Skip to content

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

Vikram promised Sunita to deliver a consignment from a warehouse. Vikram knew, or with reasonable diligence could have known, that the act was unlawful, while Sunita did not know. Sunita lost money because of non-performance. Which statement is correct under Section 56?

Vikram must compensate Sunita for her loss. Section 56 makes a promisor liable when he knew, or with reasonable diligence could have known, that the act was impossible or unlawful and the promisee did not know. Fraud need not be proved.

  1. AVikram must compensate Sunita for her lossCorrect
  2. BSunita bears her loss, because the contract is void
  3. CVikram need compensate only if Sunita proves fraud
  4. DBoth parties share the loss equally

Explanation

Section 56 provides that where a promisor promised something he knew, or with reasonable diligence might have known, to be impossible or unlawful, and the promisee did not know, the promisor must compensate the promisee for loss from non-performance. The contract being void does not remove this duty. Requiring proof of fraud is wrong, since the test is knowledge or reasonable diligence.

Did you get it right without looking?

One question tells you little. A timed set on Discharge of Contracts shows your real accuracy, how long you take and where you lose marks.

Practise Discharge of ContractsFree diagnostic mock

More Discharge of Contracts questions