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    Question

    ABC Pvt. Ltd. entered into a contract with Mr. Rao for

    supplying machinery worth ₹25 lakhs. After execution of the contract, Mr. Rao became insolvent and his estate was taken over by the official assignee. ABC Pvt. Ltd. seeks to enforce the contract through court. Which of the following correctly describes the legal status of the contract?
    A Contract becomes void due to frustration Correct Answer Incorrect Answer
    B Official assignee is bound to perform Correct Answer Incorrect Answer
    C The contract becomes unlawful Correct Answer Incorrect Answer
    D ABC Ltd. can demand specific performance Correct Answer Incorrect Answer

    Solution

    As per Section 56 of the Indian Contract Act, a contract becomes void due to frustration if a party becomes legally incapable of performance, such as insolvency.

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