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X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to deliver within a fortnight at buyers godown at Karachi. X failed to supply these goods. State the legal position in each case with explanation.
Q.If these goods were to be manufactured by Z who is ready to supply @ Rs. 1,111/bale because of unexpected increase in the cost of material and labour 
  • a)
    Void on the ground of supervening impossibility
  • b)
    Void on the ground of non-performance
  • c)
    Void on the ground of third-party default
  • d)
    Void on the ground of commercial impossibility
Correct answer is option 'D'. Can you explain this answer?
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X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to ...
Legal Position:
The legal position in this case is that the contract between X and the buyer is void on the ground of commercial impossibility.
Explanation:
- Commercial impossibility refers to a situation where the performance of a contract becomes impossible due to unforeseen circumstances that make it commercially impracticable or impossible for a party to fulfill their obligations.
- In this case, X agreed to sell 1000 bales of cotton to the buyer at a price of Rs. 999 per bale and deliver them within a fortnight at the buyer's godown in Karachi.
- However, X failed to supply these goods as agreed upon.
- The reason for X's failure to supply the goods is that they were supposed to be manufactured by Z, who is now unable to supply the goods at the agreed price of Rs. 1,111 per bale due to an unexpected increase in the cost of materials and labor.
- This unexpected increase in cost makes it commercially impossible for Z to supply the goods at the agreed price.
- As a result, X is unable to fulfill their obligation to deliver the goods to the buyer.
- In such a situation, the contract becomes void on the ground of commercial impossibility as it is not possible for X to perform their obligations under the contract.
- Both parties are discharged from their obligations under the contract and any payments made by the buyer to X must be refunded.
Conclusion:
The contract between X and the buyer is void on the ground of commercial impossibility. X is unable to supply the goods due to the unexpected increase in the cost of materials and labor, making it commercially impossible for them to fulfill their obligations. Both parties are discharged from their obligations under the contract.
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X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to ...
Void on the ground of commercial impossibility.

Explanation:
Commercial impossibility refers to a situation where the performance of a contract becomes commercially impracticable or impossible due to unforeseen circumstances. In this case, X agreed to sell 1000 bales of cotton to the buyer at a certain price and deliver it within a fortnight. However, X failed to supply these goods.

Now, if these goods were to be manufactured by Z, who is ready to supply at a higher price of Rs. 1,111 per bale due to unexpected increase in the cost of material and labor, the legal position would be void on the ground of commercial impossibility. Here's why:

1. Change in material and labor cost: Due to the unexpected increase in the cost of material and labor, Z is no longer able to supply the goods at the originally agreed price of Rs. 999 per bale. This change in circumstances makes it commercially impossible for Z to perform the contract as agreed.

2. Unforeseen circumstances: The increase in material and labor costs is an unforeseen circumstance that was beyond the control of both X and Z. It was not anticipated at the time of entering into the contract. Therefore, it can be considered as an event that makes the performance of the contract commercially impossible.

3. Impact on performance: The increase in cost directly affects the ability of Z to manufacture and supply the goods at the agreed price. It creates a situation where Z would suffer a loss or would not be able to recover the increased cost of production. As a result, Z is unable to perform the contract as agreed.

4. Frustration of purpose: The purpose of the contract was to sell and deliver the goods at a certain price. With the increase in cost, the purpose of the contract is frustrated as it becomes commercially impracticable for Z to perform the contract as originally agreed.

Based on these factors, the legal position in this case would be void on the ground of commercial impossibility. The contract would be considered unenforceable due to the unforeseen circumstances and the inability of Z to perform the contract at the agreed price.
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X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to deliver within a fortnight at buyers godown at Karachi. X failed to supply these goods. State the legal position in each case with explanation.Q.If these goods were to be manufactured by Z who is ready to supply @ Rs. 1,111/bale because of unexpected increase in the cost of material and laboura)Void on the ground of supervening impossibilityb)Void on the ground of non-performancec)Void on the ground of third-party defaultd)Void on the ground of commercial impossibilityCorrect answer is option 'D'. Can you explain this answer?
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X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to deliver within a fortnight at buyers godown at Karachi. X failed to supply these goods. State the legal position in each case with explanation.Q.If these goods were to be manufactured by Z who is ready to supply @ Rs. 1,111/bale because of unexpected increase in the cost of material and laboura)Void on the ground of supervening impossibilityb)Void on the ground of non-performancec)Void on the ground of third-party defaultd)Void on the ground of commercial impossibilityCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to deliver within a fortnight at buyers godown at Karachi. X failed to supply these goods. State the legal position in each case with explanation.Q.If these goods were to be manufactured by Z who is ready to supply @ Rs. 1,111/bale because of unexpected increase in the cost of material and laboura)Void on the ground of supervening impossibilityb)Void on the ground of non-performancec)Void on the ground of third-party defaultd)Void on the ground of commercial impossibilityCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for X of Mumbai agreed to sell 1000 bales of cotton @ Rs. 999/bale and to deliver within a fortnight at buyers godown at Karachi. X failed to supply these goods. State the legal position in each case with explanation.Q.If these goods were to be manufactured by Z who is ready to supply @ Rs. 1,111/bale because of unexpected increase in the cost of material and laboura)Void on the ground of supervening impossibilityb)Void on the ground of non-performancec)Void on the ground of third-party defaultd)Void on the ground of commercial impossibilityCorrect answer is option 'D'. Can you explain this answer?.
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