Contingent and Quasi Contracts

 
CHAPTER 9
 Meaning of Contingent Contract:

• When the performance of a contract is not

immediately due but it becomes so only after the
happening or non-happening of some
contingency (i.e., some uncertain event) it is
known as Contingent Contract.

• The contract of insurance, contract of indemnity

and guarantee are the examples of contingent
contract. In simple words, it is a conditional
contract.
 Definition
• A contingent contract is a contract indicating
to do or not to do something, if some event,
collateral to such contract, does or does not
happen (Sec. 31).
 Characteristics of Contingent Contract

• There are three essential characteristics of a contingent

contract, viz. :

– Its performance depends upon the uncertainty of happening or

non-happening in future of some event. It is this dependence on
a future which distinguishes a contingent contract from other
contracts.

– The event must be collateral, i.e., incidental to the contract.

– The contingent event should not be mere will of the promisor.

Rules Regarding Performance of Contingent
Contracts
• The Happening of a Future Uncertain
Event
– According to Sec. 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".
 Rules Regarding Performance of Contingent
Contracts
• Examples
• (1) 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 life time.

• (2)   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
him. The contract cannot be enforced by law unless and until C
refuses to buy the horse.

• (3)   A contracts to pay B a sum of money when B marries C, C

dies without being married to B. The contract become void.
Rules Regarding Performance of Contingent
Contracts
• The Non-happening of an Uncertain Future
Event
– According to Sec. 33, "Contingent contracts to do
or not to do anything if any uncertain future
event does not happen, can be enforced when the
happening of that event becomes impossible and
not before".
Rules Regarding Performance of Contingent
Contracts
• Example :
– A agrees to pay B a sum of money if a certain ship
does not return. The ship is sunk. The contract can
be enforced when the ship sinks. Because when the
ship sinks the event becomes impossible as the
ship can never return.
– Thus enforceability depends upon the impossibility
of the contingent event. Until the event becomes
impossible, the contract cannot be enforced
Rules Regarding Performance of Contingent
Contracts
• When Event to be Deemed Impossible
– According to Sec. 34,
• "If the future event on which a contract is
contingent is the way in which a person will act at
an unspecified time, the event shall be considered
to become impossible when such person does
anything which renders it impossible that he
should so act within any definite time, or
otherwise than under further contingencies".
Rules Regarding Performance of Contingent
Contracts
• The Happening of an Event within Fixed
Time
– According to Sec. 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 event has not happened, or if,
before the time fixed such event becomes
impossible".
Rules Regarding Performance of Contingent
Contracts
• The Non-happening of an Event within a
Fixed Time
• According to Sec. 35,
– "Contingent contracts to do or not to do anything
if a specified uncertain event does not happen
within a fixed time may be enforced by law when
the time fixed has expired and such event has not
happened, or, before the time fixed has expired, if
it becomes certain that such event will not
happen".
Rules Regarding Performance of Contingent
Contracts
• Impossible Events
– According to 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 to the
parties, to the agreement at the time when it is made".
Difference between Contingent Contracts and
Wagering Agreements
• Mutual Promise :
– A wagering agreement consists of mutual promises each of which are
conditional on the happening or non-happening of a certain event.
– A contingent contract may not consist of the mutual promise. It may
be said that all wagers are contingent contracts but all contingent
contracts are not wagers.
– For example, insurance contracts, contracts of indemnity and guarantee
are contingent contracts but not wagers.
• Validity :
• A wagering agreement is absolutely void. It is illegal in
Maharashtra and England. But a contingent contract is a valid
contract.
 Difference between Contingent Contracts and
Wagering Agreements
• Performance :
• In a wagering agreement, neither party intends to perform the contract, but
only to deal in differences.
• This is not so in contingent contracts.

• Interest in the subject matter :

• In wagering agreement, the parties to the agreement have no other interests in

the subject matter of the agreement, except for the stake.
• But in a contingent contract, parties do have some other interest in the subject
matter.
• They are interested in the occurrence or non-occurrence of the event.
 Difference between Contingent Contracts and
Wagering Agreements

• Future Event:
– In a wagering agreement the future event is the sole
determining factor of the contract while in a contingent
contract, the future event is merely collateral or incidental
to the contract.
• Nature :
– All contingent contracts are not of a wagering nature,
because all the contingent contracts are not void.
– All wagering agreements are also contingent contracts
because they are dependent on uncertain event.
 QUASI-CONTRACTS

• Certain obligations are imposed by law.

• These obligations are similar to those which are
created by contract.
• When such obligations are imposed by law in
the absence of any contract, it is called quasi-
contract.
• In other words, these are based on the equitable
principle, that a person shall not be allowed to enrich
himself at the expense of another.
 Quasi-contracts under Indian Contract Act
• Certain relations resembling those created by
contract, (Sections 68 to 72).
• Claim for necessaries supplied to a person incapable of contracting on his
account (Sec. 68).

• Reimbursement of a person paying money due by another in payment of

which he is interested (Sec. 69).

• Obligation of person enjoying benefit of a non-gratuitous act (Sec. 70).

• Rights and liabilities of the finder of lost goods (Sec. 71).

• Liability of persons to whom money is paid or things delivered, by mistake or

under coercion (Sec. 72).
 Kinds of Quasi-Contracts

• Necessaries Supplied to Person Incapable of Contracting

• If a person, incapable of entering into a contract, or any one

whom he is legally bound to support, is supplied by another
person with necessaries suited to his condition in life, the person
who has furnished such supplies is entitled to be reimbursed
from the property of such incapable person (Sec. 68).
• Thus, though the contracts by minors, idiots, lunatics, etc., are
void, but Section 68 provides that their estates are liable to
reimburse the trader who supplies them with necessaries of life.
• This is on the basis of quasi-contracts.
 Kinds of Quasi-Contracts

• Payment by an Interested Person

– A person
– (i) who is interested in the payment of money,
– (ii) in which another is bound by law to pay, and
– (iii) who therefore pays it, is entitled to be
reimbursed by the other (Sec. 69).
 Kinds of Quasi-Contracts
• Liability for Non-gratuitous Act
– Where a person lawfully does anything for another
person or delivers anything to him, not intending to
do so gratuitously, and
– such other person enjoys the benefit thereof, the latter
is bound to make compensation to the former in
respect of, or to restore, the things so done or
delivered (Sec. 70)
– Illustrations
– (a) A, a tradesman, leaves good, at B's house by mistake. B treats the goods as his
own. He is bound to pay for them.
– (b) A saves B's property from fire. A is not entitled to compensation from B, if the
circumstances show that he intended to act gratuitously .
 Kinds of Quasi-Contracts

• Responsibility of Finder of lost goods

– A person who finds goods belonging to another and
takes them into his custody, it is subject to the same
responsibility as a bailee (Sec. 71).
– He is bound to take as much care of the goods
bailed to him as a man of ordinary prudence would
under similar circumstances, take of his own goods
of the same bulk quality and value.
– It is also the duty of the finder of lost goods to trace
the true owner
 Kinds of Quasi-Contracts
• The Finder, however, can sell the goods in the following
cases :
• (i) where the thing found is in danger of perishing or losing
the greater part of its value;
• (ii) where the owner cannot, with reasonable diligence, be
found out;
• (iii) where the owner is found out, but refuses to pay lawful
charges of the finder; and
• (iv) where the lawful charges of the finder, in respect of the
thing found, amount to two-thirds of the value of the thing
found.
 Kinds of Quasi-Contracts

• Action for Money paid, or thing delivered,

by Mistake or under Coercion
– A person to whom money has been paid, or
anything delivered by mistake or under coercion,
must repay or return it (Sec. 72).
– Mistake must be as to the existence of the
obligation and not merely as to some collateral
matter which may form a motive for the payment.
 Kinds of Quasi-Contracts

• Accounts Stated/I.O.U
– This is a form of action known to English Law,
where the obligation arises from an admission of
indebtedness, from which the law may imply an
undertaking to pay, e.g., an I.O.U. (I owe you).

– Thus, where the balance has been struck in an

account, an action can be brought thereon without
going into all the transactions which led up to it.
 Kinds of Quasi-Contracts

• Claim for Quantum Meruit

– In addition to the above types of quasi-contracts, a
claim can also be made on the basis of Quantum
Meruit.
– Where one person has rendered service to another in
circumstances which indicate an understanding
between them that it is to be paid for although no
particular remuneration has been fixed, the law will
infer, a promise to pay Quantum Meruit i.e., as
much as the party doing the service has deserved.
 The claim for quantum meruit arises in the
following cases :

• (i) When an agreement is discovered to be void, or-when a contract

becomes void,
• (ii) When something is done without any intention to do so gratuitously
(Sec. 70).
• (iii) When there is an express or implied contract to render services but
there is no agreement as to remuneration,
• (iv) When one party abandons or prevents or even refuses to perform the
contract,
• (v) When a contract is divisible and the party not in default has enjoyed the
benefit of the part performance,
• (vi) When and indivisible contract for a lump sum is completely
performed, but badly, the person who has performed the contract can claim
the lump sum; but the other party can make a deduction for bad work
 The claim for quantum meruit arises in the
following cases :
• In case of Void Agreement, or contract that
becomes Void (Section 65) :
– When an agreement is discovered to be void, or
when a contract becomes void, any person who has
received any advantage under such agreement or
contract is bound to restore it, or to make
compensation for it, to the person from whom he
received it.
 The claim for quantum meruit arises in the
following cases :
• In case of non-gratuitous act (Section 70):
The obligation to pay arises if the following
three conditions are satisfied :
– (i) The thing must have done or delivered lawfully;
– (ii) The person who had done or delivered the
thing must not have intended to do so gratuitously;
and
– (iii) The person for whom the act is done must
have enjoyed the benefit of the act.
The claim for quantum meruit arises in the following
cases :

• In case of act preventing the completion of contract :

– If one party himself does not complete the contract or prevents the other
party to complete the contract, the aggrieved party can sue on quantum
meruit.
– Example : C an owner of a magazine engaged P to write a book to be
published as series in his magazine. After a few series were published,
the publication of the magazine was stopped. It was held that P could
claim payment on quantum meruit for the part already published.
(Planche Vs. Calburn).

• In case of divisible contract:

– The party at default may sue on a quantum meruit if the following

conditions are satisfied:
The claim for quantum meruit arises in the following
cases :

• In case of indivisible contract performed

completely but badly :
– The party at default may claim the lumpsum less
deduction for bad work if the following conditions
are satisfied :
– (i) if the contract is indivisble ;
– (ii) if the contract is for lumpsum;
– (iii) if the contract is completely performed; and
– (iv) but the contract is performed badly.
Distinction between Quasi-Contract and General
Contract

Basis of Quasi-contract Contract

distinction
1. Essentials for The essentials for The essentials for the
the the
formation of a formation of a formation of a valid contract
valid valid
contract contract are absent are present

2. Obligation Obligation is Obligation is created by

imposed
  by law. the consent of the parties.
Similarity between Quasi-contracts and Contracts

• The outcome of quasi-contracts resemble that

created by a contract.

• So far as claim for damages are concerned,

there is a similarity between a quasi-contracts
and contract because in case of breach of a
quasi-contract, Section 73 provides for the
same remedies as provided in case of breach of
a contract.
 Compensation for failure to discharge
obligation created by quasi-contracts (Sec. 73):
– When an obligation created by a quasi-contract
• has not been discharged,
• the injured party is entitled to receive the same
compensation from the party in default, as if the sued
person had contracted to discharge it and had broken his
contract.
End of Chapter 9