I--IQIIIDATED DAMAGES AND PENALIIES : EX

ANTE J-29
OR EX POST'METHODOLOGY

Four casesdecided under SectionT4 are important:

$) 1929: Lord Atkin in the Privy Council in Bhai panna Singh v. Bhai Arjun
Singh8g,stated that under the section, the plaintiff must prove the damages
suffered.He stated:
The effect of Section 74 of the Contract Act, l87Z is to
tiesii disentitle the
plaintiffs to recover simpliciter the sum of Rs 10,000 whether penalty
fterj or
liquidat"{ damages. The plainfiffi must prove the damages they
sif have
suffered.eo (emphasissupplied)
tnd
r' (2) 1963: Fateh Chand v- Balkishan Dasssr, in this case, the Constitution
I
Bench(five learned Judges) laid down important principles.
)re,
In that case, there was a contrar
:of
rich Rs 1,12,500 and initially Rs1000 wi
'his agreedthat once possessionis given
Rs24,000 and that the balance shou
The contract further stated that in c
registrationof the sale deed by lst June, rg4g, then the seller could
forfeit
the sum of Rs 25,000. On 25-3-7949 the purchaserpaid Rs 24,000
to rhe
sellerand obtainedpossession.However, all,egingthat the purchas",
dil ;;
comeforward to get jtrs t?J. deed regisrer.o uy lst June,
lg4g, the seller
forfeitedRs 25,000. The seller filed a Juit for recovery of posr"rrio'
as also
Rs6500 towards use occupation of the property from Z5-3-lg4g rill
Ttd
24-3-1950,the dateof the suit and also future profit, til aetivery.
The trial court granteda decreefor possessionand profits,
and on appeal
by the purchaser,the High Court came to the conclusibn
that the defendant
purchasercommitted breach in not coming forward
for registration and it
acceptedthe forfeiture of Rs 25,000 as valid and
granted Rs 1I,250 as
damagesand directedfuture profits at Rs 265 per
month.

could not b-gforfeited. It also disagre,

>ni'ouilf nt LA:on0twuspaid towards security
for due performance of the
contract"finasrnuchas there was no sueh plea.t
-seciio Th" C""rt1il;Lrr.o to
n i + of the indian contra"t A.t and held rharrhe
i arnounrof Rs 24,00a
mentionedin the contract was in the nature
, B S of a penalty, being in terrorern
'sed (seepara9 at p. l4I1 of AIR).

8ft ( t 929)30 Lw 281 : AIR

tgzg pC L7g.
9a lbid., Ig0.
9l ArR 1963SC 1405.
 SUPREMECOURT CASES (2013)1 SCC(
J-30
thejudgment of
It is necessarYto refer to the relevantpassagesfrom
for the Supre
SupremeCourt. J.C. Shah, J', (as he then was) speaking
Court observedas follows:
The section is clearly an attempt to eliminate the somew
g.
common law
elaborate refinements made under the English
payment of liquidatt
distinguishing between sripulations providing for
damages and stipulations ii&"
'/ narure of penalty. Under the cornmon tT
v mutual agreement
at ls regarded as
genuine pre-estimate oj/damages by
t

sripularion naming yfiia"red

' damages and binding between the parties;
"/
stipulationin a gfitract in terroremis a penalty"i1 the co1ll:lt":
I
---J -^G-^^^

;"i";;" tt, awqang" rhe aggrievedparty only reasonablecompensation.

rulel
In{ian t"grF(ut." has so.rgftt tu cut across the web ?f
--

under the Eiglish common law, by enactinga unifo

ulv^Er- F-
t - /

ir[u*rfrn,
namingamountsto be
to all stipulations
iltt#applicable fil^ti.:T:
(emphasis suPPli
breach and stipulationsby way of penalty'ez
The learnedJudgethen stated:
aggriev
10.... The secrion[i.e. Secrion74] undoubtedlysaysthat the
has broken
party is entitled to receive cornpensationfrom the parfy who
have been c
contract whether or not actual damageor lossis proved to
' (emphasissuPPli
by the breach.93
the meaning
and in the next sentence, the learned Judge then explained
proved to have be
the words "whether or not actual damage or loss is
caused" as follows:
10. Thereby it merely dispenseswith proof of "actual /oss
when
damage,,; it does not justify the award of compensation
beca
consequenceof the breach no legal iniury at all has resulted
make good loss
compensation for breach of con tract can be awarded to
or which
damage which naturally arose in the usual course of things,
result from
r made the contract, to be likely to . f ^ ^ ^ : ^ ^ . - * ^ 1
parties knew when they
rsv^Ys
(emPhasis suPPli
ilreu"h.,,94
the court has
The learned Judge also stated (page 1412, column 2) that
the plaintiff
adjudge, in every case, reasonuut" compensation to which
then stated:
entitled from the defendantson breach of the contract. He
the conditio
Such compensationhas to be ascertainedhaving regard to
existing on the date of the breach'es .ii6-

the Juprelrre
above case, tne rr'rLr tha!'*
Court found
SupremeL-uurL ,:
It may be noticed that in the above
a penalty (seL,"
the covenantfor forfeiture of Rs 24,000was in the nature of

92 lbid., 1410-1I , Para8.

93 lbid., I4I1, Para10.
94 lbid., 7411,Para10.
95 lbid., 1412,Paru15.
 LIQI-IIDAIED DAMAGES AND PENALTIES : EX ANTE J-31
OR EX POST METHODOLOGY

para9 at p. I4ll of AIR) and though in such cases,Section 74 permrtsthe

lourt to award reasonablecompensationex post, the Court held that there
wasno evi"dence of any /oss sufferedby the plaintiff(see para 16) saveas to
loss due to being kept out of possessionand that there was no evidenceof
depreciationin value (i.e. natural)or "any other specialdamages".The Court
further observed that when, "the plaintiff failed to prove loss suffered by
him", there was no basis for the High Court in estimatingthe loss at IUVoof
the consideration. The plaintiff got Rs 1000 as earnestmoney and had the
useof Rs 24,000 paid by the purchaserwhich had sufficiently compensated
hfunfor loss of possession.Therefore,the decreefor Rs 11,250as damages
utd ; was set aside and the plaintiff was ordered to refund the penalty amount of
)rm 7 Rs 24,000 and the Court awardeddamagesat Rs 140 per month from I-6-
, o fi 1949up to the date on which the respondentgot back possession.
ied)i The following principles can be inferred from Fateh Chanfi6 from the
passages quotedabove(pp".I4l0-12):
(1) Sectio ''74 eliminates the elaborate refinem-e-ntg*
a

"ur_rderthe
English la tween quidated damagesand penalties by cutting aCtort
presumptionsunder the English cornmon law, by
a uniform principle applicable to all stipulations naming
6untsto be paid in caseof breachand stipulationsby way of penalty.
,eerl{g (2) The aggrieved party is entitled to receive compensationfrom the
. r[r' party which has broken the contract, and the clause, 'whether or not
!li;
actual damage or loss is proved to have been caused by the breach',
merely dispenseswith proof of actual loss or damage. (The difference
between 'damage' and "actual loss or damage" will be explained later
on). (And tn Maula BuxeTthe SupremeCourt explained in what class of
s or,ffi casessuchproof of actual loss or damageis not necessary).
(3) An award of compensationcan be justified only if there is legal
iniury. That meansthat if no legal injury has resulted,no cornpensation
is payable.This is becausecompensationis payable only to make good
's#ffi loss or damagewhich naturally arises in the usual course of things or
ff i$-iir which the partiesknew when they made the contractto be likely to result
u,t; frorn the breach. (That Section 74 did not dispensewith proof of "legal
, i :i..'

:roffl, i: injury" will be explainedlater on.)

riedf $
'I
(4) Reasonablecompensationhas to be paid by the court on the basis
i;l'

thati, of the conditions existing on the date of the breach. This would clearly
(seot, mean that the Court agreed that the Indian legislature opted for the ex
post review to arrive at the actual rnoney value of legal injury suffered
on accountof the breach, which is different from the English approach
where the ex ante estimationof damagesmaCeat the time of the contract
96 AtR 1963SC 1405.
97 (1969)2 SCC 554.

It
,tli'
 \

SUPREME COURT CASES (2or3) 1 SCC (I)

J-32
is treated as payable, even if the ex posr inquiry by the court revealed
that the actual damages suffered were less than the amount originally
fixed.
19692Maula Bux v- (Jnion of Indiaeg
Next comes the secondjudgment of the Bench of three learned Judg
in Maula Bux99which was also delivered by J.C. Shah, J., (Acting Chie
Justice).
In that case,the appellant was the plaintiff in the suit and he had entered
inro a contract dated 20-2-1947with the Government of India for supplying
potatoesand he depositedan amount of Rs 10,000 as security for the due
performanceof the contract. He also enteredinto another contract on 4-3-
of Rs 8500 ils
^due of poultry and deposited another amount
Ig4i for supply
security for performance of that contract. Under both the contracts,
Clauss (8) permiited forfeiture of these amounts in case of default. The
appellant defaulted and the contracts were rescinded by the Government
Z3-11-1g47and Z-I2-I|47 respectively.The appellantfiled a suit for refu
of the forfeited amount with interest-
The trial court decreedthe suit for refund of the amount holding that
Government had not suffered any loss. On appeal by the Government,
High Court reversedthe judgment, but granteda decreeonly for Rs 4I6-25p
with interest holding that the retention by the Government of the sums o
Rs 10,000and Rs 8500 was not unreasonable.
On appeal by the plaintiff contractor, the Supreme Court set aside
judgm"rf of tn" ifigh Court regardingretentionof Rs 18,500,observing
there was no issu" itt the suit as to what was "reasonablecompensation"
declined the request of the Government to adduce fresh evidence on
issue.
The Courr held (see para 5 at p. 559 of SCC) that the deposits o
Rs 10,000 and Rs 8500 were not in the nature of earnestmoney. It held tha
it is well settled that in relation to sale of movable, or immovable prope
money paid as earnestmotrey, if the amount is reasonable,can be forfei
for brlach and such a forfeiture is not treated as penal. However,forfeirut@ff
of monies other than earnestmoney, it was pointed out, will be a penalty.'f,$
Even if the amount fixed by way of penalty is not payable, still under#i
compensationcan be paid.
Section74, reasonable r'. S

But. in that case, as the Governrnent of Indiafaited to prove the amountvo

of reasonable damages that could be awarded and did not produce anYt::
evidence as to the rates at which potatoes,poultry, etc. were purchasedby
them during the period when the plaintiff defaulted regularly, it was held that
no compeniationwas liable to be awarded.The Governmentwas not entitled
98 (1969)2 SCCss4.
eeJ1"?9:j "
?9sc,554.
 LTQUIDAI'ED DAIVTAGESAND PENAUTIES : EX ANTE J-33
OR EX POST METHODOLOGY

Rs 8500 as liquidated damages inasmuch

to retarnthe sums of Rs 10,000 and
genuine pre-estimnte of the damnges.
as these were not proved to be a
The Supreme Court explained the contents of Section 74 as follows:
6. It is true that in every case of breach of contract the person
aggrieved by the breach is not required to prove actual loss or damage
suffered by him before he can claim a decree, and the court is competent to
award reasonablecompensationin case of breach even if no actual damage
is proved to have been suffered in consequenceof the breach of contract.
But the expression, "whether or not actual dnmage or l.oss k proved to
luve been caused thereby" is intended to cover different classes of
contracts which come before the courts. In c&se of breach of some
contracts it may be impossiblefo, the court to assesscompensation arising
in
fro* [the] breach, while in other cnses compensation can be calculated
accordance with established rules. Where the court is unable to csses.s
compensati.on,the surn named by the parties, if it be regarded as a genuine
pre-estimate,may be taken into consideration as the rneasureof reasonable
compensation,but not if the sum named is in the nature of a penalty. Where
Ioss in terms of money can be determined, the pafly claiming
compensationmust prove the losssuffered by him."lOo
(emphasissupplied)
The following principles can be inferred on a combined reading of the
principles laid down by the Supreme Court in Maula &u*rot and Fateh
g1ron4roz'
(1) It is true that under Section 74, in every case of breach of
contract,the person aggrievedby the breach "is not required to prove
actual lossor dantag€",thereby indicating that rffire mayTii-somecases
in which it will be possibleand thereforenecessary,to prove actual loss
or damages.These are caseswhere, ex post, after the breach, the court,
on the facts of a given case,is able to ascertainthe actual money value
of the legal injury sustained by the innocent party consequent to the
breachof contract.
(a) There are also other cases where, ex post, after the breach, it is
not possible to compute the actual loss or damz9e, namely, the money
value of the legal injory sustained by the innocent party and in such
fitt
cases, the court is empowered under Section 14 to g_rgnt_.thg.3.geed
ny amount (provided it is not penal in nature) or t"is;na6ie Ot*Jg"t.
by (b) In cases,where, actual loss or damage can be ascertainedand
rat the ex post inquiry reveals that the innocent party has suffered less than
,ed
l'.j/J_
Ibid., 559, para 6.
l o l ( 1 9 6 9 )2 S C C 5 s 4 .
1 0 2 A r R 1 9 6 3S C 1 4 0 5 .
 SUPREME COURT CASES
(2013)1 SCC(
J-34
or no damages at, all,
what was estimated at the time of contract
amount
court is empowered to grant such lesser ": -plol:lr,::
case -uy U". The above group of words in Section 7'
darnages,as the
- mean that tegal injury is
read with the observationsin Fateh chandlO3
the payment of the agr€
must, and that the section did not contemplate
no legal injury.
amount or any amount, even if there was
o' mon
(2) where, ex post,after the breach,loss or damageii ::T:
rnust pro
can be determined at the trial, the party claiming compensation
by him in terms of money
the actuar ross or damage suifered
on a fixed alnount at
notwithstanding that parties had agreed
cornmencementof contract'
ONGC Ltd. v- SawPiPes21tr'ro4
contract by the appellant
In this case,the respondentwas granted a
for off-shoreoil explorTl?1.i"1^-:::t:l3ltl; i
supplyof equipment
i" caseof failure to deliver the suppliesor
,rtuf
"J#;J;;I,;IJ the appellant would be entitl
installment thereof within the scheduletime,
lLl5Lall.IrllvuL ^-l
to t""ou"r from the responde
without prejudiceto other rights or remedies,
the"agreed damu!"'"andnotbywav:lryi?lY:.1jJi:::T,"::
liquidated
*'t ;";i;r;;;il., whole unit per week for suchdelav or
p""" of rhe
was delay in supplyof ce
thereof,subjectto a ceiling of lTvo. There
,t it by steelmill workmenall over Europe
ll ^r'nr Ettrnr

tr'#r"il;;;;;; " and

"r|996 " the Italian '"ppl]::'^:j,P: j"jnr1;l:
September-october,
rsPL\"'r'vr ' in tirne' At that :;
sta
required raw matena,1to the respondent
;;;;;i.;;
not supPlYthe
extension
sought
therespondent of timeby 45ol': 1l-_1
1T-"r:l':*:'fi}'
conditionrhatanamooriequivalentto theliquida
H#i#'ffi;;lf,;;
be recove::l^x:3"-
damagesfor delay in supply of pipes would of delav
onaccount
lJ#il:"i. uSD 304,s70-20
in""*"iiun, deducted
on account:l
supplyof goodsand Rs 15,75,559 :i:::-11:*-t?*t":'
damages fromthebi
;Hlil Jn.u,o?iled asandby wayof liquidated
to arbitration'
The validity-of the abovedeductionwas referred
contention 'n::,
The
.t lItr Arbitral Tribunal held that the respondent's
fu
clause,was not acceptabl
appellant,sclaim was within the"force maieLrre"
rhe upq"l?1j_iii1
Bur rhe Tribunalherd(seepara34 of sccl rhar
.tr, LIt LITW I I,I :.
delay in supplies andfi
actual loss or dam ageon account of the
established
or the
evidence oI
the evidence wlLllerDeD' Lrrv Dr,'\-'r'!rbv--'-l
appelant'ss witnesr"r-l,i:r*"-T",t-t;:t
tn" appeuant
that
that according to the
according to
that led to the changein the'$
casing pipes was only one of the other reasons
had"1"i1!4.1"^
planandthattheappellant
deploymenr or the"i:?:l:*':,1:il.,n:l'l
because
ffifto.f,TTiifi:r"t.,';;;^;i""i;ney delavin supplv or'
goods".

103 AIR 1963SC 1405.

s scc 105.
104(2003)
.t
 LIQUIDATED DAMAGES AND PENAIJIIES : EX ANTE J-35
OR EX POSTMETHODOLOGY

In the appeaLpreferred by the appellant, the Supreme Court disagreed

with the Arbitral Tribunal and held that the deduction at the rate of 1Voof the
contract price for delay in supply of some items as liquidated damages, was
jusdfied.
The Court gave examples of two cases where, ex post, it is difficult to
ley ascertain actual money value of the legal injury caused by the delay in
)ve performance-
eY' (a) Cotton bales: It first gave an example of a contract relating to supply of
*
thei cotton balcs where it is said that it is not possible to ascertain the- actual
;
t-
damageor loss consequent to the legal injury. The Court stated as follows:
64. If the compensationnamed in the contract is by way of penalty,
'
fi
tor consideration would be different and the party is only entitled to reasonable
I
he compensationfor the loss suffered. But if the compensationnamed in the
ny
II contract for such breach is genuine pre-estimateof loss which the parties
3d,
a knew when they made the contract to be tikely to result from the breach of
))nt it, there is no question of proving such loss or such party is not required to
)nt
r'l lead evidence to prove actual loss suffered by him. Burden is on the other
art
a party to lead evidence for proving that no loss is likely to occur by such
nin
v. breach. Take for illustration: if the parties have agreed to purchase cotton
iin, bales and the same were only to be kept as a stock-in-trade. Such bales are
rld
rl not delivered on the due date and thereafter the bales are delivered beyond
g the stipulatedtime, hencethere is breachof the contract.The questionwhich
Bet:
led'
te would arise for consideration is - whether by such breach the parfy has
fed;
Ie sufferedany loss. If the price of cotton bales fluctuated during that time, Loss
rt
lhe,. or gain could easily be proved. But if cotton bales are to be purchased
fo}
i
in manufac turin g ! arn, con sideratio n would be diffe,s n1.ro5
a)
&Xt (emphasissupplied)
[s.'
1l The Court observed as follows:
67- In our view, in such a contr act, it would be difficult to prove
rh
:hei
the exact loss or damage which the parties suffer becauseof the breach thereof.
rl
lle,
Ie, In such a situation, if the parties have pre-estimatedsuch loss after clear
rot
not understanding,it would be totally unjustified to arrive at the conclusion that
nd
rnd the party who has committed breach of the contract is not liable to pay
of compentullon.lo6
rh
he
The Court further added:
ad
IOr
of 67. There was nothing on record that [the] cornpensation
contemplated by the parties was in any way unreasonable.It has
been
specifically mentioned that it was an agreed genuine pre-estimate
of

r05 Ibid., 7 4I, para 64.

r05 il?id.,74), para67 .
 SUPREME COURT CASES ('20t3)1 SCC
J-36
mehtioned that
d a m a g e s d u l y a g r e e d b y t h e p a r t i e s . I t w a sqlso
liquidated darnagesare not by way of penalty'
that the stipulal
No evidence is led by tre claimant to establish
contemplated was'
conditi(Nl was by way of penarty or the compensation
anywa5l,@'107
given by
(D) Coffiucrion of a ruad or a bridge: A secondexample'was
\.tryr.D- u
\a.r/
of a road.J t
C-o'6 in para 67, in respect of u "ontract for constructi.on
was delay, it was
ffige, and it was statedthat in such casestoo, if there
p"ttiUle to estimatethe loss suffered'
"similar" to
The court stated that the case in saw Pipesroz was
that where the ac
situation in the above two examples,in the sense
the delay could n
damageor loss consequentto the legal injury causedby
ex post,be assessed, ihe agreeddamages(or a reasonableamount) can
observations:
awardedby the court. This is clear from the following
in t
67. Similarly, in the present case, clelay took place
of rigs....In ourview,in suchacontrl:t,it 1.o1ti:^1i:T::t1
deploymenr
vvtrLvJ

t/^v v v [the] exact

prove loss or damage which the parties *ff-"^l _b:,"^1':::t
pre-estrnrated such I
Lreach thereof. In such a [case], if the parties have
^; t- ^,,^L ^ t-^.,..al if thc nqrties h:
to arrive at
after clear understanding, it would be totally unjustified
on the contract rs
conclusion that the party who has committed breach
emphasissuPPli
(emp
liable to paY comPensation-log
where reference is
There is yet another passagerelevant in the context
to Ext. B-121 andit is stated that, on the facts:
which
67. it would, be difficult to pro,e exact /oss or damege
if the pal
parties suffer becauseof ttrl ureach thereof. In such a situation,
it would be tot ^,.11 L^ Cal

have pre-estimatedsuch loss after clear understanding,

who
unjustified to arrive at the conclusion that the partl *:j:1n11 agl
breach of the contract is not liable to pay compensation [Parties
by way of penalty'
that the estimatewas a genuine estimateand was] not
that the stipula
No evidence is led by the claimant to established
contemplated was
condition was by way of penalty or the compensation
(ernphasissuppli
unreasonable.lt0
pipesrll, it was a casewh
In other words,the court held that tn saw
court to assess
ex post, after the breach, it was difficult for the
and therefore
compensationpayableon accountof delay in perforrnance
of the contract
amount ugr""d at the time of the cornmencement

107 lbid.,742, Pata67.

108(2003)
s scc 70s.
I09 Ibid.. J42, Para67.
1I0 lbid., 742, Paru67-
1 1 1 ( 2 0 0 3 )s s c c 7 0 5 .
 LIQTIIDATED DAMAGES AND PENALTIES : EX ANTE J-37
OR EX POSTI\,IETHODOLOGY

payable.There was also no proof that the arnount fixed was excessive or
d.isproportionateto the legal injury suffered or that it was by way of penalty.
The Court then laid down the following four propositions in para 6g:
(1) Terms ofthe contract are required to be taken into consideration
before arriving at the conclusion whether the party claiming damages is
entitled to the same.
(2) If the terms are clear and unambiguousstipulating the liquidated
damagesin case of the breach of the conffact unless it iJtreta that such
estimate of damages/compensationis unreasonable or is by wav of
penalty, party who has comrnitted the breach is required to"pay such
compensationand that is what is provided in Section 73 of the^contract
Act.
(3) Section 74 is to be read along with Section 73 and,theref'ore,in
every case of breach of contract, the person aggrieved by the breach is
not required to prove actual loss or damage suffered by him before he
can claim a decree. The court is competent to award reasonable | . ,
cornpensationin case of breach even if no aaual damage is proved ,o
havebeen sufferedin consequenceof the breachof a coniact. I"
(4) rn some contracts,it would be impossible for the court to assess
the compensation arising from breach and if the compensation
contemplatedis not by way of penalty or unreasonable,the iourt can
awardthe sameif it is genuine-pre-estimate by the parties as the measure
of reasonablecompensation.ll2 (emphasissupplied)
(In the above surnmaryof the four propositions formulated by the Court,
thethird and fourth propositionswill be explainedlater on.)
Analysisof the ratio of the three judgments of the Supreme Court:
It will be noticed that there is no conflict in the ratio of the law as
declaredin the threejudgmentsof the Supremecourt:
(a) In all three cases,there was legal injury or legal harrn. In the
first
two casesin Fateh Chandrr3and Maula 3r*r14, the amount fixed was
treatedasbeingby way of penaltyandwasthereforeheld not enforceable.
(b) Further, lrl
\o ) runner, in borh rhe cases
both the cases l..ateh
ra,teih Chandt 15 and
chaiitdiiS an; Maula Buxllt
(though there
r.uruuBrl tnere was legal lnJury'
injury, and though the arnount fixed at the ;;r
time oi
of
the
trrs u(-,r'ruaut
contract was nelo
held to be
De penal ln
in nature and could not be enforced on
facts), they were cases where the actual loss or damage
coul{d still be
ascertainedand be awarded under Section 74 as cornpensation,
but the

r t2 lbid.. 7 42_43 .
i 1 3 A I R 1 9 6 3S C 1 4 0 5 .
( 1 9 6 92) S C C 5 5 4 .
"I 1 4
t5 AIR 1963SC 1405.
I 1 6 0 9 6 9 )2 S C C s 5 4 .
 J-38 SI.'PREME CCIT.JRT
C^ESES (2013)I scc
innocent parties mrle no efiqt to adduce evidence to prove the actual I
or darnrye-
(c) The pcitim in SdIn PipesrlT was, however, different. In that
there wG l€rt intury (xr account of the delay in performance but it w
crse rtbctc, mUiry to the Supreme Court, the acfual economic or
vzb d fu bgat injury caused by the delay in perfonnance, could not
cstinqed- As there was no argument that the amount fixed was by way
pcnahy, the Court granted the stipulated amount as damages.
That completes the sunmary of the three judgments of the Supre
Court.
PART IV
Diffirence between"Iegal injur!", "damage" and "actusl damage or lo
From the discussionin .Part III, it will be noticed that the Supre
Court in Fateh Chandrrs while referring to the clause in Section
"whether or not actual damage or loss is proved to have been caused" (
:d out that unless there is "legal inj
:esulted in "actual damage or I
er Section74.
' What is the meaning of the words, "whether or not actual darnage
Ioss is proved to have been caused'? Do they dispense with the proof of
"economic value of the legal injury" or proof of "legal injury" itself?
T'here is some literature on the difference between the words "dama
and "actu&l damage or loss" which will be useful in this context. So far
the word "dam&ge" is concerned,it is synonymouswith "legal injury"
is sufferedon accountof breachof contract or on accountof a tort. But
words "actual damage or loss" convey a different idea and refer to
econornic or money value of the legal injury or darnagesufferedas a
of the breach of contract or on account of the tort. This is explained by
House of Lords in the judgment mentioned below.
In the case decided by the House of Lords in Nykredit Mortgage B
Plc. v. Edward Erdman Group [.nfl.rre,Lord Nicholls pointed out that
casescf breach of contract, the cause of action arises at the date of
breach of contract. In casestort, the causeof action arises,not when
culpable conduct occurs, but when the plaintiff first sustainsdamage.
stated that the question which has to be addressedis what is meant
o'actualdamage"
in the context of clairns for loss which is purely finan
(or economic, as it is sornetimesdescribed).He then quoted the views of

rrt (2003)
5 scc 70s.
118 ArR 1963SC I 405.
119 (1997)1 WLR 1621(HL).