CONTINGENT CONTRACTS

 CONTINGENT CONTRACTS

What is a contingent contract

According to Section 31, a contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does not happen. When the contract is dependent or conditional upon the happening or non-happening of a certain future event, the contract is contingent. For example, A contracts to pay B Rs. 10,000 if B's house is burnt, this is a contingent contract. (Illustration to Section 31). The payment of the amount is contingent on the happening of a collateral event, i.e., the burning of the house. All contracts of insurance or indemnity aim at payment of money only after a certain event happens, or the loss is caused, and, therefore, they are contingent contracts.

A wagering agreement is also a contingent contract, but that type of contingent contract has been specifically declared to be void by Section 30. A distinction is to be drawn between a contract under which a present obligation is created but performance is postponed to a future date and a contract under which there is no present obligation at all and the obligation is to arise by reason of some condition being complied with or some contingency arising in future.

In Harbaksh Singh Gill v. Ram Ratan, A.I.R. 1988 P & H 60 the vendor agreed to sell his half share in the property in dispute, but the sale deed was to be executed after a month of the partition of the property and separation of his share. The vendor undertook to get his share separated but failed to get that done. It was held that the contract was not a contingent one and the same was, therefore, not frustrated by the vendor's own wrong or failure to get his share separated. The vendee was held entitled to obtain an injunction restraining the vendor from transferring the property to somebody else.

When the performance of the contract is not dependent on the happening of some event collateral to the contract, it is an absolute contract and it must be performed unconditionally.

In a contingent contract, there should be some event collateral to the contract. If the event consists in the performance of the contract itself by one party, it is not a contingent contract. For instance, A announces a 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 the performance of the contract. This contract is not a contingent contract.

Enforcement of contingent contract

The following are the rules governing the enforcement of the various kinds of contingent contracts:

(31) 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.

Illustrations

(a) 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 life-time.

(b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse.

(c) A contracts to pay B a sum of money if B marries C. C dies without being married to B. The contract becomes void.

(32) 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. For example, A agrees to pay B a sum of money if a certain ship does not return. This ship is sunk. The contract can be enforced when the ship sinks.

(33) Contract contingent on 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 impossible that he should so act within any definite time, or otherwise than under future 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.

(34) Contracts 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.

Illustration

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.

(35) Contracts contingent on not happening of specified event within a 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.

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.

(36) Agreements contingent on impossible event

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 is not necessary.

Illustrations

(a) A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void.

(b) A agrees to pay B, 1,000 rupees if B will marry A's daughter C. C was dead at the time of agreement. The agreement is void.

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