This question applies a principle of evidence law: a spouse cannot testify about a communication made during marriage without the consent of the spouse who made it. Let's test each option against the facts, where Y told X (his wife) that he committed the murder, and X separately saw Y coming out of the neighbour's house.
Only the third option tracks the principle correctly: it protects the confidential communication between Y and X while still allowing X to testify about facts she independently observed.
Therefore, the correct answer is X is not allowed to appear as a witness to depose what was told by the husband to her, however, she can depose what she saw.
The principle sets out a specific rule of evidence: a spouse cannot be compelled or allowed to disclose in court a communication made to them by the other spouse during the marriage, unless the spouse who made it consents. To apply this correctly, it helps to break the rule into its individual conditions, a statement must (i) have passed from one spouse to the other, (ii) have been made while they were married, and (iii) lack the consent of the spouse who made it, before it becomes protected. Anything that does not meet all three conditions falls outside the rule and is ordinarily admissible. Let's run each option through this checklist.
Running the checklist against both pieces of evidence shows the confession is barred while the personal observation is not, which is precisely what the third option describes.
Therefore, the correct answer is X is not allowed to appear as a witness to depose what was told by the husband to her, however, she can depose what she saw.