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

Suresh agrees to pay Tara ₹20,000 if a particular ship returns within a year. Six months later the ship is burnt. Which statement best distinguishes this from an agreement under Section 36?

The contract becomes void under Section 35, not Section 36. It was valid when made because the ship's return was possible. It became void when the ship was burnt before the year ended. Section 36 applies only to events impossible at the time of the agreement.

  1. AIt is void under Section 36 because the event is impossible, as in both cases the event cannot occur
  2. BIt is void under Section 35 because the event became impossible after a valid agreement was made, whereas Section 36 concerns events impossible when the agreement was madeCorrect
  3. CIt remains enforceable because the time of one year has not expired
  4. DIt is enforceable under Section 33 as the ship did not return

Explanation

The event was possible when the contract was made, so it was a valid contingent contract. Under Section 35, such a contract becomes void if, before the fixed time, the event becomes impossible. Section 36 differs because it covers events that are impossible when the agreement is made. Section 33 applies to contracts contingent on an event not happening, which is not this case.

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