Test: Contingent Contracts - B Com MCQ

An essential element of a contingent contract is that the performance of the contract must be conditional. This means that the contract is dependent on the happening or non-happening of a specific event. The event can be future and uncertain, and the performance of the contract is contingent upon the occurrence or non-occurrence of this event. Therefore, option B is the correct answer. For example, if X contracts to pay Y a sum of money if Y's house is destroyed by fire, the performance of the contract is conditional upon the event of Y's house being destroyed by fire. If the event does not happen, the contract may not be enforceable.

According to the Indian Contract Act, 1872, a contract is defined as an agreement enforceable by law. It is a promise that is enforceable at law and is made by the free consent of parties competent to contract. Therefore, option D is the correct answer.

All of the options mentioned are essential elements of a contingent contract. A contingent contract must involve a valid contract to do or not to do something, the performance of the contract must be conditional, and the event on which the contract is contingent must be collateral to the contract. Therefore, option D is the correct answer.

The main difference between a contingent contract and an agreement subject to contract is that a contingent contract suspends performance until the happening of an uncertain event. On the other hand, an agreement subject to contract negates the existence of a contract until a formal contract is executed at the will of the parties. Therefore, option A is the correct answer.

All of the options mentioned are major differences between a contingent contract and an agreement by way of wager. A contingent contract is enforceable by law, involves the happening or non-happening of an event, and is a valid contract. On the other hand, an agreement by way of wager is void, involves winning or losing money or its worth, and is not a valid contract. Therefore, option D is the correct answer.

The doctrine of frustration refers to the impossibility of performance due to unforeseen circumstances. It applies when an unforeseen event occurs, making the performance of a contract impossible or radically different from what was initially anticipated. This doctrine is not explicitly mentioned in the Indian Contract Act, 1872, but it is a recognized principle in contract law. Therefore, option A is the correct answer.

A contingent contract becomes void when the event becomes impossible, when the event does not happen within a fixed time, or when the agreement is contingent on an impossible event. These are the situations mentioned in the Indian Contract Act, 1872. Therefore, option D is the correct answer.

An agreement subject to contract is an agreement that is not a contract until a formal contract is executed. It means that the parties agree not to be bound by a contract until a formal contract is executed at the will of the parties. This is different from a contingent contract, where the performance is contingent on the happening or non-happening of an event. Therefore, option C is the correct answer.

An agreement by way of wager is an agreement involving the winning or losing of money or its worth. It is a form of gambling where the parties are not interested in the occurrence or non-occurrence of the event, but rather in the outcome of the event in terms of winning or losing money. This is different from a contingent contract, where the performance is contingent on the happening or non-happening of an event. Therefore, option C is the correct answer.

An essential element of a contingent contract is that the performance of the contract is dependent on an independent event. This means that the event on which the contract is contingent must be outside the control or discretion of the promisor. The event should be uncertain and not under the direct influence of any of the parties involved in the contract. For example, if X agrees to pay Y a sum of money if Y's house is destroyed by fire, the happening or non-happening of this event is independent of the parties involved. It is an uncertain future event that is collateral to the contract. The performance of the contract, i.e. the payment of money, is contingent on the occurrence or non-occurrence of this event. In summary, an independent event that is uncertain and beyond the control of the promisor is an essential element of a contingent contract.