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Case Study - Module 1 Activity - 2 Team - 2

X contracted with Y to supply 1,000 water bottles at Rs. 5 per bottle and with Z to purchase the same amount at Rs. 4.50 per bottle for the purpose of fulfilling the contract with Y. Z failed to deliver the bottles, so X could not fulfill the contract with Y. Under Section 73 of the Indian Contract Act, since Z was aware of X's contract with Y, X can claim damages of Rs. 500 from Z, which is the profit X would have made fulfilling the contract with Y. If Z was unaware of the contract with Y, X could claim Rs. 750 in damages from Z, being the difference between the contract price and market price.

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173 views

Case Study - Module 1 Activity - 2 Team - 2

X contracted with Y to supply 1,000 water bottles at Rs. 5 per bottle and with Z to purchase the same amount at Rs. 4.50 per bottle for the purpose of fulfilling the contract with Y. Z failed to deliver the bottles, so X could not fulfill the contract with Y. Under Section 73 of the Indian Contract Act, since Z was aware of X's contract with Y, X can claim damages of Rs. 500 from Z, which is the profit X would have made fulfilling the contract with Y. If Z was unaware of the contract with Y, X could claim Rs. 750 in damages from Z, being the difference between the contract price and market price.

Uploaded by

APARNA SENTHIL
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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CASE STUDY – MODULE 1

ACTIVITY -2
TEAM -2
Case study :
✗ Q.8 'X' entered into a contract with 'Y' to supply him 1,000 water bottles @ Rs 5.00
per water bottle, to be delivered at a specified time. Thereafter, 'X' contracts with 'Z'
for the purchase of 1,000 water bottles @ Rs 4.50 per water bottle, and at the same
time told 'L' that he did so for the purpose of performing his contract entered into
with 'Y'. 'Z' failed to perform his contract in due course and market price of each
water bottle on that day was Rs 5.25 per water bottle. Consequently, 'X' could not
procure any water bottle and 'Y' rescinded the contract. Calculate the amount of
damages which 'X' could claim from 'Z' in the circumstances? What would be your
answer if 'Z' had not informed about the 'Y's contract? Explain with reference to the
provisions of the Indian Contract Act, 1872.

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Solution:

The problem asked in this question is based on the provisions of Section 73 of the Indian Contract Act, 1872.
In this case ‘X’ had intimated to ‘Z’ that he was purchasing water bottles from him for the purpose of
performing his contract with ‘Y’. Thus, ‘Z’ had the knowledge of the special circumstances. Therefore, ‘X’ is
entitled to claim from ‘Z’ ` 500/- at the rate of 0.50 paise i.e. 1000 water bottles × 0.50 paise (difference
between the procuring price of water bottles and contracted selling price to ‘Y’) being the amount of profit
‘X’ would have made by the performance of his contract with ‘Y’. If ‘X’ didn’t say about the contract with Y
to Z then the damages would have been the difference between contract price & market price (1000x 0.75) Rs
750.

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RELEVANCE

✗ BREACH OF CONTRACT- DAMAGES: Section 73 of the Indian Contract Act,


1872 lays down that 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.

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