Principle: Under Section 73 of the Contract Act, ordinary damages are those that arise naturally in the usual course of things from the breach.
Facts: A contracts to deliver machinery to B by 1 June. A delays delivery by 2 months. B loses normal production profits of ₹50,000 and an extraordinary government contract worth ₹5,00,000 (which was never disclosed to A). What damages can B recover?

Answer and explanation

Correct answer: A. Only ₹50,000 normal production profits, as extraordinary profits were not communicated

  1. Step 1: Apply the rule in Hadley v. Baxendale incorporated into Section 73 of the Indian Contract Act.
  2. Step 2: Damages are recoverable for losses that naturally arise in the usual course of things, or which were in contemplation of both parties at the time of contract.
  3. Step 3: Normal production profits of ₹50,000 are ordinary damages. The extraordinary profit of ₹5,00,000 was remote and uncommunicated, and cannot be recovered.
Answer
Only ₹50,000 normal production profits, as extraordinary profits were not communicated.

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