Section 73 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
This is the second of two articles on section 73. The first covered the first paragraph, which gives compensation for loss from a broken contract. Here we cover the rest of the section: a paragraph that extends the same compensation to obligations resembling those created by contract, and an Explanation saying that, in estimating loss, the means which existed of remedying the inconvenience must be taken into account. If you are about to send a demand for compensation, a legal notice should show what you did to limit your loss.
When an obligation resembling those created by contract has been incurred and not discharged, any person injured by the failure is entitled to the same compensation as if he had contracted for it and the other had broken the contract. The Explanation says that, in estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance must be taken into account. The section does not use the word "mitigate"; that is the label commonly used for this idea.
The second paragraph: obligations resembling those created by contract
"When an obligation resembling those created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract."
Which obligations "resemble" contract? The Act's Chapter V, "Of certain relations resembling those created by contract", covers sections 68 to 72: necessaries supplied, reimbursement of money paid, the benefit of a non-gratuitous act, the finder of goods, and money paid by mistake or coercion. See our articles on sections 68 and 69 and on sections 70 to 72. Section 73 itself does not list them; it speaks of "an obligation resembling those created by contract".
The effect is a bridge. If such an obligation is incurred and not discharged, the person injured gets the same compensation as if there had been a contract and a breach. That means the first paragraph's two heads (loss that naturally arose, and loss the parties knew to be likely) and its exclusion of remote and indirect loss are the yardstick; see the first article on section 73.
A modern example (ours). Dev's goods are held by Elan Warehousing after being found and taken into its custody. Elan fails to return the goods when demanded and they are damaged. Elan's duty to return is an obligation resembling those created by contract (see our article on section 71). Dev is entitled to receive the same compensation as if he had contracted with Elan for return of the goods and Elan had broken the contract.
The Explanation: means of remedying the inconvenience
"Explanation.—In estimating the loss or damage arising from a breach of contract, the means which existed of remedying the inconvenience caused by the non-performance of the contract must be taken into account."
Three points follow from the words.
- It is part of the way loss is estimated. The Explanation tells you what to take into account when measuring the loss. It does not state a separate penalty for failing to remedy.
- "The means which existed." The focus is on means that actually existed, not on every conceivable step.
- "Must be taken into account." The language is mandatory for whoever estimates the loss.
The Explanation does not say how much weight such means carry or what happens to the cost of using them. The Act's illustrations answer the second question in one case.
The Act's illustrations that show the Explanation at work
| Illustration | Facts | Result |
|---|---|---|
| (b) | A hires B's ship to go to Bombay, take on a cargo that A will supply and bring it to Calcutta. B's ship does not go to Bombay, but A has opportunities of getting suitable conveyance for the cargo on terms as advantageous. A uses them, but is put to trouble and expense. | A is entitled to compensation from B for such trouble and expense. |
| (f) | A contracts to repair B's house in a certain manner and receives payment in advance. A repairs it, but not as agreed. | B is entitled to recover the cost of making the repairs conform to the contract. |
| (r) | A, a ship-owner, contracts to convey B from Calcutta to Sydney, sailing on 1 January; B pays half the passage money as deposit. The ship does not sail. B is detained and put to expense, then goes in another vessel and arrives too late, losing a sum of money. | A must repay B's deposit with interest, the expense of the detention, and the excess, if any, of the second ship's fare over the agreed fare, but not the sum B lost by arriving late. |
In (b), the injured party used the means available and the Act allows the trouble and expense of doing so. In (f) the cost of putting right the defective work is the measure. In (r) the passenger who took another ship recovers the extra fare, but not the late-arrival loss.
Related illustration: loss passed down a chain
In illustration (m), A sells goods to B, warranting their quality; B, relying on the warranty, sells to C with a similar warranty; the goods are not as warranted, and B becomes liable to pay C compensation. B is entitled to be reimbursed this sum by A. This one is the Act's own; it shows compensation reaching a loss passed on by a downstream liability.
A modern example of the Explanation (ours)
Suman Foods has a contract with a courier, Swift Logistics, to deliver 200 boxes of sweets to a customer by 10 a.m. Swift fails. A rival courier, Trail Express, could have delivered by noon at an extra cost of Rs. 5,000, and the customer would have accepted noon delivery. Suman does nothing and the order is cancelled, claiming Rs. 80,000 lost sales. The Explanation says that in estimating the loss, the means which existed of remedying the inconvenience (the noon delivery at Rs. 5,000 extra) must be taken into account. The section does not give a formula; it requires that this fact be taken into account when the loss is estimated.
What can the parties change?
Neither paragraph has a "contrary intention" proviso. Parties can, however, say in the contract what steps each must take after a breach (for example, "the buyer may buy substitute goods and claim the extra cost"). Clear wording on cover purchases, repairs and replacement helps show what means existed. Where the contract names a sum payable on breach, see section 74.
Practical points
- Look for substitutes immediately after a breach: another supplier, courier, contractor or date.
- Keep records of the steps taken, their cost and the trouble involved, as illustration (b) allows compensation for that trouble and expense.
- Document why a step was not possible, if you could not remedy the position.
- Do not treat the Explanation as a bar to claiming. It speaks of taking the means into account in estimating the loss.
- Quote the actual cost of cover or repair in your demand.
Need help presenting a compensation claim?
A demand for compensation is stronger when it shows the breach, the loss, and the steps taken to limit it. Our legal notice drafting service can prepare a notice that sets these out clearly. Bring the contract, the quotations or invoices for substitute arrangements and a timeline of events.
Key takeaways
- Where an obligation resembling those created by contract is not discharged, the person injured gets the same compensation as if there had been a contract and a breach.
- The Explanation says the means which existed of remedying the inconvenience must be taken into account in estimating loss.
- The Act's illustrations allow the trouble and expense of using substitute means, and the cost of making defective work conform.
- The section does not use the word "mitigate".
Read next
- Section 73 (first paragraph): compensation for breach of contract and remoteness of damage
- Section 74: liquidated damages and penalty stipulated in contract
- Section 75: compensation to party rightfully rescinding contract
Disclaimer: Based on the text of the Indian Contract Act, 1872 as consulted on 1 October 2026. Many questions under this Act turn on case law and on the wording of the particular contract, which this article does not cover. It is general information, not legal advice; check the official text and take advice before acting.