CONTINGENT CONTRACTS

SUBMITTED BY- ASHANSH ROSHAN (58/20F)

( B.A L.L.B ) KANWAR MAAN (59/20F)

SEM-1 MUSKAN (60/20F)

TANISHA BANSAL (61/20F)

MELISHA DUA (62/20F)

SAANCH (63/20F)

SUBMITTED TO- MRS. RAJNI VERMA

UNIVERSITY INSTITUTE OF LAWS

P.U. REGIONAL CENTRE , LUDHIANA
 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to Prof. Rajni Verma

who gave us the golden opportunity to work on the topic ‘CONTINGENT
CONTRACTS’ and for their able guidance and support in completing my
assignment. Her patience, motivation, enthusiasm and immense knowledge
have helped us immensely during our research.

Ashansh Roshan
Kanwar Maan
Muskan
Tanisha Bansal
Melisha Dua
Saanch
 CONTINGENT CONTRACTS
Contingent contract are those which are based on
happening and non happening of the event or according
to SECTION-31:
‘Contingent contract is a contract to do or not to do
something if some event collateral to such contract does
not happen’.
Contingent contract are conditional contracts. In such
contract when condition is imposed then the party is in
obligation to fufill the condition and they are in
obligation to perform that act or duty. If conditions are
not fulfilled according to the contract the agreement then
became VOID.
EXAMPLE-
A MAKES A CONTRACT TO PAY TO B 10,000 IF B’S HOUSE IS
BURNT. THIS IS CONTINGENT CONTRACT. SO THIS IS BASED
ON HAPPENING ND NON HAPPENING OF THE EVENT IF THE
HOUSE IS BURNT HE WILL PAY HIM OTHERWISE HE IS NOT
LAIBLE TO PAY.

ESSENTIAL OF CONTINGENT CONTRACT-

1} PERFORMANCE OF THE CONTRACT DEPENDS UPON A
CONDITION-
It means in case of contingent contract, performance
depends upon a condition i.e happening or non
happening of the event.
EXAMPLE-
A contract with B to pay him 1000 rupees on the delivery
of some books on Friday so here he is bond to deliver the
books on Friday if he will deliver them on Saturday the
contract will became void
2} EVENT MUST BE COLATERAL-
This means that event must be incidental it is important
to mention that that contingent contract becomes
enforceable by law when that event happens or does not
happen.
EXAMPLE-
X and Y enters into contract that he will pay him 10,000
rupees on the delivery of the books By him on Friday in
this case delivery on Friday is collateral to the contract
and not the part of the consideration hence this is
contingent contract.
3} MUST BE UNCERTAIN EVENT-
The contingent contract depends upon uncertain event
where happening or not happening depends upon
chance. So happening is not in control of any of the
parties
EXAMPLE-
A CONTRACT WITH B THAT HE WILL PAY SUM OF
MONEY TO HIM IF HE MARRIES C SO THIS IS
UNCERTAIN EVENT WHICH MAY OR MAY NOT HAPPEN
IF HE MARRIES C HE IS BOND TO PAY SUM OF MONEY
IF THIS EVENT DOESN’T HAPPEN THEN CONTRACT
BECAME VOID.
CASE LAW
Frost Vs Knight (1872)
The defendant promised to marry the plaintiff on the
death of his father. While the father was still alive, he
married another woman. it was held that it had become
impossible that he should marry the plaintiff and she
was entitled to sue him for the breach of contract.

DIFFERENCE
WAGERING AGREEMENT-
1. IT IS VIOD AGREEMENT
2. THERE IS RECIPROCAL PROMISE
3. FUTURE EVENT IS ESSENTIAL TO THE CONTRACT
4. PARTIES DOESNOT HAVE ANY INTEREST IN THE
SUBJECT MATTER
CONTINGENT CONTRACT-
1. IT IS VAILD CONTRACT ND BECAME ENFORCEABLE
BY LAW ON HAPPENING OR NOT HAPPENING OF AN
UNCERTAIN EVENT
2. THERE IS NO RECIPROCAL PROMISE
3. FUTURE EVENT IS COLLATERAL TO THE CONTRACT
4. PARTIES MAY HAVE INTEREST IN THE SUBJECT
MATTER
SECTION-32
Enforcement of contracts contingent on an event
happening:
‘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.’
EXAMPLE-
(a) A makes a contract with B buy B’s horse if A survives
C. This contract cannot be enforces by law unless and
until C dies in A’s lifetime.
(b) A makes a contract with B to sell a horse to Bat 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.
(c) A contracts to pay B a sum of money when B marries
C. C dies without being married to B. The contract
becomes void.
CASE LAW
Bashir Ahmad and Others. Vs Government of Andhra
Pradesh
FACTS- The respondent contracted to purchase a book of
medical prescriptions in order to start a company for the
manufacture and sale of UNANI Medicines. The book was
taken into possession after part payment but the
purpose of taking the book couldn’t be fulfilled. The
appellant filed a suit to recover the balance amount. The
defence was that the contingent event of forming a
company wasn’t yet fulfilled. The court rejected this
contention and held that the contract was not contingent
on the event of the formation of the medical company.
This case law is a good example as to differentiating the
event and making a contract enforceable only after the
occurrence of the event. The enforcement of the contract
is envisaged when, primarily, the contract is contingent
on the happening of an event. If it is not contingent on
an event, it is not enforceable. Therefore, for any
contingent contract to be contingent, the event has to
occur before fulfilment of the conditions of the
performance of the contract.

SECTION-33
Enforcement of contracts contingent on an event not
happening:
‘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.’
That means, where contract to do or not do an act is
dependent upon, not happening of an uncertain event, it
becomes enforceable by law when the happening of that
event becomes impossible and no before. However, where
that event happens, contract becomes void.
EXAMPLE-
(a) A agrees to pay B a sum of money if a certain ship
does not return. The ship sinks. The contract can be
enforced when the ship sinks.
CASE LAW
Gyanchand v. Gopala and others ( 1995 ) 2 SCC 528
The appellant entered into an agreement with the
respondent on 13th January 1978 to purchase 1/3rd
share of the land belonging to the respondent. The
appellant had to pay a total consideration of Rs.
78,000/- and paid a sum of Rs. 20,000/- as earnest
money. The sale deed had to be executed on or before
30th April 1978. The appellant later got to know about a
notification in the Land Acquisition Act, 1984 under
section 4(1) that had been published on 3rd August 1977
and this had been concealed from the appellant. Due to
this, the appellant filed a suit for the recovery of earnest
money. The trial court held for the refund of money with
an interest of 6% p.a from 25th January 1980 till the date
of realization. The respondent filed an appeal in the
District Court where the decision had been dismissed. In
the second Appeal, the High Court dismissed the suit in
limine. Thus, the appellant appealed to the Supreme
Court.The Supreme Court held in favour of the appellant
as the contract had been frustrated and the clause in
their agreement stated that the earnest money must be
paid back. Section 4(1) stated that the Government could
take land if it needed for public purpose but this section
was not conclusive until the declaration of Section 6. In
this case, the declaration was made and it became
conclusive that the land was required for a public
purpose.Therefore, the decree of the Trial Court had been
restored.

SECTION- 34
Enforcement of contracts contingent on the future
conduct of a living person:
‘When contract is contingent upon the future conduct of a
living person and such person does anything which
renders that act impossible, the contracts becomes void’.
If 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 impossible
that he should so act within any definite time, or
otherwise than under future contingencies. That means
where a contract to do or not to do anything is dependent
on a future conduct of a person and such person does
anything which renders that act impossible, the contract
becomes void.
EXAMPLE-
A agrees to pay B a sum of money if B marries C. 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 afterwards marries B.
The impossibility is only for the time-being and the
prospect of the event becoming possible due to the future
conduct of that person in certain future contingencies, is
of no avail.

CASE LAW
Jaunpur Sugar Factory-1925 (5) TMI 1-ALLAHABAD
HIGH COURT
FACTS- R had agreed to take shares in the Jaunpur
Sugar factory if the company would appoint him its sole
agent at a certain place. The company went into
liquidation before appointing him as an agent and R was
entered into the list of contributories. It was held that R
was not liable as the contract to take shares was
contingent on his appointment as an agent, which event
never took place.
SECTION- 35
Enforcement of contracts contingent on happening of
specified event within fixed time:

‘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.’

Enforcement of contracts contingent on not happening of

specified event within fixed time:

‘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.’

EXAMPLE-

(a) 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 is burnt within the year.

(b) 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.

CASE LAW
Panem VenkanarayanaSastry V. Rajupalli China Yellw
Reddy 1958(11) TMI 29 – ANDHRA PRADESH HIGH
COURT

The defendant agreed to sell the suit properties to the

plaintiff. The agreement was subject to the title of the
defendant being approved by plaintiff’s family lawyer.
There was no time fixed within which the plaintiff should
obtain the approval of his lawyer. It was held that the
intention was the approval should be obtained within
reasonable time. The time that elapsed between the
agreement and the approval of the lawyer was about ten
days. In these circumstances there has been no
unreasonable delay.

SECTION-36
Enforcement of contracts contingent on impossible event:
‘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
agreement at the time when it is made.’
EXAMPLE-
(a) A agrees to pay B 1,000 rupees if two straight lines
should enclose a space. As two parallel lines can never
meet so agreement is void
(b) A agrees to pay B 1,000 rupees if B will marry A’s
daughter C. C was dead at the time of the agreement.
The agreement is void.
(c) A agrees to pay B one lakh rupees if the sun rises in
the west next morning. This is an impossible event and
hence void.

REAL-LIFE USE
Contingent contracts are used in our daily life. Mainly for
businesses, it is being used in negotiations where all
goodwill and trust that is created can disagree in front of
the negotiating opposite party about future events that
need to work, in that case, a contingent contract is of
great use.
In a life insurance contract, the insurer has to pay a
certain amount if suddenly the insured person dies due
to certain conditions due to which the insurer will not be
called for action of taking the amount until the death
which is an event that has happened so in this case
contingent contract is required.

ADVANTAGES
A Contingent contract has a lot of advantage which
specifically negotiator can also use:
(1) It helps to eliminate the need to come into
agreements as it will help the parties to bet on
prediction which keeps differences among the
parties but this is only helpful in case of
negotiations.
(2) It can limit the losses that could happen if the
contract failed in fulfilling the conditions.
(3) It does not offer the scope of litigation by reducing
the conflicts which are involved in it as these
events are the future of what would happen.
 CONCLUSION

A contract is an agreement enforceable by law. For every

contract, there should be an agreement which is made by
the free consent of parties competent to contract, for a
lawful consideration and with a lawful object. The
agreement should not be declared void hereby to form a
contract. Every contingent contract is a contract
primarily. Like any other contract, it is also a contract to
do or not to do something. It is not, however, an absolute
and unconditional one, without any reservations or
conditions, which is to be performed under any event. Its
performance is dependent on some event’s happening or
not happening- the contingency.

For a contract to be a contingent contract, certain

essential elements have to be there. These elements form
a contingent contract and without them, a contract will
not be contingent. There must be a valid contract to do
or not to do something. The performance of the contract
must be conditional. The said event must be collateral to
such contracts and the event should not be at the
discretion of the promisor. These are some rules that
have to be followed for a contingent contract to be
enforceable. For instance, on the happening of an event,
on the event not happening and on the event not
happening within a specified time. There are some
situations when a contingent contract becomes void.
Some of them are: the event being impossible, not
happening of event within fixed time, agreements
contingent on impossible events and on the conduct of a
living person.