Contingent Contract

 CONTINGENT CONTRACTS

By: Robin Pandey                                            Date:18/February/2022

A contract may be absolute or contingent. In case of absolute contract, the parties must perform their reciprocal promises independently of any condition. Accordingly, an absolute contract is one which must be performed and in case of its default by one of the parties, the other party is entitled to a cause of action. On the other hand, if a person binds himself to perform the contract on the happening or non-happening of some event, certain or uncertain, the contract is said to be contingent. Section 31 of the Indian Contract Act defines a contingent contract 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.

The illustration appended to the Section says: "A contracts to pay B Rs. 10,000 if B's house is burnt. This is a contingent contract."

 Contracts stipulating that on the day of redemption of the mortgaged house Y the plaintiff, the defendant would execute the sale deed of the house in plaintiffs favour is a typical illustration of contingent contract within the meaning of Section 31, Ramzan v. Hussaini. Contract of Insurance, indemnity and guarantee are the common examples of contingent Contracts. For example, A gives a loan of Rs. 10,000 to B, and C promises to A that if B does not pay the loan, he (C) would make the payment.

The performance of the contingent contract depends upon the happening or not happening of some event. The event must be uncertain. The event must e collateral to the contract. According to Pollock and Mulla  the words "some event collateral to such contract" mean that "the event is neither a performance directly promised as part of the contract nor, the whole of the consideration for a promise." Therefore, an offer for reward for finding a lost article is merely an offer and not a contingent contract. In such a case, there is no contract at all unless and until the person having knowledge of the offer finds the lost article and brings it to the offerer. Expiry of time is not uncertain. Therefore, a promise to perform a contract after the lapse of time is not contingent contract. Similarly, a clause in a contract as soon as delivered to us is not Contingent event. A wagering agreement is a contingent agreement, but it Is nor Contract as Section 30 declared it void.

If A agrees to pay B a certain sum for doing a particular job after the completion of the job, it is not a contingent contract. On the other hand, where A agrees to pay B a certain sum for doing a specific job on the condition that the job should be certified by the Inspector, the contract in this case is contingent because certification by the Inspector is a collateral event to the contract and not an integral part of the contract.

Rules regarding contingent contracts 

Sections 32 to 36 of the Contract Act has laid down the following rules regarding the performance of contingent contracts: 

(1) Enforcement of contracts contingent on an event happening: According to Section 32, "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. 1f the event becomes inmpossible such contracts become void. “The following illustrations are appended to the Section:

 (a) 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. 

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

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

2) Enforcement of contracts contingent on an event not happening: According to Section 33, 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." 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. 

3)  When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person: Section 34 provides as follows: "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. "A agrees to pay a sum of money if B marries 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”.

4) When Contracts become void which are contingent on happening of specified event within fixed time: According to Section 35, 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) to the Section states: "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 a year, and becomes void if the ship is burnt within the year."

5) When contracts may be enforced which are contingent on specified event not happening within fixed time: Section 35 provides that 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. 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, A or is burnt within the year.

6) Agreements contingent on impossible events void: It is provided in Section 36 that "Contingent contracts to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the events known or not to the parties to the agreement at the time it is made. The following two illustrations are appended to the Section: 

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

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