Tulip Consulting Limited is a company engaged in providing consulting services infinance and investments. It wanted a studio to be developed in its corporate officefor its executives to have tele meetings with its clients, branch offices andassociates.

It entered into a contract with Telnet Communication Limited for the developmentof the studio. Tulip was converting a conference hall in a studio. The contractincluded Telnet refurnishing the hall; procuring equipment including cameras,screens, servers and routers; networking the equipment; doing trial runs; andfinally handing over the completed functional studio.

The entire value of the contract was Rs$.3$ Crore. The contract provided a date bywhich the completed functional studio was to be handed over to Tulip.

Twenty days passed the delivery date. Telnet had not even started work on theproject. Within the terms of the contract, delay of delivery by Telnet was ofessence of the contract, that is$,$ it was a condition of the contract. Following theterm, Tulip terminated the contract. Tulip awarded the contract to another partyfor a contract value of $3\mathrm{.}4$ crores.

Tulip sought to recover the damages from Telnet. The contract Tulip had withTelnet had the following clauses on damages:

$5\mathrm{.}1$ Telnet shall be liable to Tulip for any damage suffered by Tulip as aconsequence of Telnet$$s breach of contract $...$

$5\mathrm{.}2$ If Telnet fails to deliver a completed functional studio within the time specified,Telnet shall be liable to pay damages at the rate of $0\mathrm{.}1\%($zero point one percent$)$of the total contract value for per day of delay in delivery of the completed studio.

Tulip calculated its damages under the two clauses as follows:

$1.$ Under clause $5\mathrm{.}1$: Rs$.4$ lakhs

$2.$ Under clause $5\mathrm{.}2$: Rs$.3,00,00,000$ x $0\mathrm{.}1\%$ x $20$ days $=$ Rs$.6$ lakhs

Tulip claimed both the amounts in damages from Telnet. Telnet contends thatTulip cannot apply both Clause $5\mathrm{.}1$ and Clause $5\mathrm{.}2.$ As it has made claim underClause $5\mathrm{.}1,$ it cannot claim under Clause $5\mathrm{.}2.$ Is the application of both, Clause$5\mathrm{.}1$ and $5\mathrm{.}2$ by Tulip, correct?

Select one:

a$.$

Yes. Clause $5\mathrm{.}1$ covers all consequences arising from the delay whileClause $5\mathrm{.}2$ specifies a minimum value of the damages.

b$.$

No$.$ It is punitive to claim damages under both the clauses for the breachby Telnet.

c$.$

No$.$ Tulip cannot use both the clauses together. It has to choose theclause which has lesser burden on Telnet. Thus, it must apply only Clause $5\mathrm{.}1$

and surrender its claim under Clause $5\mathrm{.}2$

d$.$

Yes. Clause $5\mathrm{.}1$ is being applied for employing another vendor and $5\mathrm{.}2$for the delay in delivery till the date of termination.