Case title – Mundy v. New York, 27 N.Y.S. 469 (1894)

The grant of damages is actually dependent on the fulfilment of the twin test of

1. ‘beyond the control of the party and
2. ‘unforeseeable’ factors leading up to delays.

👉 In an American case Mundy v. New York, 27 N.Y.S. 469 (1894), it was held that while a flood was outside the control of the party, the flood delay was inexcusable because similar flooding had occurred previously and was thus foreseeable. These principles also form the basis of the UNIDROIT principles and are thus, universally accepted.

Indian legal perspective:

👉 Section 73 of the Contract Act incorporates the two rules laid down in the celebrated English case
Hadley & Anor v Baxendale & Ors, [1854] EWHC Exch J70 on consequential damages arising from breach of contract which are as follows:

👉 the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.

👉 However, while the provision lays down that the damages have to be reasonably foreseeable and should not be too remote or indirectly resulting from the breach, they do not lay down any procedure for calculation of the damages (McDermott International Inc. v. Burn Standard Co. Ltd, (2006) 11 SCC 181) and the supreme court of india has observed that the method to calculate damages would depend upon the facts and circumstances of each case (M.N. Gangappa v. Atmakur Nagabhushanam Shetty & Co. and Anr., AIR 1972 SC 696).