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of <h1>Understanding Section 74: Reasonable Compensation for Breach of Contract, Limits on Penalties, and Exceptions Explained</h1> Section 74 of the Indian Contract Act, 1872, addresses compensation for breach of contract where a penalty is stipulated. It entitles the aggrieved party to reasonable compensation not exceeding the stipulated penalty, regardless of actual damage. Exceptions include public duty bonds, where the entire sum is payable upon breach. Illustrations clarify scenarios, such as increased interest rates or excessive penalties, where only reasonable compensation is recoverable. Contracts with stipulations that are not penalties, like accelerated payment clauses, may be enforced as per their terms. The section aims to ensure fairness by preventing excessive penalties while allowing reasonable compensation.
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