CMA Foundation · Fundamentals of Business Laws and Business Communication · Contingent Contracts
Meera agrees to pay Rohan Rs. 50,000 if Rohan's warehouse in Surat is destroyed by fire. Why is this a contingent contract?
It is contingent because Meera's liability to pay depends on the warehouse fire, an event collateral to the contract. Section 31 treats a contract to do something if such a collateral event happens as a contingent contract.
- ABecause the payment is made in rupees
- BBecause Meera's promise depends on an event collateral to the contract, namely the fireCorrect
- CBecause Rohan has promised to deliver goods in return
- DBecause the contract must be performed within one year
Explanation
Meera's promise to pay depends on the fire, which is an event collateral to the contract and not itself a promise of either party. This mirrors the illustration in Section 31 about paying if B's house is burnt. The other options mention features that are irrelevant to contingency.
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