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How does Indian law treat the distinction between 'penalty' and 'liquidated damages'?
AIt always awards the full stipulated amount
BIt strictly enforces penalties
CIt refuses to enforce liquidated damages
DIt makes no distinction; courts award reasonable compensation not exceeding the named sum
Answer & Solution
Correct answer: D. It makes no distinction; courts award reasonable compensation not exceeding the named sum
Unlike English law, Indian law (Section 74) draws no distinction; the court awards reasonable compensation not exceeding the sum fixed in the contract.
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