Given the 1937 background against which the parents entered into the agreement, the third possibility is the most plausible: It did not even cross the parents' minds that Richard might be drafted into the army and they made no decision about what George's obligations would be if indeed Richard were drafted.
On this view of the agreement, the words used in the agreement do not decided between two possibilities: George is obligated to pay the $1200 while Richard is in the army; George is not obligated to pay the $1200 while Richard is in the army.
Hence...