Breach of Contract in India: What Remedies You Actually Have Under Sections 73, 74 and 75, and What to Do First
When the other side does not perform, Indian law gives you damages, sometimes specific performance, and sometimes an injunction, each with limits. What sections 73, 74 and 75 of the Contract Act actually allow, when a court will order performance, and the practical steps before any claim.
A vendor misses a delivery, a customer refuses to pay, a counterparty walks away from a signed deal. The instinct is to threaten "legal action"; the useful question is what remedy the law gives, how much, and what you must do first. This guide explains the three remedies Indian law provides for breach, the limits on each, and a practical sequence. Position as of October 2026.
Damages: section 73
Section 73 of the Indian Contract Act, 1872 entitles the party suffering from a breach to compensation for loss or damage "which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it", and excludes "any remote and indirect loss or damage". The explanation to the section requires account to be taken of the means available to remedy the inconvenience, which is the duty to mitigate. So:
- Direct losses (the cost of a replacement supply at a higher price, the price not paid) are recoverable.
- Consequential losses are recoverable only if they were within the parties' contemplation at signing, which is why contracts exclude them expressly.
- You must take reasonable steps to limit your loss and cannot recover what you could have avoided.
Liquidated damages and penalties: section 74
Where the contract names a sum payable on breach, section 74 entitles the claimant to "reasonable compensation not exceeding the amount so named", whether or not actual loss is proved. Two consequences: a stipulated sum is a ceiling, not a guarantee, and a court can award less if the sum is unreasonable relative to the likely loss. Draft liquidated damages as a genuine pre-estimate (a daily delay rate tied to real cost) rather than a deterrent figure.
Rescission and restitution: section 75
A party who rightfully rescinds a contract is entitled under section 75 to compensation for damage sustained through non-fulfilment. Rescission must itself be lawful: a wrongful termination is a breach by the terminating party.
Specific performance and injunctions
Since the 2018 amendment, the Specific Relief Act, 1963 treats specific performance as a remedy the court shall grant subject to the Act's exceptions, rather than a discretionary exception. Section 14 lists contracts that cannot be specifically enforced, including contracts dependent on the personal qualifications of the parties (so no order forcing an individual to work) and contracts whose performance involves continuous supervision the court cannot undertake. Section 41(e) bars an injunction to prevent breach of a contract whose performance would not be specifically enforced; section 42 allows an injunction to enforce a negative covenant (such as confidentiality) even where the positive obligations cannot be ordered. For commercial contracts, specific performance is realistic for sale of specific goods or property and for confidentiality injunctions; damages remain the usual remedy for services.
Limitation
A suit for compensation for breach must generally be filed within three years from when the breach occurs, under the Limitation Act, 1963 (the period and starting point depend on the article that applies). Arbitration claims are subject to the same periods. Do not let negotiations run the clock out.
The practical sequence
- Read the contract. Identify the breach clause, cure period, notice clause, liquidated damages, liability cap, exclusions and dispute clause. A cap of twelve months' fees limits what any claim is worth.
- Preserve the record. The signed contract with stamp certificate and audit trail, correspondence, delivery and acceptance records, invoices. Electronic records are proved under section 63 of the Bharatiya Sakshya Adhiniyam, 2023; export them properly.
- Mitigate. Source the replacement, limit the loss, document what you did.
- Notify. A breach notice as the contract requires, with the cure period; keep the dispatch record.
- Quantify. Direct loss, contemplated consequential loss, liquidated damages where provided, all net of the cap.
- Escalate per the dispute clause. Negotiation, then mediation or arbitration (the Arbitration and Conciliation Act, 1996), then court if the clause allows.
- Settle where sensible. A signed settlement agreement with a payment schedule is a contract too; track it.
Avoiding the question
Most breach disputes trace to three drafting failures: no acceptance criteria, no cure mechanism, and no liability cap the parties actually read. A template that fixes those produces fewer claims than a strong litigation strategy.
Where Legatio fits. Legatio keeps the contract, its evidence record and its correspondence together, holds the breach, cap and dispute clauses as data, and generates and dispatches breach notices with a delivery log. The claim itself is a matter for counsel.
Position stated as of October 2026. General information, not legal advice.