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CS Professional · Drafting, Pleadings and Appearances · Commercial Contract Management

Sundaram Textiles agrees to pay Rs. 4,00,000 to Kaveri Logistics if a cargo ship carrying its yarn is lost at sea during the voyage. Which feature makes this a contingent contract under the Indian Contract Act, 1872?

The contract is contingent because performance, the payment, depends on a collateral event, the loss of the ship, that may or may not occur. Section 31 defines a contingent contract in exactly this way; the fixed amount, the corporate parties and writing are irrelevant.

  1. APayment depends on an event collateral to the contract that may or may not happenCorrect
  2. BThe contract is made between two companies
  3. CThe amount payable is a fixed sum
  4. DThe contract is reduced to writing

Explanation

Section 31 defines a contingent contract as one to do or not to do something if some event, collateral to the contract, does or does not happen. Loss of the ship is such an event. Fixed amount, parties or writing do not make a contract contingent.

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