CONTINGENT CONTRACT
Sec 1 to 36 of the Indian Contract Act 1872
CONTENTS
• What is a Contingent Contract?
• Essential Characteristics of Contingent Contract
• Rules Regarding Contingent Contract
• Difference Between wagering and Contingent Agreement
WHAT IS A CONTINGENT CONTRACT?
BASING ON THE PRESENCE AND ABSENCE
OF CONDITIONS, CONTRACTS CAN BE
TWO TYPES
ABSOLUTE CONTRACT CONTINGENT CONTRACT
• In case where there is condition, then such contract is
• In case where there is no
called Contingent Contract.
condition, it is called
Absolute Contract. • Contract means Conditional Contract. When imposed
and condition is fulfilled, the Contingent Contract
• As there is no condition, becomes valid and then parties have to perform their
obligations.
absolute contract is to be
performed under all • If imposed and Condition is not fulfilled, the Contingent
circumstances. Contract become Void and then it need not be
performed. So Contingent Contract is to be performed
under some circumstances only.
EXAMPLE
There is a Contract between A and B according to which A
has to sell his goods which are in voyage, to B if the ship
reaches the harbor safely.
Here condition can be seen and it is Contingent Contract. All
indemnity contracts, guarantee contracts and insurance
contracts are Contingent Contract
DEFINATION BY SECTION 31
Contingent Contract is a contract in which a promise is
conditional and the contract shall be perform only on the
happening or not happening of some future uncertain event.
Section 31 of the Contract Act defines a contingent contracts
as “ A contract to do or not to do something, if some event,
collateral to such contract does or does not happen.”
Eg : A contracts to pay B Rs.10,000 if B’s house is burnt. This is a
contingent contract.
ESSENTIAL CHARACTERISTICS
• There should be existence of a contingency; happening or
non-happening of some event in future.
• Contingency must be uncertain.
• The event must be collateral, incidental to the contract.
RULES REGARDING CONTINGENT CONTRACT
Rule 1: Contracts Contingent on the Happening of an Event
• Section 32 provides that contingent contracts to do or not to
do anything if any 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
• Thus, Promisor will not be liable to perform the promise
until the certain event has happened
Examples
• Raj makes a contract with Hari to buy to buy hari’s house if
Shyam dies before Raj. This contract cannot be enforced till
the death of Shyam
• Mohit makes a contract with Shiv to sell a horse to shiv at a
specified price, if ajay, to whom the horse has been offered,
refuses to buy him. The Contract cannot be enforced by law
unless and until ajay refuses to buy the horse
• Ravi contracts to pay nitin a sum of money when nitin
marries anita. Anita dies without being married to nitin. The
contract becomes void
Rule 2 : Contract Dependent on the non-happening of an
Event
• Section 33 provides contingent contracts to do or not to do
anything if any uncertain future event does not happen can
be enforced when the happening of the event becomes
impossible and not before
• Contact can be enforced only when happening of the event
becomes impossible
Examples
• Rohit agrees to pay Nikhil a sum of money if a certain ship
does not return. The ship is sunk The contract can only be
enforced when the ship sinks and not before
Rule 3: Contract Contingent upon the future conduct of a
living person
• According to section 34, if the future contingent event
consists of how a person will act at an unspecified time, that
event shall be considered to have become impossible if such
person does anything which renders it impossible that he
should so act within any definite time or otherwise than
under further contingencies
• The Contract Becomes Void when such person does
anything to make the event impossible
Examples
• Mahesh agrees to pay sachin a sum of money if Sachin
marries neha. Neha marries prasoon. The marriage of
sachin to neha must now be considered impossible
although it is possible that prasoon may die and neha may
afterwards marry sachin.
Rule-4:
• Section 35-Contingent contract to do or not to do anything, if
a specified uncertain event does not happen within a fixed
time, may be enforced if the event does not happen or its
happening become impossible before the expiry of that
time.
• Manish will pay aman Rs 4000 if a certain ship does not
return within a year. The contract may be enforced if the
ship does not returns within a year or if the ship is burnt
within the year.
• Section 35-Contingent contract to do or
not to do anything, if a specified
uncertain event happens within a
fixed time, become void if the event
does not happen or its happening
become impossible before the expiry
of that time.
• Ramesh promises to pay Suresh a
certain sum of money if Train will
arrive at its scheduled time . The
contract may be enforced if train
arrives at correct time, and becomes
void if the train get delayed or doesn’t
arrived at all.
Rule-5
• Contingent agreements to do or not to do anything, if an
impossible event happens, are void, whether or not the fact
is known to parties (Section 36).
• Aman agrees to pay rs 1000 to vinay if two straight line
should enclose a space. The agreement is void.
Example
• Nitin agree to pay 1000 to manish if manish will marry Nitin
daughter manju. Manju was dead at the time of agreement.
The agreement is void.
Contingent Contract and Wagering Agreement
How do they Differ?
“All Contracts are an Agreement
but all Agreements are not
Contracts”
Wagering Agreement
• Literally, the word wager means ‘a bet ; something to be lost or
won on the result of a doubtful issue’.
• It is a promise to give money or money’s worth upon the
determination or ascertainment of an uncertain event.
• The section does not define ‘wager.’ Section 30 states that,
“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.”
For Instance
• Say If A and B mutually agrees that If It rains today, A will
pay B Rs. 100 and If It does not rain, B will pay A Rs. 100.
• It is essential to a Wagering Contract that each party under
it may either win or lose depending on the issue of the
event and remaining uncertain until that issue is known.
A Contract is Wager If ?
• The event is uncertain, not only because it is a future event
but because it is not yet known to the parties.
• Secondly, the parties must have no interest in the event’s
happening or non-happening except winning or losing of
the bet laid between them.
• Note : Wager Agreements are considered as illegal in the
states of Maharashtra and Gujarat.
Wagering Agreement v/s Contingent
Contracts.
WAGERING AGREEMENT CONTINGENT CONTRACTS
There is a Reciprocal Promise. There is no Reciprocal Promise.
It Is a void Contract. It is a valid contract.
Future Event is Essential to the Future Contract is Collateral to the
Contract. Contract.
It is always of a Contingent Nature. It may not be of Wagering Nature.
Parties have no Interest in the Parties may have interest in the
Subject Matter. Subject Matter.
Special Cases
• Commercial Transactions.
• Lotteries.
• Competition Prices.
• Insurance Contracts.
