Legal Principle: When there is breach of contract, the resulting damages will have to be paid by the party breaching the contract to the aggrieved party. However, the parties are free to agree as to damages payable in advance in case there is a breach of contract.Factual Situation: Mr Ramesh entered into a contract with Mr Ramakrishna for selling his green Alto Car for ` 3 lakhs. Mr Ramakrishna was to pay ` 3 lakhs on or before 25th April, 2005 and take possession of the car. The party failing to honour the contract has to pay ` 40,000 as damages to the other party. Mr Ramakrishna has not performed his part of the contract. Mr Ramesh is claiming '40,000. (NLU DELHI 2011)

Each question consists of legal principle(s) (hereinafter referred to as 'principle') and facts. Such proposition may or may not be true in the real and legal sense, yet you have to conclusively assume them to be true for the purposes of this section. You have to apply the principles to the given facts to arrive at the most reasonable conclusion. Only one of the alternatives, i.e., (A), (B), (C), or (D) is the most reasonable conclusion. Remember: you must not rely on any principle except the principles that are given for every question.