Contingent contract

Section 31-36
 Example of Contingent contract
John is the owner of insurance company and
entered into the agreement with Bina, where he
stated that whenever a car of Bina will meet
with an accident at that time he will pay her all
damages which she will cause due to that
accident.
 Important of contingent contract
• Indian contract Act prevent those contract which is uncertain
in its nature; however human life is full with the
circumstances which is uncertain in its nature (life, accidents,
fire, indemnity, guarantee, behaviour of individual, ).
• Contingent contract given the space to those uncertain
events and provide assurance and protection to the party
from those uncertain events which may occurred in future.
(Insurance of car accident)
• No contract come into existence until contingency occurs.
• The liability of the parties only occurred after the existence
of contingency.
 Enforceability of contingent contract
• The contingent contract is remain
unenforceable till the existence of
contingency. The moment contingent event
occurred then only contingent contract
become enforceable one. Then only the
parties are responsible to perform their part.
• in every contingent contract there is two
contract first is Principal contract and other
one is contingent contract/collateral contract.
• A to B, If your house will be on fire I will pay
you 100 Rs. (fire is a contingency or a
collateral event on which principal contract is
depend). A is not responsible to perform his
part until the fire take place but it provide
surety to the B from future events.)
 Contingent contract is the one where the liability to
perform the promise depends upon some collateral
event which may or may not happen.
• Contract of insurance, contract of guarantee,
Indemnity contract
• If your house will be on fire then I will pay you 10,000.
• In contingent contract two contract is involve, first is
principal contract and contingent contract.
• The liability of other party only will come in existence
when certain contingency happen.
 Key ingredients of contingent contract
• Depends on the Occurrence or Non-Occurrence of an
Event: A contingent contract will be deemed valid only if
an event occurs or does not occur and it is collateral to
the contract.
• Contract Performance Must be Conditional: The meaning
of a contingent contract is that the conditions collateral
to the contract must be certain to happen in the future.
The presence of a condition is essential for a contract to
be contingent. Section 32 and Section 33 of the Contract
Act state that the enforcement of a contingent contract is
subject to the collateral conditions being fulfilled
• The Condition of the Contract must be a Future
Event: A contract will be considered a contingent
contract only if the event specified is a future event
that may or may not happen.
• The Condition Specified must be Collateral to the
Contract: A contingent contract is based on the
occurrence or non-occurrence of an event. This
event must be collateral to the contract and not a
part of the consideration mentioned in the contract.
The contingency must be an independent event.
• The Event must not Depend on the Mere will of the
Promisor : The event must not be influenced only by the will
or wish of the promisor; but if necessary one party should
put the necessary efforts to bring the contract in to the
existence.
• Reasonable efforts is implied conditions.
• A to B; A will pay 100 to B if he will pass with 90%. Here 90%
is not only depend upon the will of the promissory but
reasonable efforts.
• A to B; I will purchase your house if the tenant will vacant
the place. Here B is duty bound to put all efforts to vacant
the tenant from the house which A willing to purchase.
• Whether life insurance contract is contingent contract? (No,
it is conditional because death is certain in its nature)
• I will purchase your house, if you will pay your tax.
• If you die because of car accident, then i will pay you money.
 Meaning of contingent contract
• Section 31 “contingent contract”: A contingent
contract is a contract to do or not to do
something if some event, collateral to such
contract, does or does not happen.
• I will purchase your house if you will win the
case in court.
 Event must be happen to enforce the
contract
• Section 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.
• Example: A makes contract with B to Buys B,s horse if A
services C, this contract can not be enforced by the law
unless and until C dies in A life time.
• A ready to sell his horse to B, if c denies to purchase it.
• A will execute the sale deed if tenants will vacant the
house, If tenants not vacant then contract will be void.
 Event must not happen to enforce the
contract
• 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. —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.
• " Illustration 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. 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."
• Contingent contract based
upon the conduct of living
person
• 34. When event on which contract is contingent to be deemed impossible,
if it is the future conduct of a living person.—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. —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."
• Illustration 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
may afterwards marry B. 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 may afterwards marry B."
 Event should be happened within time only

• 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.
• Example :- I will sale you a horse if A denies to
purchase it within 8 days.
• I will pay you money if Your car will meet with an
accident within 2 years only.
Contingent Contract of Permant impossible
event
• 36. Agreements contingent on impossible event void.—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. —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.“
• Illustrations(a)
• A agrees to pay B 1,000 rupees if two straight lines should
enclose a space. The agreement is void. (a) A agrees to pay B
1,000 rupees if two straight lines should enclose a space. The
agreement is void."
• Doctrine of frustration and contingent contract
• Contingent contract is based upon uncertainty and
uncertain impossibility. Impossibility and uncertainty is
inseparable part of contingent contract. That impossibility
become possible or remain impossible. Many time if
possible uncertain future event become impossible then
also party have to perform their part as per terms of the
contract.
• In Doctrine of frustration impossibility was never be the
part of contract when contract was prepared. It is outer,
out of control, and never presumed circumstances which
make the contract impossible. In Doctrine of frustration
impossibility is lead the contract towards the absolute end.
But in contingent contract that same impossibility can give
the birth to the performance of contract, and enforce the
contract.
• Ismail Mohmmad v. Musabhai
• Contract between A and Z. If A succeeds in his
suit with regards to certain lands then i will
purchase A,s property.
• Chandulal v. Income Tax officer:
• If some event is certain but the way if will
happen it is uncertain then it will be consider
as contingent contract.
• Absolute obligations, not a contingent
contract.
• Mere postponement of performance not a
contingent contract.