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

Meera promises to pay Arun ₹50,000 if a particular cargo vessel returns to Mumbai port within one year. Before the year ends, the vessel sinks at sea. What is the legal position of the contract under the Indian Contract Act, 1872?

The contract becomes void. A contingent contract depending on an event happening within a fixed time is void if, before the time expires, the event becomes impossible. The vessel's sinking makes its return impossible, so there is no need to wait for the year to end.

  1. AIt remains enforceable until the year expires
  2. BIt becomes void because the event has become impossible before the fixed timeCorrect
  3. CIt becomes voidable at the option of Arun
  4. DIt is enforceable, because Meera must pay compensation for the loss

Explanation

Under Section 35, a contingent contract to do something if a specified uncertain event happens within a fixed time becomes void if, before the time fixed, the event becomes impossible. The sinking of the vessel makes its return impossible, so the contract is void immediately. It is not necessary to wait for the year to expire, so the first option is wrong.

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