The Indian Contract Act, 1872 ("Act") governs the law of contracts in India and is largely based on common English law. The term 'contract' is defined by the Act as an agreement enforceable by law. Due to the aggressive growth in the field of technology, the contents of a contract have become extremely detailed and elaborate. The word 'damages' is understood in the Indian Contract Act as compensation under a contract paid to the non-defaulting party by the defaulting party, which is awarded to the non-defaulting party to compensate for the former's actionable mistakes. Under Section 73 and Section 74 of the Indian Contract Act, 1872, a provision relating to damages is provided. Through the judiciary's interpretation of these provisions, various types of damages, such as general damages, nominal damages, aggravated damages, liquidated or unliquidated damages, have been classified. This article will emphasize the proposed tests and principles related to consequential damages under these classifications and to what extent the consequential damages are taken into account while awarding the damages. The compensation given for the injury/loss suffered by one party due to the consequence of the breach of the terms of the agreement is, as the name suggests, consequential damages. Consequential damages are primarily linked to the financial loss suffered by the party, such as the delay in potential profits if the infringement had not occurred or the costs incurred by the injured party to correct the injury or damage caused by the breach of the agreement. One of the fundamental conditions necessary to claim consequential damages is that it should not be remotely related to the infringement, but in the eyes of any prudent person, it should be clear and certain that such pecuniary loss or expenditure was incurred as a result of the defaulting party's breach of the agreement.

Some important aspects of Consequential Damages are:

• Reasonable Contemplation: In order to understand the remoteness of the damage, the first thing that needs to be determined is whether the party considered or anticipated such a loss in the event of an infringement while entering into a contract. The parties envisage the possible/potential outcomes arising from the breach of the contract when the terms of the agreement are formulated. If both parties genuinely contemplated such losses for which the consequential damages are claimed, then the defendant party can not avoid liability to pay consequential damages by stating that such loss was remote or indirect. Ultimately, this is where the issue of the remoteness of damage lies in determining whether a prudent human can apprehend such loss.
• Principle of Mitigation: The claimant is responsible for taking all reasonable steps to mitigate the effect of injury/loss caused by the default of the defendant under this principle.
• Proximity: The first thing to be determined by the courts and established by the complainant is that the loss for which the complainant claims damages arose as a result of the breach of contract. It is evident from the perusal of Section 73 of the Indian Contract Act, 1872 that for any remote or indirect loss, the aggrieved party can not seek damages. The principle of the remoteness of damage is applied in order to ascertain proximity.

It may be concluded that the general principle with regard to the claim of consequential damages by the Non-Defaulting Party is that the Non-Defaulting Party is entitled only to recover or claim, as was reasonably foreseeable at the time of execution of the contract, part of the damage or loss resulting from the infringement by the Non-Defaulting Party as the result of the infringement.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.