Contingent Contract | 13 Sep 2023

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.