Contracts · Provision
Compensation for loss that arose naturally from the breach, or that both parties knew was likely — and nothing remote. (Section 73, Indian Contract Act, 1872.) In force since 1 September 1872 · Text checked against India Code on 25 October 2026.
Check your compliance exposure — free All provisions73. Compensation for loss or damage caused by breach of contract.— 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. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach. Compensation for failure to discharge obligation resembling those created by contract.— When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. Explanation.— In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account.
Natural and known loss. Remote or indirect loss is not compensated, and unmitigated loss is discounted.
Under section 73, compensation for loss that arose naturally in the usual course of things from the breach, and for loss the parties knew when contracting was likely to result. Remote or indirect loss is excluded.
Yes. The explanation to section 73 requires the means available for remedying the inconvenience caused by non-performance to be taken into account when estimating loss.
Not automatically. Section 74 entitles the injured party to reasonable compensation not exceeding the amount named, so the figure in the clause is a ceiling rather than a guarantee.
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