Contingent contract

The law of contract is that branch of law, which determines the circumstances in which promises made by the parties to
the contract shall be legally binding on them i.e., to say A contact is such an agreement which allows a party to do or
not to do something in reference to the contract which they have performed.

Generally, A contract may be of two types i)Absolute contract, and ii)contingent contract. An absolute contract is the
one in which the promissory binds himself to perform in any event without any precondition’ whereas, contingent
contract is a sort of conditional contract, where a condition itself is of uncertain nature.

Thus, a contract which is, subject to certain or an absolute type of condition cannot be regarded as a contingent
contract. For example, a contract to pay a sum of money on the expiry of a time or on the death of a person is not a
contingent contract because of the obvious reason that, in these both of the contract the condition prescribed are of sure
or certain in nature . If the condition is of uncertain nature, then only the contract can be regarded as truly contingent.
For example, to pay a sum of money on the destruction of a building by earthquake is a contingent contract. Thus, from
this particular point , what can be said is that, all the contracts like, contract of indemnity and guarantee , contract of
insurance(except life insurance) and even a wagering contract are the contingent contract.

According to Black’s law of dictionary the word ‘contingent’ means that which is dependent on something else. Thus
contingent actually means something uncertain or accidental. This is to say, there is no certainty, about something that
may happen or not. The contingent contract further emphasizes that; the contingency contemplated by the contract must
be collateral to the contract. It means that a contract has already arisen or a subsisting contract is there but its
performance cannot be demanded unless the contemplated events happens or does not happen. Thus a contract to sell a
piece of agricultural land which was the subject matter of the on going consolidation proceedings was held to be of
contingent nature, because nobody could tell beforehand to whom the land might become allocated .It was not
enforceable until and unless the consolidation would leave the land on hand of the seller.

Nepalese contract Act 2056, in its section 12 has dealt about contingent contract to some extent, but in this section also
the definition regarding the contingent contract has not been mentioned and only the provision regarding it has been
dealt with. However, the Indian contract Act has made an attempt to define it according to which “A contingent is a
contract to do or not to do something, if some event collateral to such contract does or does not happen.” Thus it is a
type of contract the performance of which depends merely upon the happening or non-happening of something
uncertain.
Where, collateral means “connected with something else” but in addition to the contract and therefore is of less
important. As for Pollack and Mullah, a collateral event which is neither a performance directly promised as a part of
the contract nor the whole of the consideration for a promise .Thus, a contingent contract is nearer to a unilateral
promise or obligation, then to a mutual obligation .For example, A promises to pay nine lakes to B on the destruction of
House by a fire. The house gets destroyed by the recent Tsunami. The liability of A does not arise even though the
house has been destroyed because the event cause is not in the contingent contract.
Therefore, from all these clarification the basic characteristic of contingent contract can be listed as follow:

i) There must be a contract between the parties to do or not to do something

 ii) The performance of a contract must be dependent upon the happening or non-happening of a uncertain
event in future
iii) The event must be possible but of uncertain nature.
iv) The event must be collateral to the subject matter of the contract

RULES REGARDING CONTINGENT CONTRACT

As a basic characteristics of a conditional contract, the contingency depends on the uncertainty of an event. The rules
regarding a contingent contract are provided in sec 12(1) (2) (3) (4) (5) of Nepalese Contract Act which are found to be
quite similar to those of Indian Contract Act (ICA).

a) On the happening of a future uncertain event.

A contract to do or not to do something if uncertain event happens cannot be enforced by law unless and until the event
has happened but if the ‘ground event’ becomes impossible then such a contract becomes void because there is no
ground for the fulfillment of such contract.
Example: A contract to pay B a sum of money when B marries C but if C dies without being married to B, the contract
becomes void.
A promises to pay B, Rs 10,000, if A’s ship coming from London does not reach at Mumbai on or before 31 st may
2011.
Case I: when ship reaches on or before time (void)
Case II: when ship reaches after specified time (valid)
Case III : when ship sinks (Valid)

b) Event which is contingent to be deemed impossible due to the act of human conduct:
If contract contingent on the act or conduct of a specialized person becomes impossible by his denial or inability can
not create any liability for the performance of the contract. Example: A agrees to pay B a sum of money if B marries
C, but C marries D. The marriage of B to C must now be considered impossible. Therefore, where the contract is
enforceable if a certain person is to act in a certain way, the event shall be considered to have become impossible if that
person does something which makes it impossible that he should act in that way in any definite time or without further
contingencies being fulfilled. In Frost v. Knight (1872), the defendant promised to marry the plaintiff on the death of
his father. While was still alive he married another woman. It was held that it had become impossible that he shall
marry the plaintiff and then she was entitled to sue him for the breach of contract.

c) When performance depends upon non-happening of an event.

If an uncertain future event does not happen can be enforced when the happening of that event becomes impossible and
not before if any uncertain event does not happen in the future. Liability under that contract shall emerge only after the
happening of the event becomes impossible. Example: A agrees to pay R a sum of money if certain ship does not
return. The ship sunk. The contract can be enforced when the ship sinks. Similarly, R agrees to sell her car to P if S
dies. The contract cannot be enforced so long as S is alive.

d) When contract become void which are contingent on happening of specified event within fixed time:
If a specified uncertain event happens within a fixed time, it becomes void if at the expiration of the time fixed ,such
event has not happened, or if , before the time fixed such event becomes impossible . Example, A promises to pay B a
sum of money if a certain ship returns with in a year. The contract may be enforced if the ship returns with in a year
and becomes void if the ship is burnt or, sunk and or lost in the sea

e) On the non –happening of on event within a fixed time :-

If a specified uncertain event doesn’t happen with in a fixed time, may be enforced by law when the time fixed has
expired and such even has not happened or, before the time fixed has expired, if become certain that such event will not
happen. Example: ‘X’ promises to pay ‘Y’ a sum of money if a certain ship does not return with in a year. The contract
may be enforced if the ship does not return within the year or is burnt, lost or such with in the year. These are the
various provisions which our contract Act has dealt about but beside these Indian contract Act sec 36 further adds that
in an agreement to do or not to do something, if an impossible event happens, is void whether the event is known or
unknown to the parties at the time of creation of that contract. For example, S agrees to pay R a sum of money if two
straight lines enclose a space. Then this agreement in fact is a void contract. Similarly if M agrees to give N his
property if n will marry M’s daughter to R but R was dead at the time of the agreement. The agreement is void.

f) Agreements contingent on Impossible Events

Agreements contingent on impossible events 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. Example; A agrees to pay B Rs 1,000 if B will marry A’s daughter
C. C was dead at the time of agreement. The agreement is void because B’s marriage with C can never take place.