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

Dhruv Industries agrees to pay Eshan Ltd Rs 8 lakh if a rival bidder, Fatima Corp, does not win a government tender. Fatima Corp is disqualified before the award. Which statement is correct under the Indian Contract Act, 1872?

The contract can be enforced once Fatima Corp's winning becomes impossible, and not before. Under the Contract Act, contracts contingent on an event not happening are enforceable when that event's occurrence becomes impossible, so disqualification triggers enforceability.

  1. AThe contract is void because the event is now impossible
  2. BThe contract can be enforced when it becomes impossible that Fatima Corp wins, and not beforeCorrect
  3. CThe contract can be enforced only after the tender is awarded to someone else
  4. DThe contract can never be enforced because it is contingent

Explanation

A contract contingent on an event not happening can be enforced when the event's happening becomes impossible, and not before. Disqualification makes Fatima's win impossible, so enforcement is available then. Option one confuses this with the rule for contracts contingent on an event happening, which become void when the event becomes impossible.

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