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CS Professional · Drafting, Pleadings and Appearances · Drafting of Commercial Contracts

Bharat Auto contracts to pay Dev Logistics Rs 5 lakh if a named export licence is granted to Bharat Auto within six months. At the end of month four the licensing authority finally and irrevocably rejects the application. Which is correct?

The contract becomes void at month four. A contract contingent on a specified event happening within a fixed time becomes void if, before the time expires, the event becomes impossible. The irrevocable rejection of the licence makes grant impossible, so there is no need to wait for the six months to end.

  1. AThe contract remains alive until six months expire, then becomes void
  2. BThe contract becomes void, since the specified event became impossible before the time fixedCorrect
  3. CThe contract becomes enforceable against Bharat Auto immediately
  4. DThe contract is enforceable only if Dev Logistics proves loss

Explanation

Section 35 provides that a contract contingent on a specified event happening within a fixed time becomes void if, before the time fixed, the event becomes impossible. The final rejection makes the grant impossible in month four. Waiting until expiry is wrong because voidness arises as soon as impossibility occurs. Enforcement would apply only to a contract contingent on the event not happening.

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