Augmented Reality (AR) provides a unique opportunity to situate learning content in one's environment. In this work, we investigated how AR could be developed to provide an interactive context-based language learning experience. Specifically, we developed a novel handheld-AR app for learning case grammar by dynamically creating quizzes, based on real-life objects in the learner's surroundings. We compared this to the experience of learning with a non-contextual app that presented the same quizzes with static photographic images. Participants found AR suitable for use in their everyday lives and enjoyed the interactive experience of exploring grammatical relationships in their surroundings. Nonetheless, Bayesian tests provide substantial evidence that the interactive and context-embedded AR app did not improve case grammar skills, vocabulary retention, and usability over the experience with equivalent static images. Based on this, we propose how language learning apps could be designed to combine the benefits of contextual AR and traditional approaches.