Contract Law
Key Supreme Court Precedents on Contractual Breaches & Liquidated Damages (2026 Update)
By Dr. A. K. Sen
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September 04, 2026
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5 min read
The law governing contractual damages in India under Section 73 and Section 74 of the Indian Contract Act 1872 has evolved significantly through recent pronouncements of the Supreme Court of India.
1. Distinction Between Section 73 & Section 74
While Section 73 deals with unliquidated damages arising naturally in the usual course of things from breach of contract, Section 74 applies to contracts containing a stipulated sum or penalty payable upon breach.
"Where a contract names a sum to be paid in case of breach, the party complaining of the breach is entitled to receive reasonable compensation not exceeding the amount so named." — Supreme Court Ruling Digest.
2. Practical Takeaways for Advocates & Drafters
- Always include explicit pre-estimation recitals when drafting liquidated damages clauses.
- Demonstrate proof of actual loss where loss is capable of exact assessment.