Section 55

Section 55 of the Indian Contract Act, 1872, states: 'When a contract is 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.' This section reiterates the principle that the party suffering a loss due to a breach of contract is entitled to receive compensation for the loss or damage caused. The courts have interpreted this section to mean that the compensation should be such that it puts the aggrieved party in the position they would have been in had the contract been performed. In the case of Union of India vs. Raman Iron Foundry, the court held that the compensation awarded should be reasonable and should not be excessive.