Intermediate liquidated damages upheld where the contract fixed staged milestones and treated delay compensation as a genuine pre-estimate of loss.

A contract clause providing intermediate compensation for delay was enforced as liquidated damages where the agreement separately fixed staged milestones and contemplated liability for slippage before final completion. Applying Sections 73 and 74 of the Indian Contract Act, the court treated the stipulated sum as a genuine pre-estimate of loss and held that proof of actual loss was not required on these facts. The delays at intermediate stages were established, the correspondence showed contemporaneous concern over slippage, and the clause was not treated as a penal or inoperative formality. The contractor was therefore liable for the deducted intermediate compensation, and the challenge to the levy failed.

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Issues: Whether the amounts deducted under the contract as intermediate liquidated damages were recoverable without proof of actual loss and whether the contractor was liable under the agreed compensation clause.

Analysis: The contract contained a distinct clause for intermediate compensation for delay, separate from the final completion damages clause. The contractual scheme showed that the parties deliberately provided for staged timelines, and that compensation could be levied for slippage in intermediate milestones in addition to any liability for final delay. Applying the principles governing Sections 73 and 74 of the Indian Contract Act, the determining question was whether the stipulated sum represented a genuine pre-estimate of loss and whether proof of actual loss was necessary in the circumstances. The delays at the intermediate stages were established, the correspondence showed contemporaneous concern over slippages, and the clause was not treated as a mere inoperative formality. On the facts, the stipulated intermediate compensation was held to be enforceable as liquidated damages and not dependent on independent proof of loss.

Conclusion: The contractor was liable to pay the intermediate liquidated damages deducted under the contract, and the challenge to the levy failed.

Final Conclusion: The appellate court held that the contractual provision for intermediate delay compensation was enforceable on its terms, set aside the decree under challenge, and dismissed the contractor's suit and cross-objections.

Ratio Decidendi: Where a contract expressly provides for intermediate liquidated damages as a genuine pre-estimate of loss, such compensation may be recovered in accordance with the bargain without requiring proof of actual loss, unless the stipulation is shown to be penal or otherwise unenforceable.

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