Contingent Contract

Given under Section 31 to 36.

“Contingent contract” defined.—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.
Thus, the contract is dependent or conditional upon the happening or
non-happening of a future event or contingency.
Example:
A contracts to pay B Rs. 10,000 if B’s house is burnt. This is a contingent
contract.
All contracts of insurance or indemnity and guarantee are contingent
contracts.
In a contingent contract, there should be some event collateral or incidental
to the contract.
It is one which does not form part of consideration of contract and is
independent of it. If the event consists in performance of the contract itself
by one party, it is not a contingent contract. For instance, “A announces an
reward of Rs. 100 to be paid to anyone who finds his lost dog. B finds the
dog. B’s act of finding the dog is acceptance of the offer as well as of the
performance of contract. It is not a contingent but an absolute contract.
A ‘wagering agreement’ is also a contingent contract, but it has been declared void by Sec-30. The only chief
element of a contingent contract is that its performance is linked with the happening of a contingency.
Example: A car insurance against accident creates liability only when an accident takes place. The performance
of a wagering agreement is also linked with an uncertain event. But a contingent contract is an attempt to make
gain out of a pure chance. There is no business or consideration in it. Further, in a wagering contract, there are
mutual chances of gain or loss, if either of the party may win but cannot lose, it is not a wagering contract. It
then becomes a contingent contract. Thus if A enters into contract with B to pay him a sum of Rs. 5,000 if India
wins the world cup, it is a contingent contract.
 Enforcement of Contingent Contract
The rules governing the enforcement of various kinds of contingent contracts are as follows:
(i) Contracts contingent on an event happening- Contingent contracts to do or not to do anything if an
uncertain future event happens cannot be enforced unless and until that event happened. If the event
becomes impossible, the contract becomes void (Section 32).

Example: A makes a contract with B to buy B’s house if A survives C. This contract cannot be enforced by
law unless and until C dies in A’s lifetime. Likewise, A makes a contract with B to sell a horse to B at a
specified price, if C, to whom the house has been offered refuses to buy him. The contract cannot be
enforced unless and until C refuses to buy. But where A contracts to pay B a sum of money if B marries C, C
dies without being married to B, the contract becomes void.

(ii) Contracts Contingent on the 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 (Section-33).

Example: 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.
(iii) Contracts contingent on the future conduct of a living person- If the event contemplates the way in which a
particular individual 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 act so within any definite time, or otherwise than
under future contingencies(Section-34).

Example: A person promises to marry certain person and marries another person, his marriage with the promisee is
then deemed to have become impossible.

(iv) Contracts contingent on happening of happening of specified event within fixed time- If the contract contemplates
the happening of the event within a certain time, the contract becomes void if the event does not happen or its
happening becomes impossible before the expiry of that time. Where the contract is to be performed if the event does
not happen within a specified time, its performance can be demanded if the event does not happen or its happening
becomes impossible before the expiry of that time.

Example: If 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.

(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).

Example: A agrees to pay B Rs. 1,000 if two straight lines should enclose a space, the agreement is void.