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

Mehta Constructions Pvt Ltd drafts a clause promising to pay Rs 5,00,000 to Kapoor Suppliers if Kapoor's godown is damaged by fire. Which statement best describes the nature of this promise?

It is a contingent contract. Payment depends on an uncertain event, fire damage to the godown, which is collateral to the contract itself. The Act defines such a contract as one to do or not to do something if a collateral event does or does not happen.

  1. AIt is a contingent contract because performance depends on an event collateral to the contractCorrect
  2. BIt is a wagering agreement, void in all cases
  3. CIt is a quasi-contract imposed by law
  4. DIt is an absolute contract because payment is certain

Explanation

A contingent contract is a contract to do or not to do something if some event, collateral to the contract, does or does not happen. Payment here depends on the collateral event of fire damage, as in the Act's illustration of paying money if a house is burnt. It is therefore not absolute.

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