Introduction
Contingent contracts are those types of contracts that depend on the happening or not happening of a future uncertain event. Here, we will see the situations when these agreements are enforced and when they become void, hence not enforceable by law.
Relevant Provisions
Sections 31-36 of the Contract Act, 1872.
Meaning
The term Contingent means “dependant on or subject to something unpredictable or unforeseen”.
It also means “an agreement enforceable at law”.
Definition
Section 31 of the contract Act defines Contingent Contract as follows;
“A contingent contract is a contract to do or not to do something, if any event, collateral to such contract does or does not happen.”
Example: A contracts to pay B Rs. 70,000/- if B’s horse dies. This is a contingent contract.
Explanation
All the contracts of insurance, indemnity & guarantee are examples of contingent contracts.
Essentials of Contingent Contracts
The essentials of contingent contracts that must be fulfilled are discussed below.
1. Uncertain Future Events
The event to which the performance of the contract is subject should be of an uncertain nature, where the happening of that particular event would be the “contingency of the contract. This is the underlying principle for contingent contracts.
Example: A contract to pay 2 Lac rupees on the destruction of premises by fire is a contingent contract.
2. Collateral To Contract
The contingency contemplated by the contract must be collateral to it. It means that even if a contract has arisen or it is existing, still its performance cannot be demanded unless the contemplated event happens or does not happen.
Example: A contracts with B to give him Rs. 50000 if a certain ship does not return. Here the contract is contingent on the loss of the ship; therefore, this contract would only be enforced if the ship sinks.
3. Stipulated conditions must be Fulfilled
A contingent contract becomes absolute when the condition is fulfilled strictly and absolutely. Any divergence in the fulfillment of the condition would render the contract unenforceable.
In the same way, where the contingent condition is not fulfilled the contract is not enforceable. Therefore, for a contingent contract to be legally enforceable, the condition stipulated should be fulfilled absolutely and without any deviation.
4. Contingency to be the Condition Precedent
The condition which is collateral to the performance of the contract should be a condition precedent i.e. it should be satisfied first and then performance should be demanded.
5. It depends upon the Will of a Person
A contract will be no less contingent where the happening or non-happening depends upon the will of a party.
Example: A contracts with B to give him his bus if he married D, and B marries Z. Thus the contract with A is not enforceable.
Enforcement of Contingent Contracts
Here are some rules for the performance and enforcement of contingent contracts. They are discussed in detail below.
1. Happening of an event U/s 32
Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless & until that event has happened. If the event becomes impossible, the contract becomes void.
Example: A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced by law unless & until C dies in A’s lifetime.
2. Non-happening of an event U/s 33
If the performance of a contract depends on a particular individual acting in a particular manner or 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 then under future contingencies.
Example: A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B and C must now be considered impossible, although it is possible that D may die & that C may afterward marry B.
3. When it is Linked with human conduct U/s 34
If the future event on which a contract is contingent is the way in which a person acts 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.
Example: A agrees to pay B Rs. 200000/- if B marries C. But B married Z. Thus B’s marriage to C has now become an impossibility. Although it is possible that Z dies and B marries C afterward.
4. Happening of a specified event within a fixed time U/s 35(1)
If the contract contemplates the happening of an 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.
Example: A promises to pay B a sum of money if a certain ship returns within a year contract may be enforced if the ship returns within the year, and becomes void if the ship does not return or is burnt within the year.
5. Non-happening of a specified event within a fixed time U/s 35(2)
When the performance of a contract depends on the non-happening of an event within a specified time, its performance cannot be demanded if the event does not happen or its happening becomes impossible before the expiry of that time.
Example: 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 returns within the year and becomes void if the ship does not return within the year.
6. Void Contingent agreements U/s 36
If the performance of a contract is made dependent upon an event that is already impossible, the contract is void whether or not the fact is known to the parties.
Example: A agrees to pay B to pay a certain sum of money if B will marry A’s daughter C. C was dead at the time of the agreement. The agreement is void.
Final Note
A contract, the performance of which depends upon the happening or not happening of some uncertain event of the future is a contingent contract. Such a condition has to be collateral to the agreement and should be a part of the consideration forming the contract.
FREQUENTLY ASKED QUESTIONS
What is meant by “Contingent Contracts”? What are the rules of their enforcement?
(2019-A, 2015-S)
Define contingent contracts. Are they enforceable? If so explain.
(2007-A)
Define contingent contracts. Explain the rules which govern the enforcement of these contracts.
REFERENCES
- The Contract Act, 1872
- N-Series by M.A. Chaudhary
- Law of Contract by Avtar Singh
