True or false: voidable contract; insurance; special damages

(i)True A voidable contract (s. 2(i) of the Indian Contract Act, 1872) is one that the law enforces at the option of one or more of the parties but not at the option of the others. Until the party who holds that option uses it, the contract stands and can be enforced. A buyer pressured into a purchase by undue influence may cancel it; if he chooses to keep it, it is valid.

(ii)False Insurance is a valid contingent contract, not a wager. The test is whether the party has something real at stake. The insured has an insurable interest in the life or property covered, and each side gives something (premium for cover); outside life insurance the policy only makes good an actual loss. A wager has none of this: the parties merely back opposite outcomes of an uncertain event, and one wins what the other loses. Hence insurance is enforceable and a wager is void.

(iii)False Section 73 compensates two kinds of loss: loss that flows from the breach in the ordinary course of things, and loss that both parties, when contracting, knew was likely to follow; remote or indirect loss is never compensated. Special damages fall in the second kind: they can be claimed only if the special circumstances were made known to the other party at the time of the contract, as Hadley v. Baxendale decided. A caterer who is not told that a delayed cake was for a film shoot costing ₹2 lakh a day is not liable for the cost of the lost shooting day.