Contingent Contract

Contingent Contract: Written By Tarleen Kaur

INTRODUCTION

According to Sec. 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”. This contract is dependent on some uncertain future event. The point to be noted is that the uncertain event on the happening of which the contract is conditional must be collateral to the contract and must not form part of the consideration. The condition may be a condition precedent or a condition subsequent.

An agreement is an essential element for a contract. Without agreement, there can be no contract. A proposal when accepted becomes a promise. A promise with consideration forms agreement. An agreement enforceable by law is a contract. All contracts are agreements but all agreements are not contracts. According to Sec. 2(e) of The Indian Contract Act, “Every promise and every set of promises, forming the consideration for each other, is an agreement. According to Sec. 2(h) of The Indian Contract Act, “An agreement enforceable by law is a contract.”

WAGERING AGREEMENTS

Sec. 30 of The Indian Contract Act explains the wagering agreement. According to Sec. 30, “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 the result of any game or other uncertain event on which any wager is made.” These wagering agreements are only based on winning or losing, just for money. There is no real interest in the contract. They are not enforceable by law and thus, void.

Essentials of a Wagering Agreement
  1. Parties have opposite views.
  2. There is chance of gain or loss.
  3. There is no other interest in the contract. (Exception; horse-racing).

CONTINGENT CONTRACTS (Sec. 31 of The Indian Contract Act, 1872)

“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.

For example  

A contract to pay B Rs. 10,000 if  B’s house is burnt. This is a contingent contract.  

In other words, When the contract is dependent or conditional upon the happening or non-happening of a certain future event the contract is contingent. In the above illustration, the payment of the amount is contingent on the happening of a collateral event, i.e. the burning of the house. All the contracts of insurance or indemnity aim at the payment of money only after a certain event happens, or the loss is caused, and, therefore, they are contingent contracts.

Essential features of a Contingent Contract
  1. It is a contract to do or not to do something.
  2. It is dependent upon happening or non-happening of an event.
  3. The event is uncertain.
  4. The event is collateral to contract.

Uncertain future event

In the case of Bashir Ahmed v. Govt. of Andhra Pradesh[1] It was held that the contract was not a contingent one and the plaintiff had a right to enforce the contract. The Supreme Court held that for a contingent contract, it should be necessary that there should be an uncertain future event.

In the case of M.M. Rizvi vs. Subhash Singh[2]The Supreme court gave a redefined definition of a contingent contract. It was held that uncertain future event is an essential element for a contingent contract.

Enforcement of a Contingent Contract

Read Also: What are the Essentials of the Valid Contract in India

  1. Enforcement of contracts contingent on an event happening (Sec. 32 of The Indian Contract Act,1872)

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 becomes void.

  • Enforcement of contracts contingent on an event not happening (Sec.33 of The Indian Contract Act)

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.

  • When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person (Sec. 34 of The Indian Contract Act)

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.

  • When contracts become void, which are contingent on happening of specified event within fixed time (Sec. 35 of The Indian Contract Act,1872)

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.

  • Agreements contingent on impossible event void. ( Sec.36 of The Indian Contract Act,1872)

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.

DIFFERENCE BETWEEN CONTINGENT CONTRACT AND WAGERING AGREEMENT

CONTINGENT CONTRACTWAGERING AGREEMENT
  Contingent contract is defined under Section 31 of The Indian Contract Act,1872.  Wagering agreement is defined under section 30 of The Indian Contract Act,1872.  
  Contingent contract is valid.  Wagering agreement is void.
  According to Section 31, “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.”  According to Section 30, “ 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 the result of any game or other uncertain event on which any wager is made.”
  In contingent contract, we have real interest in the contract.  In wagering agreement, there is no real interest. It is concerned with winning and losing only.
  Contingent contract is to do or not to do something if a certain event does or does not happen.  Wagering agreement, on the other hand, is just for money purposes.

CONCLUSION

A contract is an agreement enforceable by law. For every contract, there should be an agreement which is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object1The agreement should not be declared void hereby to form a contract. Every contingent contract is a contract primarily. Like any other contract, it is also a contract to do or not to do something. It is not, however, an absolute and unconditional one, without any reservations or conditions, which is to be performed under any event. Its performance is dependent on some event’s happening or not happening- contingency.

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent. There must be a valid contract to do or not to do something. The performance of the contract must be conditional. The said event must be collateral to such contracts and should not be at the discretion of the promisor. There are some rules that have to be followed for a contingent contract to be enforceable. For instance, on the happening of an event, on an event not happening and on the event not happening within a specified time. There are some situations when a contingent contract becomes void. Some of them are: the event being impossible, not happening of event within fixed time, agreements contingent on impossible events and on the conduct of a living person.

Though both contingent agreements and wagering contracts both depend upon the future events, but their legal consequences are completely opposite to each other. Contingent contracts are perfectly valid, while wagering agreements are illegal and therefore void in nature.


[1] AIR 1970 SC 1089

[2] AIR 2014 SC 1261

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