Issue 4

Can the contracting party contract out Section 75 of Contract Act 1950 in a contract which
based on PAM?

Pursuant to Section 75 of Contract

“When a contract has been broken, if a sum is named in the contract as the amount to be
paid in case of such breach, or if the contract contains any other stipulation by way of
penalty, the party complaining of the breach is entitled, whether or not actual damage or
loss is proved to have been caused thereby, to receive from the party who has broken the
contract reasonable compensation not exceeding the amount so named or, as the case may
be, the penalty stipulated for.”
Section 75 requires proof of damages or reasonable compensation before the innocent party
in a contract that has been breached can recover the sum fixed in a clause
PAM Contract 2018
Not related.

Judgement on Selva Case

Judgement on Cubic case

Judgement on Macvilla case

Similar case held for
Conclusion
Section 75
Contracting parties have to be prepared to prove their losses and cannot seek to circumvent
the need to prove actual losses/reasonable compensation by an insertion of clause seeking to
contract out of section 75 or to deem the damage as having been incurred.
PAM contract
Clause 22.2 stated liquidated damages is the pre-estimate loss or damages which the
employer suffer in the event of contractor is in breach of clause 21.0 and 22.2.
Therefore, section 75 deals with the general principles of contract which contract out is not
applicable as it will fall foul of the contract act and common law
Contract Act 1950 section 75
PAM contract 2018 clause 22.2
So section 75 contract act 1950 – the general principles of contract (allow or not) to contract
out

Contract out whether the contract act 1950 allow any party to contract out from the particular
obligation and also require to look through PAM clause