Principles evolved in Hadley v Baxendale are the basis of Section 73 of the Indian Contract Act. Section 73 of the Indian Contract Act, 1872 provides that when a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, 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.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
Note. According to the rule of Hadley v. Baxendale, 9 Exch. 341 (1854) consequential damages can be claimed by the non-breaching party only if both the parties to the contract were aware of the possibility of such losses arising from the breach of contract. Sections 73 and 74 of Contract Act contemplate that in a contract the party who suffers by such breach is entitled to receive compensation for any loss which naturally arises in the usual course of things from such breach.
