CONTINGENT CONTRACT

Under Section 31 of the Indian Contract Act, 1872, contingent contracts are defined as follows: “If two or
more parties enter into a contract to do or not do something, if an event which is collateral to the contract
does or does not happen, then it is a contingent contract.”
Example: Peter is a private insurer and enters into a contract with John for fire insurance of John’s house.
According to the terms, Peter agrees to pay John an amount of Rs 5 lakh if his house is burnt against an
annual premium of Rs 5,000. This is a contingent contract.
Essential characteristics
1. The performance must depend upon the happening or non (-) happening of an event.
2. The event must be uncertain, i.e., it may or may not happen. If the event is sure to happen, the contract
is not contingent but an absolute one.
3. The event must be collateral, i.e., incidental to the contract. An event which is “neither a performance
directly promised as part of the contract, nor the whole of the consideration for a promise” is known as
collateral event.
Rules regarding contingent contracts:
1. Contracts contingent on the happening of a future uncertain event: Contingent contracts dependent upon
the happening of an uncertain future event cannot be enforced until the event has happened. If the event
becomes impossible such contracts become void (Sec. 32) Examples: A promises to pay B Rs. 1,000 if
he marries C. C died before the marriage. The contract becomes void.
2. Contracts contingent on the non-happening of a future uncertain event: Contingent contract 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. (Sec. 33) Example: A promise to pay Rs. One lakh to B if
B’s ship does not return. The ship is sunk. The contract can be enforced after the ship is sunk and not
before.
3. Contracts contingent on future conduct of a living person: Where a contract is contingent upon the way
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. (Sec. 34) Example: A agrees to pay B Rs. 10,000 if B
marries C. C marries D. If bigamy is not allowed, then the marriage of B with C must be considered
impossible although it is possible that D may die and that C may afterwards marry B.
4. Contracts contingent on the happening of an event within a fixed time: Contract contingent on the
happening of an event within a fixed time becomes void if such event does not happen or the event
becomes impossible before the time fixed. 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.
5. Contracts contingent on the non-happening of an event within a fixed time: Contracts contingent on the
non-happening of an event within a fixed time may be enforced by law if such event does not happen,
or it becomes impossible before the expiry of fixed time. (Sec. 35). 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.
6. Contract contingent on an 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. (Sec. 36). Examples: A agrees to pay B Rs. 1,000
if two straight parallel lines should cut each other. 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.