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Law o f Contract 41

in G h eru la l Parekh v M ahadeo D a s (AIR 1959 SC 781), that a partnership to enter

into w a g erin g transactions is not illegal, and therefore a partner who has paid the
losses on such transactions may recover proportionate indemnity from his co-partners.
In States like Maharashtra and Gujarat, wagering agreements have been declared
illegal also. Thus in these States the collateral transactions to wagering agreements
are a ls o void.

E xceptions

Sec. 30 d oes not render void a subscription/contribution, or an agreement to subscribe/

contribute towards any plate, prize or sum o f money (of the value o f Rs. 500 or
upwards) to the winner or winners o f any horse-races. Thus a bet on a horse race
carrying a prize o f Rs. 500 or m ore to the winners is valid. Further, crossw ord
com petitions in which skill plays a substantial part are not wagers. But where prizes
d epen d upon a chance, that is a ‘lottery’, it is a wager.

6. CONTINGENT CONTRACTS

A ccording to Sec. 31, a “contingent contract” is a contract to d o or not to d o something,

if som e event, collateral to such contract, d o e s o r d oe s not happen. Thus the contract
is dependent or conditional upon the happening or non-happening o f a future event
or contingency. For example, A contracts to pay B Rs. 10,000 i f B ’s house is burnt,
this is a contingent contract. The payment o f the amount is contingent on the happening
o f the collateral event i.e. burning o f the house. A ll contracts o f insurance o r indemnity
and guarantee are contingent contracts.
A distinction is to b e drawn betw een a contract under which a present obligation
is created but performance is postpon ed to a future date, and a contract under which
there is no present obligation at all and the o bligation is to arise by reason o f som e
condition being com plied with or som e contingency arising in future. Thus when the
agreement states that the delivery is to be m ade when the g o o d s are received from the
m ills or when they arrive, such contracts are not contingent contracts.
In a contingent contract there should be som e event collateral or incidental to
the contract. A ccordin g to P ollock and Mulla, a ‘collateral event’ means an event
which is “neither a performance directly prom ised as part o f contract, nor the w hole
o f the consideration for a prom ise”. It is one which d oes not form part o f consideration
o f the contract, and is independent o f it. I f the event consists in performance o f the
contract itself by one party, it is not a contingent contract. F or instance, A announces
a reward o f Rs.100 to be paid to any on e w ho finds his lost dog. B finds the dog. It
is not a contingent but an absolute contract.
Similarly, where C contracts to pay Rs. 100 to D for white-washing his house on
the terms that no payment shall be m ade till the com pletion o f the work, it is not a
contingent contract because the event (D’s com pleting the work) is an integral part o f
the contract and not collateral to the contract However, where A contracts to pay Rs.
50,000 to B, a contractor for constructing a building, provided the construction is
42 Law Guide for Competitive Exam inations

approved by an architect, it is contingent contract because approval by an architect is

a collateral event which is independent o f consideration i.e. construction o f the building.
Where with a view to set up a com pany for the manufacture and sale o f Unani
medicines, a State Government paid an advance to B for the purchase o f his b ook on
Unani medicine; however, the scheme o f manufacturing medicines could not materialize.
Held that the contract was not contingent on the happening o f collateral event (setting
up o f the company) and thus B can claim the remaining sum from the Government
(Bashir Ahmed v Govt, o f A.P. AIR 1970 SC 1089).
A ‘wagering agreement’ is also a contingent contract, but it has been declared
void by Sec. 30. The only chief element o f a contingent contract is that its performance
is linked with the happening o f a contingency. The performance o f a w agering
agreement is also linked with an uncertain event. But a contingent contract serves
some business or social purpose while a wagering contract is an attempt to make gam ,
out o f a pure chance. There is no business or consideration in it. Further, in a w agering I
contract, there are mutual chances o f gain or loss, if either o f the party may win bijt.
cannot lose, it is not a wagering contract. It then becom es a contingent contract. Thus
i f A enters into a contract with B to pay him a sum o f Rs.5,000 if India wins the w orld
cup, it is a contingent contract.

Enforcem ent o f C on tin gen t C on tra ct

The rules governing the enforcement o f various kinds o f contingent contracts are as
follows:
(i) Contracts contingent on an event happening (Sec. 32).
(ii) Contracts contingent on the event not happening (Sec. 33).
(iii) Contracts contingent on the future conduct o f a living person- I f the
event contemplates the way in which a particular individual will act at
an unspecified time, the event shall be considered to becom e im possible
when such person does anything which renders it im possible that he
should act so within any definite time, or otherwise than under further
contingencies (Sec. 34).
(iv) Contracts contingent on happening o f specified event within fix e d time-
If the contract contemplates the happening o f the event within a certain
time, the contract becom es void if the event does not happen or its
happening becom es im possible before the expiry o f that time (Sec. 35).
(v) Contracts contingent on impossible event - If the performance is made
to depend upon an event which is already impossible, the contract is
void whether or not the fact is known to the parties (Sec. 36). For
example, A agrees to pay B Rs. 1,000 if two straight lines should en close
a space, the agreement is void.

7 . PERFORMANCE OF CONTRACT

When the rights and obligations arising out o f a contract are extinguished, the contract is
said to be dischaiged or terminated. A contract may be discharged in the following ways: