CONTINGENT CONTRACT

PRESENTED BYIQRA AFSAR

MEANING

Contingent : Something possible, or liable, but not
certain, to occur; incidental. Therefore is Dependent for effect on something that may or may not occur

Contract: The agreement of two or more persons, upon a
sufficient consideration or cause, to do, or to abstain from doing, some act.

WHAT IS A CONTINGENT CONTRACT?

According to Section 31 of the Indian Contract Act 1872 “ 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”.

When the performance of a contract is not immediately due but it becomes so only after the happening or non-happening of some contingency (i.e., some uncertain event) it is known as Contingent Contract.

X contracts to indemnify Y up to Rs 20000, in consideration of Y paying Rs 1000 annual
premium, if Y‟s factory is burnt. This is a contingent contract.

CONT….
Thus, it is a contract, the performance of which is dependent upon, the happening or non-happening of an uncertain event, collateral to such contract.  Contingent contracts are also known as, „Conditional Contract‟.

If the event becomes impossible, such contracts becomes

void • The contract of insurance, contract of indemnity and guarantee are the examples of contingent contract.

COLLATERAL EVENT

„A Collateral Event‟ means an event which is “neither a

performance directly promised as part of the contract, nor the whole consideration for a promise”. It is an event which does not form part of consideration of the contract, and is independent of it. For example, Steve contracts to pay Rs 50000 to Edward, a contractor, for constructing a building, provided the construction is approved by the particular government organization.

EXAMPLES OF CONTINGENT CONTRACT
Krishna Contracts with Ram that he will give 1 crore rupees if rains fall on 31st December... held it is based on future whether it happens or may not happen.  John promises to give a loan of Rs.10000 to Bill, if he is elected the president of a particular association.  Alex contracts to sell Smith 10 bales of cotton ,if the truck by which they are coming returns safely.

CONTRACT
C O N D I T O N A L

CONTINGENT CONTRACT

Collateral Event

ESSENTIAL FEATURES OF CONTINGENT CONTRACTS
There should be existence of a contingency; happening or non-happening of some event in future.  Its performance depends upon the uncertainty of happening or non-happening in future of some event  The event must be collateral, i.e., incidental to the contract.  Contingency must be uncertain.

CONT…
The contingent event should not be mere will of the promisor.  The event must be an act of the party.  There must be a valid contract.

ENFORCEMENT OF THE CONTINGENT CONTRACTS
The following are the rules governing the enforcement of the various kinds of contingent contracts.


 


Contracts contingent on an event happening Contracts contingent on the event not happening Contracts contingent on the future conduct of a living person Contracts contingent on happening of specified event within fixed time Contracts contingent on not happening of specified event within a fixed time Agreements contingent on impossible event

ENFORCEMENT OF CONTRACTS CONTINGENT ON AN EVENT HAPPENING .
According to Sec. 32, "Contingent contracts to door 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".

EXAMPLES
Alex makes a contract with Bob to buy Bob's horse if Alex survives Charlie. This contract cannot be enforced by law unless and until Charlie dies in Alex's life time.

Alex makes a contract with Bob to sell a house to B at a specified price, if Charlie to whom the house has been offered, refuses to buy it. The contract cannot be enforced by law unless and until Charlie refuses to buy the house.

Alex contracts to pay Bob a sum of money when Bob marries Jane, dies without being married to Bob. The contract become void.

ENFORCEMENT OF CONTRACTS CONTINGENT ON AN EVENT NOT HAPPENING
According to Sec. 33, "Contingent contracts to door not to do anything if any uncertain future event does not happen, can be enforced when the happening of that event becomes impossible and not before".

EX AMPLE

A agrees to pay B a sum of money if a certain cargo plane does not return. The plane crashes on its way. The contract can be enforced when the plane gets crashed. Because when the plane crashes the event becomes impossible as the plane can never return. Thus enforceability depends upon the impossibility of the contingent event. Until the event becomes impossible, the contract cannot be enforced

WHEN EVENT TO BE DEEMED IMPOSSIBLE
According to Sec. 34, "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".

EX AMPLE

A agrees to pay B a sum of money if B‟s son S marries his daughter C. S marries D. The marriage of S to C must now be considered impossible, although it is possible that D may die and that S may afterwards marry C.

ENFORCEMENT THE HAPPENING OF AN EVENT WITHIN FIXED TIME

According to Sec. 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".

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

THE NON-HAPPENING OF AN EVENT WITHIN A FIXED TIME
According to Sec. 35, "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".

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

AGREEMENT CONTINGENT ON IMPOSSIBLE EVENTS VOID
According to Sec. 36, "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".

EXAMPLES

A agrees to pay B Rs.1,000 if two straight lines should enclose a space. The agreement is void Sam agrees to give Sim his house, if Sim proves that earth is actually flat in shape.

CONTINGENT CONTRACT AND WAGERING CONTRACT

A contingent contract is a contract to do or not to do something if some uncertain event collateral to such contract does or does not happen. The happening of event is uncertain; but if it happens there arises a contract. Eg. Contract of insurance. A wagering contract means a bet. It is about happening or non-happening of an event with mutual chance of profit or loss. SIMILARITY : Both contingent contract and wager depends on happening of future events which must be uncertain at the time of contract

WAGERING CONTRACT ESSENTIALS:
   

It consists of reciprocal of promises It is of contingent in nature. It is a void contract. The future event is the sole dependent of the contract.

Example: P and Q enter into an agreement that if Australia‟s team wins the test match, P will pay Rs. 100 and if it loses Q will pay Rs. 100 to P

DIFFERENCE BETWEEN CONTINGENT CONTRACTS AND WAGERING AGREEMENTS CONTINGENT WAGERING BASIS
CONTRACT Mutual Promise
The contract need not contain any mutual promises.
In a contingent contract, the future event is merely collateral or incidental to the contract. In a contingent contract, parties do have some other interest in the subject matter. They are interested in the occurrence or non-occurrence of the event.

CONTRACT
The contract is bound by mutual and reciprocal promises.
In a wagering agreement the future event is the sole determining factor of the contract In wagering agreement, the parties to the agreement have no other interests in the subject matter of the agreement, except for the stake

Future Event

Interest in the subject matter

Power Over The Uncertain Event

The uncertain event may be within the power of one of the parties.

The uncertain event is beyond the power of both the parties.

Validity

These are valid agreements.
All contingent contracts are not of a wagering nature, because all the contingent contracts are not void

These are void
agreements. All wagering agreements are also contingent contracts because they are dependent on uncertain event.

Nature

Void Agreement

Contingent contract is not Wagers are void. void unless it is dependent on the occurrence of an impossible event

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