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

Asha agrees to pay Bharat ₹50,000 if Bharat can make two straight lines enclose a space. Bharat believes it can be done, but Asha knows it cannot. What is the position of the agreement?

The agreement is void. Section 36 applies whether or not the parties know the event is impossible when they contract. Two straight lines cannot enclose a space, so Bharat's belief and Asha's knowledge make no difference to the result.

  1. AVoid, because the event is impossible, whatever the parties knowCorrect
  2. BVoidable at Bharat's option because of Asha's knowledge
  3. CValid, because Bharat believed in good faith the event was possible
  4. DValid, but Bharat can claim only half the amount

Explanation

Section 36 makes a contingent agreement on an impossible event void whether or not the parties know of the impossibility when it is made. Bharat's belief and Asha's knowledge are therefore irrelevant. The option treating Bharat's good faith as saving the agreement is wrong for this reason.

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