Contracts may be absolute or contingent. We have discussed so far the concept of absolute contract; the contingent contract is a matter of study in this topic. Both these contracts are valid and enforceable by law. S. 31 of the Indian Contract Act (hereinafter called ‘the Act) defines a contingent contract as follows.

“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”[2].

The following are the Essentials of a Contingent Contract:-

1) The performance of a contract depends upon the happening or not happening of a future event;

2) The future event is uncertain;

3) The uncertain future event is collateral to the main contact.

Illustrations3

a) ‘A’ contracts to pay ‘B’ Rs.-10,000/-if ‘B’s’ house is burnt. This is a contingent

contract.

b) ‘A’, a master, contracts with ‘B’, his servant. If ‘B’ does any damage, A will not pay

his salary.

c) A makes a contract with B to buy B’s horse if A survives. C is a contingent contract
d) A makes a contract with B to sell a horse to B at a specified price if C, to whom the

horse has already been offered refuses to bring it, is a contingent contract.

e) ‘A’ agrees to pay ‘B’ a sum of money if B marries C, which is a contingent contract.

There is no term ‘contingent contract’ in English and American law; they call it a ‘conditional contract’. A contingent contract is a conditional contract, and the condition is of uncertain nature. A contract which is subject to a certain or an absolute type of condition is not a contingent contract, e.g. a contract to pay a sum of money on the expiry of a particular period or the death of a person is not a contingent contract because the time will certainly expire or the person will definitely die.

When the condition is of an uncertain nature, then only the contract can be regarded as truly contingent, e.g. a contract to pay a sum of money on the destruction of premises by fire is a contingent contract because contingency may or may not happen. From this point of view, all contracts of insurance except certain life insurance are contingent contracts. Therefore, a contingent contract will contemplate a future event. ‘Condition collateral to contract’ means a binding contract exists, but its performance cannot be demanded unless the contemplated event does or does not happen. Thus, the contract of indemnity and insurance are contingent contracts, and a ‘wagering contract’ is also a contingent contract, but it is declared void and hence cannot be enforced. A Contract will be contingent where the happening or non-happening of the contingency depends upon the party’s will, e.g. A agrees to pay B a sum of money if B marries C, is a contingent contract, even though his marriage is within his control.

The condition, which is collateral to the performance of a contract, is generally a condition president (i.e., the main condition). Therefore, it has to be satisfied first, and then performance can be demanded.

II] RULES REGARDING ENFORCEMENT OF CONTINGENT CONTRACTS.

Following are the rules deduced from Ss. 32 to 36 relating to the enforcement of the contingent contracts.

1) Contracts contingent on an event happening in future- when enforceable4 (S. 32):-

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.

Illustration

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 makes a contract with B to sell a horse to B at a specified price if C, to whom

the horse has been offered, refuses to buy it. The contract cannot be enforced by

law unless and until C refuses to buy the horse.

c) A contract to pay B a sum of money when B marries C. C dies without being

married to B. The contract becomes void.

2) Contingent contracts on the happening of a specified event within fixed time5 (First part of S.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 an event has not happened or if, before the time fixed, such event becomes impossible.

Illustration

‘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 burns within the year.

3) Contract Contingent on an event Not Happening-when Enforceable6? (S.33):-

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. In other words, where the performance of a contract depends upon the non-happening of an event, naturally, the parties have to wait till the happening of that event becomes impossible.

Illustration

A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk, and the contract can be enforced when it sinks.

4) Contracts Contingent on a Specified event Not Happening within a Fixed Time7 (Latter part of S. 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 an event has not happened, or before the time fixed has expired, if it becomes certain that such event will not happen.

Illustration

‘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.

5) Events Linked with Human Conduct8 (S. 34):-

If the future event on which the contract is contingent is the way in which a person will act at an unspecified time, the event is to be considered to become impossible when such person does anything which renders it impossible that he should act within any definite time or otherwise than further contingencies.

Illustration

A agrees to pay B a sum of money if B marries C, and 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.

6) Agreement Contingent on Impossible Events Void9 (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 known to the parties to the agreement at the time the agreement is made.

Illustration

a) A agrees to pay ‘B’ Rs.-10,000/- if two straight lines should enclose a space. The agreement is void.
b) A agrees to pay B Rs.-1,000/- if B marries D’s daughter C. C was dead at the time of the agreement; the agreement is void.

III] “Contingent Contract’ and ‘wager10’ distinguished:-

There are six points of distinction between these two, viz.

1) Reciprocal Promises11:-

A wagering agreement consists of reciprocal promises, the performance of which depends upon uncertain future events. In a contingent contract, reciprocal promises are not necessary.

2) Whether Contingent12?

All wagering contracts are contingent, but all contingent contracts are not wagering agreements.

3) Control:-

In a wagering agreement, the uncertain event is beyond the control of both parties, whereas, in a contingent contract, the event may be within the control of one of the parties (If A marries B, B will pay A Rs. 1000. It is within the power of A to marry).

4) Interest of the Party:-

In a wagering agreement, the parties are not interested (apart from the money earned or lost) in the occurrence of the event. In contrast, in a contingent contract, they are very interested.

5) Determining Factor:-

In a wager, the future event is the sole determining factor of the contract, whereas in a contingent contract, it is collateral or incidental.

6) Effect:-

Wagers are void, whereas contingent contracts are valid.

A contingent contract is not void unless it is dependent on an impossible event.

*****

[1] पुढे घडणारे घटनेवर अवलंबून करार [प्रासंगिक करार]

[2] ज्या वेळी करार प्रमाणे एखादि कृती करणे अथवा ना करणे हे कराराशी संबंधित एखाद्या घटनेच्या भविष्यात घड्ण्यावर अथवा न घड्ण्यावर अवलुम्बून असते त्यास घटनावलंबी कारर असे म्हणतात [“प्रासंगिक करार” एक ऐसा करार है जिसमे कुछ करने या न करने का करार, कोई दुसरे घटना के होणे या ना होणे पर आश्रित होता है।]-

3 Illustration a) (above) is only provided by S. 31, rest are provided for better understanding of subject by students.

4 भविष्यत घडणार्या घटनेवर अवलुंबू असणारा करार [भविष्य में होने वाली किसी घटना पर आश्रित होता है[]

5 भविष्यातील विशिष्ट वेळेत घडणाऱ्या घटनेवर करार अवलंबून असल्यास [निश्चित समय के भीतर एक निर्दिष्ट घटना होने पर आश्रित करार।]

6 घटनेच्या न घडण्यावर करार अवलुम्बून असल्यास [घटना के नहीं होने पे आश्रित करार।]

7 घटनेच्या विशिष्ट वेळेत न घड्ण्यावर करार अवलुम्बून असल्यास [एक निर्दिष्ट घटना के समय पर ना होणे पार करार]

8 मानवी कृतीवर करार अवलंबून असल्यास [मानव आचरण से जुड़ी घटना पार आश्रित करार।]

9 घडणे अशक्य असलेल्या घटने संबंधीचा करार हा रद्दबातल असता [असंभव घटनाओं पर आकस्मिक समझौता शून्य है।]

10 पैजेचा अथवा जुगाराचा करार [आकस्मिक अनुबंध’ और ‘दांव]

11 एकमेकांना वचन [परस्पर वचन]

12 घटनावलंबी करार [अनिश्चित घटना पर निर्भर करार]