Introduction

• A contract is an agreement signed by two parties that is enforceable by law. But to make it more interesting, the terms and conditions in a contract are modified according to one’s benefit. One of such contracts is known as a contingent contract.
• The term contingent means an act that depends on the happening or non-happening of another act in the future.
• A contingent contract is a contract whose validity depends on an uncertain event in the future.
• For example, A agrees to pay Rs. 30,000 to B, only if B tops his final-year exams. Now, this is a contingent contract as B may or may not succeed in his exams.

Concept of Contingent Contract

• Section 31 of Indian Contract Act, 1872 (ICA): “Contingent contract” defined. - 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.
  • Illustration: A contracts to pay B Rs. 10,000 if B’s house is burnt. This is a contingent contract.
• 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.
  • Illustrations:
    • (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 contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.

Legal Provisions

• 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.
  • Illustration: 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.
• Section 34: When event on which 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.
  • Illustration: A agrees to pay B a sum of money if B marries C, however, 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.
• Section 35: 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.
  • 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.
  • Illustrations:
    • (a) 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.
    • (b) 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.
• Section 36: Agreements contingent on impossible event 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.
  • 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 the agreement. The agreement is void.

Essentials of Contingent contract

• There must be a contract between the parties.
• The contract must be to do or not to do something.
• The performance of the contract depends upon the happening or not happening of some future event.
• The happening of event must be uncertain at the time of the agreement.
• If the event becomes impossible, the contract will become a void contract.

Case laws

• Nemi Chand and Ors. v. Harak Chand and Ors. (1965):
  • It was observed by the Rajasthan High Court that Section 32 of the Indian Contract Act, 1872 (ICA) states that a contingent contract to do or not do anything depends on the happening of an uncertain future event and till then the contract cannot be enforced. This fact is true.
  • However, the party who claims that the contract shall be void as the event has become impossible should try the matter and file a plea, not only on the question of law but also on the question of fact.
  • If the party does not want to try the matter, then it is not the responsibility of the Courts to consider the case suo moto.
• Chandulal Harjivandas v. CIT(1967):
  • In this case, it was held by the Supreme Court that all contracts of insurance and indemnity are contingent.
• Frost v. Knight (1872):
  • The defendant promised to marry the plaintiff on the death of his father. While the father was still alive, he married another woman. It was held by the English Court that it had become impossible that he should marry the plaintiff and she was entitled to sue him for the breach of contract.

Conclusion

For a contingent contract, there is a certain event which needs to be fulfilled. The terms of these contract are certain and depend on the occurrence or non-occurrence of a future event. There are many types of contingent contracts are being used by Insurance companies so that they can earn profit and also, help the people with the happening or non-happening of an uncertain event. Life insurance policies and contracts of Indemnity are examples of contingent contracts.