Question 2 - Hedley v Baxendale propounds cardinal principles about

compensation. Indian laws follow the same principle but with certain
modifications. Highlight the law on compensation in india with the help of
relevant case laws.

Answer- Introduction:
The concept of compensation in contract law is a fundamental and intricate
aspect that serves as a cornerstone for maintaining the integrity of contractual
relationships. Hedley v Baxendale is a landmark English contract law case that
established important principles regarding the assessment of damages for breach
of contract. While Indian law draws upon these principles, it has evolved with
certain modifications to suit the unique legal landscape in India. Understanding
these principles and their Indian interpretations is crucial in appreciating the
significance of compensation in contract law and its pivotal role in maintaining
contractual fairness and justice in India.

Principles of Compensation in India:

1. Principle of Causation:
In the Indian legal framework, the principle of causation is a fundamental
cornerstone of assessing compensation in contract law. This principle dictates that
a party can seek damages for a breach of contract only when the damages incurred
are a direct result of that breach and not too remote. The fundamental criterion
for compensation is that these damages must have been reasonably foreseeable
and flow naturally from the breach, as established in the "reasonable
contemplation of the parties." In essence, this means that damages claimed should
be within the scope of what the parties could have anticipated at the time of
forming the contract. This principle ensures that compensation is proportionate to
the harm caused and aligned with the intentions of the parties at the contract's
inception.

2. Principle of Mitigation:
Drawing from the common law principles exemplified in Hedley v Baxendale,
Indian law upholds the principle of mitigation when it comes to compensation.
Under this principle, an injured party is obligated to take reasonable and prudent
steps to mitigate their losses resulting from a breach of contract. This obligation
stems from the idea that parties should not exacerbate their damages when they
can reasonably prevent or minimize them. Failure to actively mitigate damages
may result in a reduction in the amount of compensation awarded. The principle of
mitigation ensures that the injured party does not unreasonably escalate their
losses and highlights the need for a proactive approach in preserving the sanctity
of contractual relationships.
3. Principle of Certainty:
Within the Indian legal framework, the principle of certainty is a pivotal aspect of
compensation. This principle mandates that compensation claims must be certain
and quantifiable. In other words, damages claimed should not be speculative or
uncertain but grounded in concrete evidence and specifics. Parties seeking
compensation must be able to provide sufficient proof to substantiate their claims.
This requirement for certainty ensures that compensation is based on tangible and
proven harm rather than conjecture or subjective interpretations. It serves to
maintain the integrity of contractual relationships by demanding that damages be
well-established and indisputable.

Relevant Case Laws in India:

1. Hadley v Baxendale Principle in India:

Facts: In the case of Maula Bux v. Union of India (1969), the plaintiff entered into a
contract with the defendant to transport a broken shaft to a place for repair. Due
to the defendant's delay in delivery, the plaintiff suffered financial losses as his
factory remained non-operational during the delay.

Judgment: The Supreme Court of India, in line with the Hadley v Baxendale
principle, held that damages are recoverable only for losses that arise naturally
from the breach or that were within the contemplation of the parties at the time
of contracting. As the delay and financial losses were foreseeable, the plaintiff
was entitled to recover damages.

2. Sitaram Agarwal v. Radha Bai (2007)

Facts: In the case of Sitaram Agarwal v. Radha Bai (2007), the plaintiff suffered
damages due to the defendant's wrongful act. However, the plaintiff did not take
reasonable steps to minimize these damages and instead allowed them to escalate.

Judgment: The Supreme Court of India, in this case, stressed the duty of the
injured party to mitigate their damages. The court ruled that the plaintiff cannot
recover damages for losses that could have been reasonably avoided. In this
specific case, the plaintiff's failure to mitigate the damages limited the recovery to
only those losses that could not have been prevented through reasonable efforts.

3. R.M.D.C. v. Union of India (1989),

Facts: In the case of R.M.D.C. v. Union of India (1989), the claimant sought
damages for losses allegedly incurred due to the defendant's actions. However, the
claimant failed to provide sufficient evidence to prove the exact amount and
nature of the damages.
Judgment: The Supreme Court of India, emphasizing the certainty of damages,
held that damages must be proven with a reasonable degree of certainty. Damages
that are speculative or cannot be quantified will not be awarded. In this case, the
court required the claimant to provide more concrete evidence to establish the
nature and extent of the damages claimed for them to be recoverable.

Conclusion:
Indian law on compensation in breach of contract cases draws inspiration from the
principles laid down in the famous case of Hedley v Baxendale. The core principles
of causation, mitigation, and certainty are upheld in India, but with nuances and
modifications that reflect the Indian legal context. Several landmark cases in India
have reaffirmed these principles, ensuring that the law on compensation remains
consistent and fair in its application. Parties to contracts in India can seek
compensation for losses resulting from a breach, provided they meet the criteria
established by law and jurisprudence.