64
“Law Master’s Publication”
“Contingent Contract”
Prof. Santosh D. Bhosale
(..7..)
Contingent Contract
(Ss. 31 to 36)
QUESTION BANK
Q.1. Define ‘Contingent Contract’ and enumerate the rules for enforcement of such
contract.
Q.2 Explain meaning of contingent contract. What are rules relating to contingent
contract?
Q.3. Define ‘Contingent Contract.” How can the contingent contracts be enforced?
Q.4. What is the difference between a ‘contingent Contract’ and a ‘wager’?
SHORT NOTES
1.
Contingent contract.
SYNOPSIS
(S. 32)
(First part of S.35)
(Latter part of S. 35)
65
“Law Master’s Publication”
“Contingent Contract”
Prof. Santosh D. Bhosale
I.
CONTINGENT CONTRACT DEFINED (S. 31):-
Contracts may be absolute or contingent. We have discussed so far the
concept of absolute contract; the contingent contract is a matter of study in this topic. Both
these contracts are valid and enforceable by law. S. 31 of the Indian Contract Act
(hereinafter called ‘the Act) defines a contingent contract as follows.
“A contingent contract” is a contract to do or not to do something if some event,
collateral to such contract does or does not happen”.
The following are the Essentials of a Contingent Contract:-
1)
The performance of a contract depends upon the happening or not
a future event;
happening of
2)
3)
The future event is uncertain;
The uncertain future event is collateral to the main contact.
a) ‘A’ contracts to pay ‘B’ Rs.-10,000/-if ‘B’s’ house is burnt. This is a contingent
contract.
b)
‘A’, a master, contracts with ‘B’, his servant. If ‘B’ does any damage, A will not pay
his salary.
c)
A makes a contract with B to buy B’s horse if A survives. C is a contingent contract
A makes a contract with B to sell a horse to B at a specified price if C, to whom the
horse has already been offered refuses to bring it, is a contingent contract.
d)
3
Illustration a) (above) is only provided by S. 31, rest are provided for better understanding of subject
by students.
66
“Law Master’s Publication”
“Contingent Contract”
Prof. Santosh D. Bhosale
e) ‘A’ agrees to pay ‘B’ a sum of money if B marries C, which is a contingent contract.
There is no term ‘contingent contract’ in English and American law; they call it a
‘conditional contract’. A contingent contract is a conditional contract, and the condition is
of uncertain nature. A contract which is subject to a certain or an absolute type of condition
is not a contingent contract, e.g. a contract to pay a sum of money on the expiry of a
particular period or the death of a person is not a contingent contract because the time will
certainly expire or the person will definitely die.
When the condition is of an uncertain nature, then only the contract can be regarded
as truly contingent, e.g. a contract to pay a sum of money on the destruction of premises
by fire is a contingent contract because contingency may or may not happen. From this
point of view, all contracts of insurance except certain life insurance are contingent
contracts. Therefore, a contingent contract will contemplate a future event. ‘Condition
collateral to contract’ means a binding contract exists, but its performance cannot be
demanded unless the contemplated event does or does not happen. Thus, the contract of
indemnity and insurance are contingent contracts, and a ‘wagering contract’ is also a
contingent contract, but it is declared void and hence cannot be enforced. A Contract will
be contingent where the happening or non-happening of the contingency depends upon the
party's will, e.g. A agrees to pay B a sum of money if B marries C, is a contingent contract,
even though his marriage is within his control.
The condition, which is collateral to the performance of a contract, is generally a
condition president (i.e., the main condition). Therefore, it has to be satisfied first, and then
performance can be demanded.
II]
RULES
REGARDING
ENFORCEMENT
OF
CONTINGENT
CONTRACTS.
Following are the rules deduced from Ss. 32 to 36 relating to the enforcement of the
contingent contracts.
1) Contracts contingent on an event happening in future- when enforceable
(S. 32):-
Contingent contracts to do or not to do anything if an uncertain future event happens
cannot be enforced by law unless and until that event has happened.
If the event becomes impossible, such contracts become void.
Illustration
a)
A makes a contract with B to buy B’s horse if A survives C. This contract cannot
be enforced by law unless and until C dies in A’s lifetime.
b)
A makes a contract with B to sell a horse to B at a specified price if C, to whom
the horse has been offered, refuses to buy it. The contract cannot be enforced by
law unless and until C refuses to buy the horse.
67
“Law Master’s Publication”
“Contingent Contract”
Prof. Santosh D. Bhosale
c)
A contract to pay B a sum of money when B marries C. C dies without being
married to B. The contract becomes void.
2)
Contingent contracts on the happening of a specified event within fixed time
(First part of S.35):-
Contingent contracts to do or not to do anything if a specified uncertain event
happens within a fixed time become void if, at the expiration of the time fixed, such an
event has not happened or if, before the time fixed, such event becomes impossible.
Illustration
‘A’ promises to pay B a sum of money if a certain ship returns within a year. The contract
may be enforced if the ship returns within the year and becomes void if the ship burns
within the year.
3)
Contract Contingent on an event Not Happening-when Enforceable? (S.33):-
Contingent contracts to do or not to do anything if an uncertain future event does
not happen can be enforced when the happening of that event becomes impossible, and
not before. In other words, where the performance of a contract depends upon the non-
happening of an event, naturally, the parties have to wait till the happening of that event
becomes impossible.
Illustration
A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk, and
the contract can be enforced when it sinks.
4)
(Latter part of S. 35)-
Contingent contracts to do or not to do anything if a specified uncertain event does
Contracts Contingent on a Specified event Not Happening within a Fixed Time
not happen within a fixed time may be enforced by law when the time fixed has expired,
and such an event has not happened, or before the time fixed has expired, if it becomes
certain that such event will not happen.
Illustration
‘A’ promises to pay B a sum of money if a certain ship does not return within a year. The
contract may be enforced if the ship does not return within the year or is burnt within the
year.
5)
Events Linked with Human Conduct (S. 34):-
If the future event on which the contract is contingent is the way in which a person
will act at an unspecified time, the event is to be considered to become impossible when
such person does anything which renders it impossible that he should act within any
definite time or otherwise than further contingencies.
Illustration
68
“Law Master’s Publication”
“Contingent Contract”
Prof. Santosh D. Bhosale
A agrees to pay B a sum of money if B marries C, and C marries D. The marriage of B to
C must now be considered impossible, although it is possible that D may die and that C
may afterwards marry B.
6)
Agreement Contingent on Impossible Events Void (Sec. 36):-
Contingent agreements to do or not to do anything if an impossible event happens
are void, whether the impossibility of the event is known or not known to the parties to the
agreement at the time the agreement is made.
Illustration
a) A agrees to pay ‘B’ Rs.-10,000/- if two straight lines should enclose a space. The
agreement is void.
b)
A agrees to pay B Rs.-1,000/- if B marries D’s daughter C. C was dead at the time
of the agreement; the agreement is void.
III]
1)
“Contingent Contract’ and ‘wager’ distinguished:-
There are six points of distinction between these two, viz.
Reciprocal Promises:-
A wagering agreement consists of reciprocal promises, the performance of which
depends upon uncertain future events. In a contingent contract, reciprocal promises
are not necessary.
2)
3)
Whether Contingent?
All wagering contracts are contingent, but all contingent contracts are not
wagering agreements.
Control:-
In a wagering agreement, the uncertain event is beyond the control of both parties,
whereas, in a contingent contract, the event may be within the control of one of the parties
(If A marries B, B will pay A Rs. 1000. It is within the power of A to marry).
4)
Interest of the Party:-
In a wagering agreement, the parties are not interested (apart from the money
earned or lost) in the occurrence of the event. In contrast, in a contingent contract, they
are very interested.
5)
Determining Factor:-
In a wager, the future event is the sole determining factor of the contract, whereas
in a contingent contract, it is collateral or incidental.
6)
Effect:-
Wagers are void, whereas contingent contracts are valid.
A contingent contract is not void unless it is dependent on an impossible event.
*****