Breach Of Contract MCQ Quiz - Objective Question with Answer for Breach Of Contract - Download Free PDF

The correct answer is Section 75

Key Points

• As per section 75 of the Indian Contract Act, a person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non-fulfilment of the contract.
• This section applies when a party cancels (rescinds) the contract lawfully, for example due to breach, fraud, misrepresentation, etc.
• The rescinding party is entitled to claim compensation for losses caused by the other party's default or wrongful act.
• Example: Suppose A agrees to deliver 100 bags of wheat to B by a certain date. A fails to deliver even after repeated notices. B rightfully rescinds the contract and buys wheat at a higher price from another seller. B can claim compensation from A for the extra amount paid.

The correct answer is  Option 2.

Key Points

1. Hadley v. Baxendale → Remoteness of Damages (ii):
   • Principle: Established the rule of remoteness of damages, i.e., damages recoverable for breach of contract must either:
     1. Arise naturally from the breach, or
     2. Be in the contemplation of both parties at the time the contract was made.
   • Case Facts: A mill owner sued for the delayed delivery of a broken crankshaft, claiming losses from halted mill operations. The court ruled the losses were too remote.

2. Gajanan Moreshwar v. Moreshwar Madan → Indemnity (iv):
   • Principle: This Indian case dealt with the scope of indemnity under the Indian Contract Act, 1872 (Section 124).
   • Case Facts: The plaintiff sought indemnity from the defendant for liability incurred while discharging a third-party debt on the defendant's behalf.

3. Dunlop Pneumatic Tyre Co. Ltd. v. New Garage & Motor Co. Ltd. → Liquidated Damages (i):
   • Principle: Differentiated between liquidated damages (pre-determined, genuine estimates of loss) and penalties (punitive in nature).
   • Case Facts: A clause fixing damages for resale of tires below a certain price was upheld as liquidated damages, not a penalty.

4. Krell v. Henry → Frustration (iii):
   • Principle: A contract becomes frustrated when an unforeseen event occurs, making its performance impossible or fundamentally altering its purpose.
   • Case Facts: A room was rented to watch King Edward VII’s coronation procession. When the event was canceled due to the King’s illness, the contract was deemed frustrated.

a) Hadley v. Baxendale → ii (Remoteness of Damages)

b) Gajanan Moreshwar v. Moreshwar Madan → iv (Indemnity)

c) Dunlop Pneumatic Tyre Co. Ltd. v. New Garage → i (Liquidated Damages)

d) Krell v. Henry → iii (Frustration)

Thus, the correct code is: 2) a(ii) b(iv) c(i) d(iii).

The correct answer is option 1.Key Points

• Compensation for loss or damage caused by breach of contract is given for any loss or damage that 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. This means that compensation is provided only if the parties were aware of the likelihood of the loss at the time of making the contract. 
• Section 73 of Indian Contract Act 1872 deals with 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.

The correct option is Section 73.

Key Points

• Damages are the solution or the remedy for the damage caused to the party. 
• Damage can be caused in two ways:
  • Consequential
  • Incidental
• The estimated money should equal the harm or detriment suffered by either party, as directed by law. 
• Section 73 of the Indian Contract Act of 1872 lays down the provision relating to damages. 
  • It provides that the party who breaches a contract is liable to compensate the injured party for any loss or damage caused due to the breach of contract. 
• Illustration:
  • ‘A’ contract to repair B’s house in a certain way and receive the money in advance. ‘A’ repairs the house, but not according to the contract. ‘B’ is entitled to recover the cost of making the repairs by the contract from ‘A’.
• Section 74 of the Indian Contract Act of 1872, deals with liquidated damages. 
•  Section 75 of the Indian Contract Act of 1872 deals with cases where the plaintiff is entitled to receive compensation when the contract is rescinded rightfully.

The correct answer is Option 3

Key Points

• Section 73 delineates the scope of compensation in the scenario of a contract breach, specifying that a suffering party is eligible to receive compensation for any loss or damage that naturally occurred in the normal flow of events from the breach, or was known to both parties as a probable outcome during the contract's formation.
• This provision ensures that the compensation covers foreseeable impacts directly tied to the breach, thus establishing a fair and predictable framework for redress. It explicitly excludes compensation for remote and indirect losses, underlining the intention to link damages directly to the consequences of the breach.

The correct answer is Liquidated damages.Key Points

• Dunlop pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd. (1915) AC 79  is a notable English contract law case addresses the extent to which damages may be sought for a contract breach when a sum is fixed in the contract.
• It emphasises the enforceability of liquidated damages unless the sum is considered unconscionable.

The Correct answer is Option 3

Key Points

• Section 61 provides a method of appropriation when neither the debtor nor the creditor makes an appropriation of a payment towards a specific debt.
• In such circumstances, the payment should be applied to settle the debts in chronological order, based on their due dates. If the debts share the same standing in time, then the payment is to be divided proportionally among them.
• This guiding principle ensures a logical and fair approach to debt reduction when specific appropriation directions are absent, prioritizing older debts for clearance.

The correct answer is Option 3

Key PointsExplanation: Sec 74 ICA deals with situations where amount to be paid in case of breach is given in contract. In such cases compensation amount cannot be more than that and there is no requirement to prove actual loss.

The correct answer is option 1.Key Points

• Compensation for loss or damage caused by breach of contract is given for any loss or damage that 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. This means that compensation is provided only if the parties were aware of the likelihood of the loss at the time of making the contract. 
• Section 73 of Indian Contract Act 1872 deals with 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.

The correct answer is Liquidated damages.Key Points

• Dunlop pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd. (1915) AC 79  is a notable English contract law case addresses the extent to which damages may be sought for a contract breach when a sum is fixed in the contract.
• It emphasises the enforceability of liquidated damages unless the sum is considered unconscionable.

The Correct answer is option 4

Key Points The principles evolved in the landmark case Hadley v. Baxendale form the basis of Section 73 of the Indian Contract Act. This case established a foundational rule for determining the extent of compensatory damages due for breach of contract. The main principles derived from Hadley v. Baxendale include:

• Direct Damages: Compensation can be claimed for losses or damages which arise naturally (i.e., according to the usual course of things) from the breach of contract.
• Foreseeable Damages: Compensation is also applicable for losses or damages which the parties knew, at the time they made the contract, to be the probable result of the breach of it.

• Section 73 of the Indian Contract Act incorporates these principles by stating that a party suffering from a breach is entitled to receive compensation for any loss or damage caused by the breach, which naturally arose in the usual course of things, or which was known to be likely to result from the breach at the time of contract formation.
• This section also specifies that compensation is not given for any remote and indirect loss or damage sustained due to the breach, aligning with the Hadley v. Baxendale's principle that only foreseeable or naturally occurring damages attributable to the breach are compensable. This establishes a clear boundary for determining compensation, ensuring it's fair and predictable within the context of the contract's formation and breach.

The correct option is Section 73.

Key Points

• Damages are the solution or the remedy for the damage caused to the party. 
• Damage can be caused in two ways:
  • Consequential
  • Incidental
• The estimated money should equal the harm or detriment suffered by either party, as directed by law. 
• Section 73 of the Indian Contract Act of 1872 lays down the provision relating to damages. 
  • It provides that the party who breaches a contract is liable to compensate the injured party for any loss or damage caused due to the breach of contract. 
• Illustration:
  • ‘A’ contract to repair B’s house in a certain way and receive the money in advance. ‘A’ repairs the house, but not according to the contract. ‘B’ is entitled to recover the cost of making the repairs by the contract from ‘A’.
• Section 74 of the Indian Contract Act of 1872, deals with liquidated damages. 
•  Section 75 of the Indian Contract Act of 1872 deals with cases where the plaintiff is entitled to receive compensation when the contract is rescinded rightfully.

The correct answer is Option 3

Key Points

• Section 73 delineates the scope of compensation in the scenario of a contract breach, specifying that a suffering party is eligible to receive compensation for any loss or damage that naturally occurred in the normal flow of events from the breach, or was known to both parties as a probable outcome during the contract's formation.
• This provision ensures that the compensation covers foreseeable impacts directly tied to the breach, thus establishing a fair and predictable framework for redress. It explicitly excludes compensation for remote and indirect losses, underlining the intention to link damages directly to the consequences of the breach.

The Correct answer is Option 3

Key Points

• Section 61 provides a method of appropriation when neither the debtor nor the creditor makes an appropriation of a payment towards a specific debt.
• In such circumstances, the payment should be applied to settle the debts in chronological order, based on their due dates. If the debts share the same standing in time, then the payment is to be divided proportionally among them.
• This guiding principle ensures a logical and fair approach to debt reduction when specific appropriation directions are absent, prioritizing older debts for clearance.