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What are Contingent Contracts? State the rules regarding enforcement of such contracts.

What are Contingent Contracts? State the rules regarding enforcement of such contracts.

Owlgen
Course: B.Com

1 Answer

According to Section 31 of the Indian Contract Act, 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. For example, insurance contracts.

For example:
  • A makes a contract to pay B Rs. 10,000 if B’s house is burnt. This is a contingent contract.
  • A promises to pay B Rs. 1 crore if a certain ship does not return within a year.
Essentials of a Contingent Contract:
  • The performance is dependent on the happening or non happening of some event.
  • Such dependent event must be collateral to the contract.
  • The event must be uncertain.

Rules regarding the enforcement of contingent contracts:

Contracts contingent upon the happening of a future uncertain event cannot be enforced by law, until the event actually happens. For example: A makes a contract with B to buy B’s horse if A survives C. This contract is not enforceable by law unless C dies in A’s life time.

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Contracts contingent upon the non-happening of a certain future event can be enforced when the happening of that event becomes impossible however not before. For example: A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can lie enforced when the ship sinks.

If a contract is contingent upon how a person will act at an unspecified time, the event is considered to become impossible when such person does anything, that renders it impossible that he should no act within any definite time For example: A agrees to pay B a sum of money if B marries C. But C marries D. The marriage of B and C is to be considered impossible, although it is possible that D may D and that C may afterwards marry B.

Contracts contingent upon the happening of an uncertain specified event within a fixed time becomes void, if at the expiration of the fixed time, such event has not happened or if, before the fixed time such event becomes impossible. For 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 a year, and becomes void if the ship is burnt within the year.

Contracts contingent upon the non-happening of a specified event within a fixed time may be enforced by law when the fixed time has expired. For 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.

Contingent agreement 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. For example: A agrees to pay B Rs. 1, 000 if two parallel straight lines should enclose a space. This agreement is void.

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May 16, 2019
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