The rule in Hadley v Baxendale, as embodied in the Indian Contract Act, 1872, provides that damages for breach of contract are recoverable only for loss which arises naturally in the usual course of things, or which the parties knew at the time of the contract to be likely to result from the breach. This rule concerns:

Section 73 of the Indian Contract Act, 1872, following the rule in Hadley v Baxendale (1854), provides that when a contract is broken, the party who suffers the breach is entitled to compensation for any loss or damage which naturally arose in the usual course of things from the breach, or which the parties knew to be likely to result from it, and that no compensation is given for any remote or indirect loss or damage. This is the doctrine of remoteness of damage, under which only losses within the reasonable contemplation of the parties are recoverable. Mitigation requires the injured party to minimise his loss, liquidated damages are a pre-estimated sum fixed by the parties, and interest is governed by section 34 or by agreement. The famous case governs remoteness.