What is Contingent Contract? Discuss the Rules Relating to such Contracts.
Section 31 of the Contract Act defines the 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. Illustration: A contract to pay B Rs. 60,000 if B’s house is burnt. This is a contingent contract. A contingent contract is a conditional contract in nature. When the performance of a contract becomes due only after the happening or non happening of some uncertain event, such a contract is known as a contingent contract.
Essentials of a contingent contract
- There must he a valid contract: The first requirement is that there must be a valid contract between the parties. It must fulfill all the essential requirements of a valid contract.
- The performance of such a contract must depend on happening or non happening of some future event.
- The event must be uncertain: The event upon which the performance of the contract depends must be an uncertain event.
- The event must be collateral i.e., incidental contract: The event upon which the performance depends should not form part of reciprocal promises which constitute a contract. The event should be independent or ancillary to the contract.
- The Contingent event must not be at the mere will and pleasure of the promisor: For instance, if A promise to pay B Rs. 20,000 if he so choose, it is not a contingent contract [In fact, it is not a contract at all].
Rules regarding Contingent Contracts (Sections 32-36): The rules regarding enforcement of contingent contracts are:
Contingent contract dependent on the happening of a future uncertain event: Contingent contract to do or not to do anything, if an uncertain future event happens,, cannot be enforced unless and until that event has happened. If the event becomes impossible, such contract becomes void. Examples: A makes a contract with B to buy B’s horse if A survives C. This contract cannot be enforced unless C dies in A’s life time.
Contingent contract dependent on the non happening of a future uncertain event: When a contract is dependent upon the non happening of a future event, it can be enforced only when that event becomes impossible, and not before. Example: 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.
Event linked with human conduct: If a contract is contingent as to how 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.
Contract contingent upon happening of a specified event within a fixed time: Contingent contract to do or not to do anything if a specified uncertain event happens within a fixed time, becomes void, if at the expiration of the time fixed, such event has not happened, or if before the time fixed, such event becomes impossible.
Contracts contingent upon the non happening of a specified event within a 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 it will not happen.
Agreements contingent upon an impossible event: 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 when it is made.