Contingent Contract under the Indian Contract Act


Introduction

Under section 2(h) of the Indian Contract Act, a contract is defined i.e. an agreement enforceable by law is a contract. For each contract, there must be free consent, competent for agreement, lawful consideration and object. The consent of the parties for performing the contract shall be free from coercion, undue influence, etc. Contract can be classified into two groups, Absolute and Contingent Contracts depending upon the happening or non-happening of a certain event in the future.

Absolute Contracts are those contracts where there is no condition and can be performed in all circumstances and Contingent Contracts are those contracts where there is a condition and also known as the Conditional Contracts. Section 31 to 36 of the Indian Contract Act, 1872, talks about the Contingent Contract.

Section 31 of this Act defines Contingent Contract as the contract to do or not to do something if some events collateral to such contract will happen or doesn’t happen. This means that a contract depends upon some unsure event if the events happen, the contract will be performed and if the events don’t happen it’ll not be performed. Hence the simple way to find whether the contract made is contingent or not is uncertain. For example, if Mr. A and Mr. B contract that if Mr. A’s sister marries Mr. B’s brother, then Mr. A gives 5000 to Mr. B. Here, it shows that it is commonly regarded as a contingent contract because the performance of such contract depends on the contingency that is unsure.

Essential for Contingent Contract

A contract can’t be said to be Contingent Contract unless it follows these essential elements of the contingent contract.

A contract to do or abstaining from doing something

Section 32 and 33 of this Act talk about enforcement of the contract on the happening of the event or the non-happening of the event respectively. The contract will be valid only if it is about performing or not performing an obligation. But if the event becomes impossible, such contracts become void. For example, A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.

Performance of the Contract must be Conditional

It must be a conditional contract, therefore it should be uncertain. This means that it is not said to be a contingent contract where the performance of the contract is dependent on an event and which is although a future event, but certain and sure to happen. Hence it does not include postponement of the happening of the event and it wouldn’t be a contingent event. Therefore it must be unpredictable for an individual and the happening or non-happening of the event shouldn’t be in the hands of the individual.

The event shouldn’t be at the option of the promisor

As in contingent contract, it wholly depends upon the contingency, so the said event should be collateral and will not be at the discretion of the promisor. In the case of N.P.O Ballaya v. K.V.S Setty and Sons, where a person promised his lawyer that in case he wins the litigation, he’ll pay the lawyer his expenses related to tax and cost, it was held by the Court that the event would not be in the hands of the promisor and wouldn’t be at his discretion, because he cannot guide the litigation. Therefore it was not a contingent contract.

The event must be Collateral to the Contract

The event on whose happening or non-happening of the event on which the performance of the contract is dependent should not be a part of the consideration of the contract. The happening or non-happening of the event should be collateral to the contract and should exist independently.

Enforcement of Contingent Contracts

On the happening of the event (Section 32)

Section 32 of this Act provides about  Enforcement of contract contingent on an event happening which means that if the party was entering in a contingent contract then the contract can be enforced only on the happening of the event. Therefore, under this section, the contract is contingent only on the happening of an event. Hence the event has to occur before the obligation is discharged. In the case of

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Bashir Ahmed & Others v. Government of State, it was held by the court that the contract wasn’t dependent on the event of making the medical company. So, it set a good example of how to differentiate between the event and creating a contract enforceable solely once the occurrence of the event. For example, A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced by law unless and until C dies in A’s lifetime.

On Non-happening of an event (Section 33)

Section 33 talks about the Enforcement of contracts contingent on an event not happening means that when parties enter into a contingent contract which is subject to the non-happening of an event, the contract can be enforced only when the happening of the event becomes an impossibility, and the contract can’t be enforced before that. For 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.

 Depending upon the impossible event and the future conduct of a living person (Section 34)

Section 34 provides about when an event on which contract is contingent to be deemed impossible if it is the future conduct of a living person.  This means when an individual does anything that compels the happening of an event.

 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 afterward marry B.

Happening/ Not Happening of an event within the fixed time (Section 35)

Section 35 talks about when contracts become void, which are contingent on the happening of specified event within a fixed time. This means that when a contingent contract depends upon the happening of an unsure event in a fixed time or pattern. Thus, if that event takes place within the fixed time the contract will be regarded as void.

When contracts may be enforced, which are contingent on a specified event not happening within a fixed time means the contingent contract relies upon an uncertain or unsure event in a stable time or pattern.

For example, 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. For 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 does not return within the year, or is burnt within the year

Contract contingent depending or relying upon an impossible event is void (Section 36)

Section 36 of this Act states that the Agreements contingent on impossible event void. This means if an impossible event happens whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made becomes void.  For example, A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void. For example, 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.

Difference between Contingent Contract and Wagering Contract
Contingent ContractWagering Contract
There is no Reciprocal PromiseThere is a Reciprocal Promise.
It is a valid contractIt is a void contract
Future contract is collateral to the contractFuture event is essential to the contract
It may not be of Wagering nature.It is always contingent.
Parties may have an interest in the subject matter.Parties have no interest in the subject matter.

Also Read: Void and Voidable Contract under the Indian Contract Act, 1872

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