Indian Contract Act 1872: Contingent Contracts

Concept of Contingent Contracts

Section 31 of the Indian Contract 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.

Thus it is a contract, the performance of which is dependent upon, the happening or non-happening of an uncertain event, collateral to such contract.
A contracts to indemnify B upto ₹20,000, in consideration of B paying ₹1,000 annual premium, if B's factory is burnt. This is a contingent Contract.

Any ordinary contract can be changed into a contingent contract if its performance is made dependent upon happening or non-happening of an uncertain event, collateral to such contract.
For Example, the following are the contingent contracts:

• A contracts to sell B 10 bales of cotton for ₹20,000, if the ship by which they are coming returns safely.
• A promises to give a loan of  ₹1,000 to B, if he is elected the president of a particular association.
• A promises to pay ₹50,000 to B if a certain ship does not return, of course after charging a usual premium. 

 

 

 

 Essentials of Contingent Contract 

1. The performance of such a contract depends upon happening or non-happening of some future uncertain event.
2. The future uncertain event is collateral, i.e., incidental to the contract. 

Rules regarding the performance of Contingent Contracts

Sections 32 – 36 of the Indian Contract Act, 1872, list certain rules for the performance of a contingent contract which are discussed below:

1. 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. (Section 32).
2. 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 even become impossible, and not before (Section 33). 
3. If a contract is contingent upon how a person will act at an unspecified time, the event shall be considered to become impossible when such a person does anything which renders it impossible that he should so act without any definite time, or otherwise than under further contingencies (Section 34).
4. Contingent Contracts 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 [Section 35 (1)].
5. 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 [Section 35 (2)]. 
6. Contingent Contracts to do or not to do anything, if an impossible event happens, are void, whether the impossiblity of the event is known or not to the parties to the agreement at the time when it is made (Section 36).