Indian Contract Act - Study Mode

Explanation

Solution: Contingent Contract: A contingent contract is defined under Section 31 of the Indian Contract Act, 1872 . It refers to a contract whose performance depends on the occurrence or non-occurrence of a future uncertain event. The contract is enforceable only if the specified event takes place. Correct Answer: Option A – 'A' insures his factory against damage or destruction by fire An insurance contract is a classic example of a contingent contract because the insurer's liability depends on the occurrence of an uncertain future event, such as fire, theft, or accident. In this case, the insurance company's obligation to compensate 'A' arises only if the factory is damaged or destroyed by fire. Explanation: >> In a contingent contract, the promisor agrees to perform an obligation only if a specified uncertain event occurs. >> An insurance contract is contingent in nature because the insurer's duty to pay depends on the occurrence of an uncertain event, such as fire, theft, or natural disaster. >> If the event does not happen, the contract does not become enforceable, and no liability arises. >> Section 31 of the Indian Contract Act clearly classifies such contracts as contingent contracts. Since Option A meets the criteria of a contingent contract, it is the correct answer.