Abstract

In the construction of a contract, there is a wide range in contractual provisions that deal with delays and their consequences. Several such contractual provisions are examined in this paper, and their legal interpretation is examined. The older forms’ wording reflects the way the courts have interpreted them, as well as their history. Newer forms use different language, but their goals are the same-to allocate contract risk in a clear and efficient manner. According to contract law, a party can only be held liable for losses that occur in the normal course of things or that can be reasonably presumed to have been in the contemplation of both parties at the time the contract was made, as set out in the English case of Hadley v. Baxendale. In this paper, we use a formal model to examine the impact of this limitation on contract damages. One is the Hadley limit on liability, and the other is an unrestricted liability rule. Section 73 of the Indian Contract Act, 1872, dealing with unliquidated damages is the main essence from the landmark case of Hadley v. Baxendale case law, here the two rules were established through the judgement which are reinterpreted in the section 73 of the Indian Contract Act, 1872, which specifically talks about general and special damages and on what grounds they are granted. The case also talks about remoteness of damages which states that for the purposes of compensating losses caused by contract breaches, 'remoteness of damages' is defined as the legal standard for determining which damages are compensable, it provides that the party suffering from the breach may only seek consequential damages if both parties were aware of the likelihood of arising of such losses.

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