Introduction-
In layman's terms, the word 'contingent' means depending on the occurrence or non occurrence of the future event in order to happen and 'contract' means an agreement binding by law between two or more persons or groups. So, the term 'contingent contract' means an agreement binding by law between two or more persons or groups to do or not to do something depending on future events in order to happen.
For example, 'A' agrees to give 'B' Rs. 12,000 if 'B' passes the job interview.
'Contingent Contract' defined under law-
In law, under Section 31 of the Indian Contract Act, 1872, contingent contract has been
defined as -
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.[1]
Illustration
A contracts to pay B Rs. 10,000 if B's house is burnt. This is a contingent contract. Here, the payment of Rs. 10,000 is contingent on the event of burning of house.[2]
In simple words, a contingent contract can only be enforceable on the promisor i.e., the person who makes the promise,when certain conditions previously agreed are met. A contingent contract being conditional in nature depends on occurrence or non- occurrence of a future event.
But if the event in the contract consists in the performance of the contract by one party itself then it shall not be a contingent contract.[3] For example, if A announces that he will give a reward of Rs. 15,000 to whoever will find his lost cat. B finds the cat. B’s act is acceptance of the offer as well as the performance of the contract. But the contract will not be a contingent contract.
The contract of indemnity, guarantee and insurance are the examples of a contingent contract.
In the case Chandulal Harjivandas, Jamnagar vs Commissioner Of Income-Tax 1967 SCR (1) 921, the court held that all contracts of indemnity and insurance are contingent
contracts.[4]
The wagering contract is also an example of a contingent contract but under Section 30 of the Indian Contract Act, 1872 it has been declared to be void.
Essentials for a Contingent Contract-
1. Existence of a contract to do or to not do an act.
2. Conditional performance of the contract.
3. Existence of a collateral event in the said contract.
4. The event should be independent of the discretion of the promisor.
When can a contingent contract be enforced?
The contingent contracts can be enforced in various ways under Section 32 -36 of the
Indian Contract Act, 1872 as explained below-
1. Contracts contingent on happening of an event -
[Section 32 - Enforcement of contracts contingent on an event happening. 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.][5]
Under Section 32 of the Indian Contract Act, 1872, a contingent contract to do or not to do an act can only be enforced by the law on the happening of an uncertain future event and not otherwise. If the happening of the event becomes impossible then the contract shall be void.
Illustrations
(a) A contracts to pay B an amount of Rs. 15,000 if C's bike is lost. The contract can't be enforced by law unless and until C's bike is lost.
(b) A makes a contract with B to sell a painting to B at the specified price, if C to whom the painting has been offered, refuses to buy it. The contract can't be enforced by law unless and until C refuses to buy the painting.
(c) A contracts to pay B a sum of Rs.11,000 if B marries C, the most intelligent girl in the class. But C dies in a car accident before marrying B. Since the marriage is no longer possible, the contract has become void.
2. Contracts contingent on not happening of an event -
Section 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. [6]
Under Section 33 of the Indian Contract Act, 1872, a contingent contract to do or not to do an act can only be enforced by the law on the impossibility of occurrence of an uncertain future event. If the occurrence of an event is possible then it can't be enforced and shall be void.
Illustration
(a) A agrees to pay B a sum of Rs. 36,000 if a certain business carriage does not return. The carriage is destroyed on the way. The contract can be enforced when the carriage is destroyed. But if it returns then the contract is void.
(b) A agrees to pay B a sum of money if a certain ship does not return. The ship returns back. Since the event of returning of the ship has taken place, the contract has become void.
3. Contracts contingent on the future conduct of a living person-
Section 34 - When an event on which a 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.[7]
Under Section 34 of the Indian Contract Act, 1872, if the contingency of a contract is dependent upon the future conduct of a person then the event shall be deemed to be void when such person does an act which makes it impossible for the event to take place.
Illustration
(a) A agrees to pay B a sum of Rs. 1 Lakh if B marries C. However, C marries D. The marriage between B and C must now be deemed to be impossible although it is possible that D may die in future and C may afterwards marry B.
4. Contracts contingent on happening of a specific event within the fixed time period-
Section 35 (paragraph 1) - When contracts become void, which are contingent on happening of specified event within fixed time .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.[8]
Under Section 35 (paragraph 1) of the Indian Contract Act, 1872, when for a contingent contract if a time period is fixed for the occurrence of an uncertain event then the contingent contract can only be enforced when the event takes place within the fixed time period. If the time lapses and event does not take place then the contract is void. The contract is also void if the occurrence of the event becomes impossible before the fixed time.
Illustration
(a) A agrees to pay B a certain sum of money if a certain train returns before 27th January 2015. The contract shall be enforceable if the train returns within the fixed time period and becomes void if the fixed time period lapses and the train doesn't return back.
(b) A agrees to pay B a sum of Rs. 40,000 if the cargo ship returns within six months. But the cargo ship returns a month later after the time has lapsed. The contract has become void.
5. Contracts contingent on not happening of a specific event within the fixed time period-
Section 35 (paragraph 2) - When contracts may be enforced, which are contingent on specified event not happening within fixed time .Contingent contracts to do or not to do anything if a specified uncertain event does not happen within a fixed time may be enforced by law when the time fixed has expired, and such event has not happened, or,
before the time fixed has expired, if it becomes certain that such event will not happen.[9]
Under Section 35 (paragraph 2) of the Indian Contract Act, 1872, when for a contingent contract if a time period is fixed for the non- occurrence of an uncertain future event then the contingent contract can be enforced when the event does not take place when the fixed time period has lapsed, or, before the expiration of time period fixed and it becomes certain that event will not take place.
Illustrations
(a) A agrees to pay B a sum of Rs. 25,000 if certain stock is not delivered within a year. The contract can be enforced if the stock is not delivered within the year, and will become void if the stock is delivered within the year.
6. Agreements contingent on impossible event to be void-
Section 36. Agreements contingent on impossible events, 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.[10]
Under Section 36 of the Indian Contract Act, 1872, if the contingency of a contract is dependent on the occurrence of an impossible event then the contingent contract is deemed to be void notwithstanding if the parties to the agreement has known or not about the impossibility of the event at the time when the agreement is made.
Illustrations
(a) A agrees to pay B Rs.1,500 if B will marry C,the cousin of A. But C was already dead at the time when the agreement was made. The agreement shall be void.
A agrees to pay B Rs. 500 if two parallel lines can intersect at any point. The agreement shall be void due to impossibility of the event.
[1] Indian Contract Act, 1872- Section 31. "Contingent Contract" defined [2] Indian Contract Act, 1872 - Section 31 [3] Contract-I by Dr. R.K. Bangia [4] Chandulal Harjivandas, Jamnagar vs. Commissioner Of Income-Tax 1967 SCR (1) 921 [5] Indian Contract Act, 1872 - Section 32. Enforcement of contracts contingent on an event happening [6] Indian Contract Act, 1872 - Section 33. Enforcement of contracts contingent on an event not happening [7] Indian Contract Act, 1872 - Section 34. When an event on which a contract s contingent to be deemed impossible, if it is the future conduct of a living person [8] Indian Contract Act, 1872 - Section 35 - When contracts become void, which are contingent on happening of specified event within fixed time. [9] Indian Contract Act, 1872 - Section 35(paragraph 2) - When contracts may be enforced, which are contingent on specified events not happening within a fixed time. [10] Indian Contract Act, 1872 - Section 36. Agreements contingent on impossible events, void.
This article is written by Saakshi Shrikant Kumar of Parul Institute Of Law, Parul University.