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CA Foundation · Business Laws · The Indian Contract Act, 1872

Anita agrees to pay Rs 40,000 to Bharat if his ship 'Sagar' returns safely to Mumbai port this season. Before the season ends, the ship is sold by Bharat to a foreign buyer and can no longer return as his ship. What is the legal position of the contingent contract?

The contract becomes void. A contingent contract depending on an uncertain future event is void once that event becomes impossible. Since Bharat's sale of the ship makes its return as his ship impossible, Anita has no obligation to pay under the agreement.

  1. AThe contract can still be enforced because the ship may return anyway
  2. BThe contract becomes void because the future event has become impossible by Bharat's actCorrect
  3. CAnita must pay half the amount as compensation
  4. DThe contract becomes voidable at Bharat's option

Explanation

Under the Contract Act, a contingent contract to do something if an uncertain future event happens becomes void when that event becomes impossible. Sale of the ship to a foreign buyer makes the stated event (return of Bharat's ship) impossible. It is not voidable and no part payment is due.

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