Question

Which follow from application of the undermentioned legal principle:

FACTUAL SITUATION: A contracts with B to sell him $1,000$ tonnes of iron at $Rs.100/-$ per tonne. B tells A that he needs the iron for export purposes, and that he would be selling the iron at $Rs.200/-$ per tonne. A breaks the contract. When the question comes about damages, A says he will pay only $Rs.5000/-$ as damages because the same variety of iron was available in the market at $Rs.105/-$ per tonne. B however contends that he should be given $Rs.1,00,000/-$ because that was the profit which he would have made had A fulfilled the contract. B had actually bought the iron at $Rs.110/-$ and had exported it.

How much damage is B entitled to get?

• A. Not entitled to damages.
• B. Entitled to $Rs.10,000$ as damages.
• C. Entitled to $Rs.5,000$ as damages.
• D. Entitled to $Rs.1,00,000$ as damages.

Answer 1

Answer: (B)

Entitled to $Rs.10,000$ as damages.

According to law of the Law of Contract --- Remoteness of Damage refers to the consequence of breach may be endless but there must be an end to the liability. The defendant cannot be held liable for all that follows from his breach. There must be a limit to the liability and beyond that limit the damage is said to be remote and not recoverable. Therefore as per the given legal principle --- 'which naturally arose in the usual course of things from such breach' stands firm in this case. The original contract $1,000$ tonnes of iron at $Rs.100$ per tonne when broken by A should be compensated with the same amount as per the contract. Therefore B is entitled to $Rs.10,000$ as damages.