S
Sahaj Vidhi
Delhi Judicial Services 2006

X agreed to supply 1000 tons of iron Rs 100 per ton to Y to be delivered not later than 31/1/05. X also entered into a contract with A for purchase of 1000 tons of iron at Rs 80 per ton telling A clearly that iron is needed before 31/1/00 for supply to Y to fulfil the contract with Y. A fails to supply iron to X who in turn failed to supply the same to Y. In an action by X against A

Verified Answer
A. X can recover damage for loss or profit he would have earned by timely supply to Y & also damages which X might have paid to Y an a/c of breach of contract
B. X can recover damage which X might have paid to Y on account of breach of contract
C. X can recover damages in the form of penalty
D. X can recover for loss of profit at rate of Rs. 20 per ton of iron i.e. loss of profit

Explanation:

This scenario relates to the assessment of damages for breach of contract, particularly consequential damages, as governed by Section 73 of the Indian Contract Act, 1872 (based on *Hadley v. Baxendale*). Since X explicitly informed A that the iron was needed to fulfill a contract with Y, A had knowledge of the special circumstances and the potential losses X would incur if A breached the contract. Therefore, X can recover from A not only the direct loss but also the loss of profit X would have earned from Y, and any damages X might have to pay to Y due to X's own breach of contract with Y, as these were losses that naturally arose from the breach or were known to A at the time of contracting.