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CMA Foundation · Fundamentals of Business Laws and Business Communication · Contingent Contracts

Anil agrees to pay Bhavna Rs. 20,000 if a certain ship does not return to Mumbai within one year. Three months later the ship is burnt and lost at sea. What is the legal position under Section 35?

The contract can be enforced now. Under Section 35, where a contract depends on an event not happening within a fixed time, it may be enforced once it becomes certain before the time expires that the event will not happen. The ship's loss makes return impossible.

  1. AThe contract is void because the event has become impossible
  2. BThe contract can be enforced only after the full year has expired
  3. CThe contract can be enforced, because it has become certain before the time fixed that the ship will not returnCorrect
  4. DThe contract is voidable at Anil's option

Explanation

For contracts contingent on an event not happening within a fixed time, Section 35 permits enforcement when the time has expired without the event, or earlier if it becomes certain the event will not happen. The ship's loss makes its return impossible, so Bhavna need not wait for the year to end. Waiting the full year is wrong because the Act allows earlier enforcement.

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