
force majeure doctrine could potentially absolve Mr. E of liability, depending on the specific
circumstances and the terms of the contract. A detailed examination of the contract, the
nature of the breach, and the applicability of legal principles such as force majeure is
necessary to determine the extent of Mr. E's liability for damages.
Recommendations for Mr. F
To strengthen his claim, Mr. F should:
 ● Document the losses: Keep detailed records of the financial losses incurred due to the
halted production.
● Establish causation: Demonstrate a direct link between the delay in delivery and the
financial losses.
● Review the contract: Examine the contract for any provisions related to force majeure,
breach, and damages.
● Consult legal counsel: Seek advice from a legal expert to navigate the complexities of
contract law and potential defenses.

Recommendations for Mr. E

To defend against the claim, Mr. E should:

● Substantiate the force majeure claim: Provide evidence that the supply chain issues
were unforeseeable and beyond his control.
● Review contractual obligations: Examine the contract to understand his obligations
and any provisions that may limit his liability.
● Document communications: Keep records of all communications with Mr. F
regarding the delay and any attempts to mitigate its effects.
● Seek legal counsel: Consult with a legal expert to understand his rights and
obligations under the contract and Indian law.

ERRORS AND OMISSIONS

The analysis has failed to mention the essentials of section 73 itself correctly as it did not
explicitly mention that it excludes recovery for remote and indirect losses. This is crucial as
Mr. F must demonstrate that his claimed losses are direct and foreseeable, not merely
consequential. The analysis lacks a mention of Section 74, which deals with liquidated
damages. If the contract included a clause specifying liquidated damages for delays, this
could significantly affect Mr. F's entitlement to damages under Section 73, as he may only be
entitled to the stipulated amount rather than unliquidated damages. It has also failed to
elaborate on the need for Mr. F to provide evidence that he took reasonable steps to mitigate
those losses, which is a requirement under Indian law.

The analysis states that Mr. E's invocation of force majeure may absolve him of liability but
does not sufficiently explore whether such a clause exists in the contract The study states that
Mr. E's invocation of force majeure may absolve him of liability but does not adequately
explore whether such a clause exists in the contract also the analysis has failed to mention
Section 55 and 56 of Indian Contract Act which are essential with the perspective of Mr E as
it deals with the doctrine of force majeur. The analysis fails to consider whether there are any
specific contractual provisions regarding delays or penalties that could limit Mr. E's liability
or affect Mr. F's ability to claim damages. This includes examining any clauses on extensions
of time due to unforeseen circumstances.

Although Murlidhar Chiranji Lal vs. Harish Chandra is cited, the analysis does not discuss
how this case relates to foreseeability and direct causation in assessing damages, which is
critical for understanding how courts may interpret similar claims.

CORRECTIONS

The analysis mentions that to claim damages, Mr. F must establish that he took reasonable
steps to mitigate his losses. One of the essentials for Section 73 allows for unliquidated
damages, it requires proof of actual loss caused by the breach, reinforcing the necessity for
Mr. F to demonstrate mitigation efforts.

The references to case law, such as Fateh Chand v Balkishann Das1 and Chunilal Mehta &
Sons Ltd v Century Spinning & Mfg. Co. Ltd2, provides judicial context for understanding
how courts interpret these sections regarding reasonable damages and liquidated damages
clauses. This enhances the analysis by illustrating how legal precedents shape the application
of these sections in real cases.

Thus, in the supremely famous case law of Kailas Nath Associates v DDA, the Court held
that "damage or loss is a sine qua non for applicability of Section 74." The possibility to
prove loss remains an important ingredient to fulfil the pre-requisites of Section 74 of The
IndianContract Act 1872.3

A detailed analysis of the case Murlidhar Chiranjilal v. Harishchandra Dwarkadas states the
principle that damages for a breach of contract must be limited to those naturally arising from
the breach or those foreseeable at the time of the contract. The court held that the plaintiff

1
Fateh Chand v Balkishann Das (1963) SCR (1) 515
2
Chunilal Mehta & Sons Ltd v Century Spinning & Mfg. Co. Ltd 1962 AIR 1314
3
Anwesh Bhomick & Rudra Sinsinwar, Ingredients Dominating Sections 73 and 74 of ICA, 1872 - How the
Study of Damages and Compensation Is Crucial for Upholding the Essence of a Contract?, 3 JUS CORPUS L.J.
614 (December 2022).
must prove the actual loss caused by the breach, and damages must be ascertainable. This
will help in a better understanding of the case and why is it given.
 Part-2: Legal Drafting

Real World legal notice

Notice u/s 138 of the negotiable instruments act

ADVOCATE'S NAME.............................................................PARTY'S NAME

ADDRESS.................................................................................ADDRESS

Dated.................
Notice (by registered a.d.)
To
Shri ……………………

Sir,
Under instructions from and on behalf of my client, Shri ……… Mumbai ………, I
have to address you as follows:
1. That my client and yourself happened to be old friends, and as such the
relationship between you two has been established for a very long time.
2. That my client has been running his business in readymade clothes; and hosiery
in Mumbai city.
3. That the business of my client is that of a wholesaler, and he supplies clothes and
hosiery to various businessmen in and around the city.
4. That recently, you have also started your business in readymade clothes and
hosiery as a retailer having a shop in the suborning of the city.
5. That since the beginning of your business, you used to purchase ready clothes
and hosiery from the shop of my client on a credit basis and you also used to make
the payment for the same within a period as agreed by and between my client.
6. That my client says that you had been regular and punctual in making the
payment for the materials purchased by you from the shop of my client, and every
time, you used to issue cheques towards the payment of bills on that account.
7 That the last time, on................., you had purchased the material for Rs.50,000/-
and issued in favour of my client a cheque for that amount. That my client, as usual,
presented the said cheque to his banker, Bank of Maharashtra, Karve Road Branch,
on.................for encashment.
8. That, however, the Bank has returned the said cheque to my client with an
endorsement "Dishonoured for insufficient balance". That since the said cheque has
been dishonoured for the reason of "Insufficiency of funds", you may be held liable
civilly as well as criminally particularly under section 138 of the Negotiable
Instruments Act and provisions of the Code of Civil Procedure.
9. That my client does hereby call upon you to make the payment of the said amount
of Rs. 50,000/- within fifteen days from the receipt of this notice, failing which my
client will be constrained to take against you an appropriate legal action including
filing of a criminal complaint, which please note.
10. That since your illegal behaviour has necessitated the issue of this notice, you
are hereby charged with its costs, i.e. Rs. 1,500/-, which also please further note.
Yours faithfully,

[ Harshad Badhbade]
ADVOCATE.

Clause-by-Clause Explanation of the Legal Notice

Clause-by-Clause Explanation of the Legal Notice

1. Clause 1: Relationship Between Parties
○ Purpose: Establishes the longstanding friendship between the client and the
accused.
○ Importance: Sets the background of trust, which forms the basis of the credit
arrangement.
2. Clause 2: Business Operations of the Client
○ Purpose: Describes the nature of the client’s business (wholesaling in
readymade clothes and hosiery).
○ Importance: Establishes the client's capacity to supply goods on credit.
3. Clause 3: Business Model
○ Purpose: Explains the client's business practice of supplying goods to local
businessmen.
○ Importance: Establishes the scope and reliability of the client’s business
operations.
4. Clause 4: Business of the Accused
○ Purpose: Details the accused's business as a retailer of clothes and hosiery.
○ Importance: Identifies the accused’s role and business relationship with the
client.
5. Clause 5: Credit-Based Transactions
○ Purpose: States that the accused purchased goods from the client on a credit
basis.
○ Importance: Establishes the pattern of transactions and the mutual agreement
regarding payment terms.
6. Clause 6: Regular Payments
○ Purpose: Highlights the accused's history of regular and punctual payments
using cheques.
○ Importance: Demonstrates the trustworthiness of past transactions, contrasting
with the current issue.
7. Clause 7: Last Purchase and Issuance of Cheque
○ Purpose: Specifies the last transaction amount (Rs. 50,000/-) and the cheque
issued for payment.
○ Importance: Provides precise details of the defaulted payment, crucial for legal
proceedings.
 8. Clause 8: Dishonour of Cheque
○ Purpose: States the cheque's dishonour due to insufficient funds.
○ Legal Reference: Relevant under Section 138 of the Negotiable Instruments
Act.
○ Importance: Establishes a violation of the law and the grounds for criminal
and civil liability.
9. Clause 9: Demand for Payment
○ Purpose: Demands repayment of Rs. 50,000/- within 15 days from the notice.
○ Legal Reference: Mandatory under Section 138 of the NI Act before initiating
legal proceedings.
○ Importance: Provides the accused a final opportunity to remedy the breach.
10. Clause 10: Notice Costs
○ Purpose: Charges the accused with the cost of issuing the legal notice (Rs.
1,500/-).
○ Importance: Highlights the inconvenience caused and adds to the claim for
compensation

Outreach & Lead Identification

Roots Cyber Law Firm

- +91 9620125678
- IP Law Firm
- [email protected]
- No. 30, 1st Floor, 4th Cross, 7th Block, Jayanagar, Bangalore - 560070
 - Mid Firm
- Legal Research and Drafting

Sundaraswamy and Ramdas

- 91(080) 2226 3838

- Law Firm
- [email protected]
- No. 24, Keshava Nivas, Kalidasa Marg, Gandhi Nagar, Bengaluru, Karnataka 560009
- Small Firm
- Legal Research and Drafting

Dharma Law Partners

- [email protected]
- Law Firm
- 507, Westminster, Cunningham Rd, Kaverappa Layout, Vasanth Nagar, Bengaluru,
Karnataka 560052
- Small Firm
- Legal Research and Drafting