The contingent contract meaning in Indian Contract Act can be found under section 31. A contingent contract is also known as a 'Contingency Contract.' Let's see what are contingent contracts and the meaning of contingent contracts. The contingent contracts are provided under chapter III and deal with sections 31 to 36 of the Indian Contract Act, 1872.
Contracts are of different types. Based on the performance and non-performance of the contract, it can be divided into two types i.e. Absolute Contract and Contingent Contract. The absolute contract means a contract promise to perform the contract without any condition. A contingent contract is an agreement that states which actions under certain conditions will result in specific outcomes.
We already covered the Absolute Contract i.e. valid contract and types of contract. Now let's see the contingent contract in detail. The provisions relating to the contingent contract are provided under sections 31 to 36 of the Indian Contract Act, 1872. Let's discuss;
Contingent Contract Definition
What is Contingent Contract? The contingent contract definition has been provided under section 31 of the Indian Contract Act, 1872, the contingent contract means, "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."
The contingent contract is defined as "when two or more parties enter into a contract to do or not to do some event if an event which is collateral to the contract does or does not happen, then it is known as a contingent contract."
In other words, Contingent Contracts means, the contracts where the promise is conditional and based on some happening and non-happening of an uncertain future event, the contract shall perform. The contracts of guarantee, indemnity and insurance etc. are some examples of contingent contracts.
Example: A promised to pay Rs. 5,00,000/- to B if B's house burnt. This is a contingent contract example.
Essentials of Contingent Contract
the essential element and rules of the contingent contract are provided under sections 32 to 36 of the Indian Contract Act, 1872. The essential elements of contingent contracts are as follows;
1. There must be a valid contract to do or not to do something
A contract is contingent when there is a happening or non-happening of a certain event.
Section 32 and 33 of the Act, stated that the enforcement of the contingent contract on the happening or non-happening of certain future events. Here, the contract is valid when it is about performing or non-performing an obligation towards the contract.
Example: A promised B to pay a certain amount if the certain ship does not return. The ship sinks in the ocean. Therefore, the contract can be enforceable in the eye of law.
In the case of Nandkishore Lalbagh v/s New Era Fabrics Pvt. Ltd. 2015, the contract for the sale of land with a company was to be performed only when the employees of the company agreed to sell such land but the change of land was by the appropriate authority. Then non this contingency was fulfilled because there was no approval of employees. Then it was held that the contract was accordingly not allowed to enforce against the seller of the land.
2. Such performance of the contract must be conditional
For making a contingent contract, there must be a condition for the performance of the contract and there must be a performance of certain future events.
And, if the performance of the contract depends on a future event and such future events must be uncertain. But, such an event is certain and sure to happen then such contracts would not be considered contingent contracts.
Example: A promised B to deliver the bike and B promised to pay for it after the delivery of the bike. This is not a contingent contract because future events are certain and sure to happen.
3. The event should be collateral to the contract
It is an important and essential element to the contingent contract that the event should be collateral to the contract that means the future event in the contingent contract should not be a part of the contract, not either in the form of promise and/or in the form of consideration to the contract.
In other words, the future event in the contingent contract the performance of the contract depends upon the happening and non-happening of the uncertain future event should not be a part in the contract, not in the form of consideration and not in the form of a promise to the contract.
Therefore, in the contingent contracts, the happening and/or non-happening of the uncertain future event should be collateral to the contract and should exist in future independently.
Example: A promised B to deliver the bike and B promised to pay for it after the delivery of the bike. This is not a contingent contract because the event i.e. delivery of bike is not collateral to the contract.
4. The event should not belong to the promisor
In the contingent contract, the uncertain future event which is happening or not happening should be independent and the contingency of the event should lie upon the promisor only. It should be a totally futuristic and uncertain event.
Example: A promises to pay B, if B leaves Mumbai and lives in Delhi for 20 days. This is a contingent contract because going to Delhi is dependent upon the B's will and merely on the A's will only.
Conditions for Enforcement of Contingent Contract
The conditions relating to the enforcement of contingent contract are provided under sections 32 to 36 of the Indian Contract Act, 1872. Let's discuss;
1. Enforcement of contingent contract on the happening of an event
As section 32 of the Act, states that "Contingent contracts to do or not to do anything in an uncertain future event happens, cannot be enforced by law unless and until that event has happened. If the event becomes impossible to perform, such contingent contracts are void.
Example: A made promise with B to sell his house for a certain price, to whom the house has been offered, refuses to buy him. The contract cannot be enforced till C refuses to purchase the house.
2. Enforcement of contingent contract on non-happening of an event
As section 33 of the Act, states that "Contingent contracts to do or not to do something if an uncertain future event does not happen, can be enforced when the happening of the future uncertain event becomes impossible to perform and not before that ."
Example: A agrees to pay B if a certain ship does not return. The ship is sunk. The contract is valid when the ship sinks in the ocean.
3. When an event on which the contract is contingent to be deemed impossible to perform if it is the future conduct of a living person
As Section 34 of the Act, states that "If the uncertain future event on which the contract is a contingent is how an individual will perform at unspecified time, the future event shall be considered to become impossible to perform when the individual does something that should so act within the fixed time, or then under further contingencies."
Example: A agrees to pay B if B marries C, But C marries D. The marriage of B to C is impossible to perform, but it is possible when D may die and that C may afterwards marry with B.
4. When contracts become void, which are contingent on happening of specified event within the fixed time
As section 35 (paragraph 1) of the Act, states that "The contingent contracts are to do or not to do something, is a specified uncertain future event happen within the fixed time, and it becomes void, if at the expiration of the time, such event has not happened, or before the time fixed such event becomes impossible to perform."
Example: A promises to pay B if a certain ship returns within a month. The contract can be enforced if the ship returns in a month, and becomes void if the ship is burnt within the month.
5. When contracts become void, which are contingent on happening of specified event within the fixed time
As section 35 (paragraph 2) of the Act, states that "When contracts may be enforced, which are contingent on a specified event not happening within fixed time: Contingent contract tutu 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 if a certain ship does not return within a month. The contract may be enforced if the ship does not return in a month, or is burnt within the month.
6. Agreements contingent on an impossible event void
As section 36 of the Act, states that "The contingent agreement is to do or not to do something if an impossible uncertain future event happens, and it is void whether the impossibility of the event is known or not to the parties to the agreement at the time when it was made."
Example: A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void.
Difference Between Contingent Contract and Wagering Agreement
| Contingent Contract | Wagering Contract |
|---|---|
| Contingent contracts are provided under sections 31 to 36 of the Indian Contract Act, 1872. | Wagering Agreements are provided under section 30 of the Indian Contract Act, 1872. |
| Contingent contracts means, "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." | Wagering agreements means, "Agreements by way of wager are void, and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide by the result of any game or other uncertain event on which any wager is made." |
| Contingent contracts are valid in the eye of law. | Wagering agreements are void in the eye of law. |
| In contingent contracts, may or may not contain reciprocal promises. | In wagering agreements, it contains reciprocal promises. |
| In contingent contracts, the future uncertain event must be collateral to the contract. | In a wagering contract, the future uncertain event is essential to the contract. |
| Contingent contracts are not like wagering. | Wagering agreements are always like a contingency. |
Conclusion
The contingent contracts are used in our daily life and it tells about those contracts where a promise is conditional and on the happening and non-happening of an uncertain future event that the contract shall perform.
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