Contingent Contract

It may be defined as a conditional contract

According to section (2h), A contract is an agreement must be enforceable by law and it
must be made with the free consent of the competent parties. The word contingent means
‘subject to chance’ The word contingent in ICA 1872 means conditional. The contract is been
divided into 2 parts absolute and conditional in which there is no condition and another one is
in which there is a certain condition for fulfillment. A contingent contract is an agreement
which will become contract only after fulfilling a certain condition which has been laid down
in agreement. That means the contract is subject to fulfillment of the condition. It is
contracted to do something or not do something if some event happened or even does not
happen

Example of a contingent contract

There is a contract between Mohit and Tanay in which Mohit has to sell his good which is in
the ship, to Tanay if the ship reaches the harbor safely in this example it talks about
contingent contract All Insurance Contract, Guarantee Contract and indemnity are
Contingent Contract

Essential of contingent contract

1 It must be a valid contract

Sections 32-33 of ICA,1872 tells us about happening of an event and non-happening of an
event, for example, if Satyam contracts to pay Hitesh, another person, a sum of $10902 if
Hitesh house is burnt it is a valid contract.

2 The performance of the contract must be conditional

The event must be related to the future and also be unpredictable

3 The event must be uncertain

4 The event must be collateral,

For example, Ram contracts to pay 1000 rupees to Shyam if Shyam house is destroyed by
fire, in consideration of Shyam paying 10 rupees per month. The consideration for the
promise of ram to pay 1000 rupees is the payment by Shyam, monthly of 10 rupees. The
obligation to pay 1000 rupees will be enforceable only on the happening of the uncertain
event- destruction of Shyam house by fire

Illustration of contingent contract

When Aman contracts to pay Ashwin $ 100000 if Ashwin house burnt, These are the perfect
example of a contingent contract
Ram promise Ashwin to pay a sum of dollars if a certain ship returns within the time limit
set by Ram . The contract may be enforced if the ship returns within a the time limit set by
Ram , and becomes void if the ship does not come within the time limit .

Basically on the absence of condition or presence of condition, Contract can be divided into
two types Absolute Contracts and Contingent Contracts . When there is no condition it is
called as absolute Contract. As no condition is there in absolute contract it is performed
therefore in all circumstances . where as when there is condition it is called as contingent
contract. Therefore we can conclude that contingent contract are Conditional Contract.When
all conditions are fulfilled and the Contract become valid and the parties have obligation to
follow

• Example: There is a contract between Mohit and Tanay in which Mohit has to sell his
good which is in the ship, to Tanay if the ship reaches the harbor safely in this example it
talks about contingent contract All Insurance Contract, Guarantee Contract and indemnity
are Contingent Contract

Types of Contingent Contracts

1 Depending Upon Happening of an unpredictable Event

Contingent contract sometimes depends upon happening of an unpredictable event.And if

such an unpredictable event happens or take place, the contingent contract becomes valid and
if the unpredictable event does not take place then it is said that the contingent contract is
void

Example – There has been contracting formed between Ashwin and Saloni according to
which Ashwin has to sell the good to Saloni and the goods in the voyage and if the ships do
not come back its void contract, and if the ships comeback its valid contract

2 Depending upon non-happening of an unsure event:

In these condition contingent contract sometimes depends upon the nonhappening of an

unsure event .if the event does not take place then also contract is valid and if that event take
place the contract is void

Example – There is a contract between Vanash and sarthak according to which Vansh has to
sell goods to sarthak, here if ship comeback the contract will be void and ship has been
drowned the contract will be valid.

3 Depending upon happening of an unsure event in a fixed period:

At times Contingent Contract may depend upon happening of an unsure event in a fixed
period. If such an event happens within a fixed period, the contract is Valid. If such an event
does not take place within a fixed period, the contract is void

Example: As per the contract formed between A and B, A has to sell goods to B, if the
ship comes back within 10 days. If it comes on the 8th day (or) 9th day, the contract is valid
and if it comes back on the 12th day (or) 13th day, the contract is void.

4 Depending upon non-happening of an unsure event in a fixed period:

At times the Contingent Contract may depend upon non-happening of the unsure event in a
fixed period then if such event take place within that time period provided , the contract is
void and if that event does not take place within deadline, then it is valid.

Example: Sanket has to sell goods to Omm if the ship does not come back within 10 days.
If it comes on the 8th day (or) 9th day, the contract is void and if it comes back on the 12th
day (or) 13th Day, the contract is valid.

5 Depends upon a not possible Event:

Sometimes the Contingent Contract may depend upon un possible event. These type of
contract are wrong from the beginning.

Example: There is a contract between ruby and pearl where ruby has to pay $1000 to Pearl
if Pearl marries Raju. Assume that Raju died 10 years ago, In these type of contract are
impossible therefore these are abintio wrong.

When Contingent Contract is Void

1 When happening of an event become impossible

According to INDIAN CONTRACT ACT Sec (32) tells that if happening of an event
becomes impossible, the contract also becomes void.

2 Conduct of a living person –

ACC to Sec (34) of ICA Which states that event which is collateral to the contract is the
future conduct of a living person and the person does any act which the happening of an
event impossible, then it is said to be void
Collateral to contract

The happening or nonhappening of an event of which, the performance of the contract is

dependent,must not form part of the consideration of the contract

Example – Ram contracts to pay 1000 rupees to Shyam if Shyam house is destroyed by fire,
in consideration of Shyam paying 10 rupees per month. The consideration for the promise of
ram to pay 1000 rupees is the payment by Shyam, monthly of 10 rupees. The obligation to
pay 1000 rupees will be enforceable only on the happening of the uncertain event- the
destruction of Shyam house by fire

Uncertain and futuristic

The event must be related to future or unsure event. If the performance of duty under a
contract is made to depend on an event which must happen as sometimes or other, it will not
make a contingent contract.Likewise, more postponement of the time performance will not
make the contingent contract

Example If Ahas sold some goods to B has undertaken the payment when he is in the
position to pay, it is not a contingent contract
 Relevant case laws

The Commissioner of wealth tax, Mysore v Her Highness Vijayaba, Dowger Maharani
Saheb Of Bhavnagarpal1

FACT

In this case, there has been certain dispute arose between the 2 sons, after the death of their
father, in respect of the asset of the father which he left.The younger brother filed suit against
the elder brother. The mother interpreted them and the idea of a legal proceeding was
dropped because the mother i.e the assessed , gave a letter to the younger son, agreeing to
purchase peace for the family and to pay him the amount which fell short of the specified
amount if the elder son did not pay any potion

HELD

It was held that Mr. Ahuja that the best undertaking given by the assessee , in her letter was a
contingent contract within the meaning of Sec 31 of ICA. In this case, the mother has a
liability to pay a certain amount of money in the failure of payment by Elder son This did
happen sometime between 14 May 1953 and12 September 1959.In that view of the matter, if
not earlier, the liability of the mother becomes enforceable by law on the latter date

1 The Commissioner of wealth tax, Mysore v Her Highness Vijayaba, Dowger Maharani Saheb Of
Bhavnagarpal 1979 AIR 982, 1979 SCR (3) 545
 Secretary of state for India v AJ Arthur2

FACT

The plaintiff entered into contract with the defendant who is superident of gun factory to
provide a certain quantity of timber .in these the plaintiff also mention certain condition
which must be laid down by the defendant at the time of delivering the product and the
timber must be in unexceptional quality if it is not in the required quality the plaintiff can
denied the product at the time of delivery and he will not be held liable. The plaintiff having
tendered certain timber which the superident of the carriage factory declined to accept and
having paid Rs 1235 to the defendant under protest to recover his deposit, sued to recover this
sum from the defendant and 6000 Rs for damages of not accepting the timber tendered

HELD

It was held that for Rs 1235 on the ground that the plaintiff had a right to question the
reasonableness of the refusal to accept the delivery, that the timber tendered sufficient good
quality and that the defendant broked the contract and finally it was not entitled to retain the
amount paid by the plaintiff under protest

2
Secretary of State for India v AJ Arathoon (1879) ILR 5 Mad 173
 Ramzan v Hussaini3

FACT

The case arises out the suit filed by the respondent, against her brother, the appellant for
specific performance of a suspicious contract of the sale dated 23 June in respect of a
house.The property was under a mortgage and according to plaintiff case, the defendant
agreed to execute a deed of sale on the redemption of the mortgage by her which she died in
1970.In spite of her repeated demands,the defendant failed to respect the agreement, which
necessitated the institution of the suits.The defendant-appellant besides pleading limitation
denied the agreement, as also the plaintiff alleged that she had redeemed the mortgage, The
question was taken to trial court as a preliminary issue and decided in favor of the plaintiff.

HELD

The case has been decided in favor of the plaintiff

3
Ramzan vs Smt. Hussaini 1990 AIR 529, 1989 SCR Supl. (2) 287