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

Ravi agrees to pay Kiran Rs. 20,000 if a certain ship returns within a year. Unknown to both parties, the ship had already sunk before the agreement was made. Which statement best fits the Act?

The agreement is void. Section 36 declares contingent agreements dependent on an impossible event void, whether or not the parties knew of the impossibility when contracting. Since the ship had already sunk, its return was impossible, and the parties' ignorance does not change this.

  1. AThe agreement is valid and enforceable if the year expires
  2. BThe agreement is void because the event was impossible when made, whether or not the parties knewCorrect
  3. CThe agreement is void only if Ravi knew of the sinking
  4. DThe agreement is voidable at Kiran's option

Explanation

Section 36 makes contingent agreements to do or not to do something if an impossible event happens void, whether or not the parties knew of the impossibility when making it. Ravi's lack of knowledge is irrelevant, so the knowledge-based option is wrong. Section 35 timing rules do not rescue it.

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