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

Chetan agrees to buy a flat from Deepa for Rs 50 lakh if Chetan's bank sanctions a home loan within 60 days. Which statement is correct about enforcement of this contract?

The contract cannot be enforced until the bank sanctions the loan, and it becomes void if the loan is refused. It is a valid contingent contract, because it depends on an uncertain future event, and enforcement waits for that event to happen.

  1. AIt can be enforced immediately, because the condition is not part of the contract
  2. BIt is void because it depends on an act of a third party
  3. CIt cannot be enforced until the bank sanctions the loan; if the loan is refused, the contract becomes voidCorrect
  4. DIt can be enforced only if Deepa arranges the loan

Explanation

This is a contingent contract depending on an uncertain future event, the loan sanction. It cannot be enforced by law until that event happens. If the event becomes impossible, for example by refusal of the loan, the contract becomes void. Dependence on a third party's act does not make it void.

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