109 THE INDIAN CONTRACT ACT, 1872 1.
109
UNIT – 6: CONTINGENT AND QUASI CONTRACTS
LEARNING OUTCOMES
After studying this unit, you would be able to understand-
Have clarity about the basic characteristics of ‘Contingent contract’ and ‘Quasi-
contract’ so that you are able to distinguish between a contract of any of these
types and a simple contract.
Be familiar with the rules relating to enforcement of these in order to gain an
understanding of rights and obligations of the parties to the contract.
UNIT OVERVIEW
Contingent
Quasi-Contracts
Contracts
Rules Relating to
Cases deemed as
Enforcement of
Quasi-Contracts
Contingent Contracts
Difference between
Contingent &
Wagering Contract
6.1 CONTINGENT CONTRACTS
In this unit, we shall briefly examine what is called a ‘contingent contract’, its essentials and the rules regarding
enforcement of this type of contracts. The Contract Act recognises certain cases in which an obligation is created
without a contract. Such obligations arise out of certain relations which cannot be called as contracts in the strict
sense. There is no offer, no acceptance, no consensus ad idem and in fact neither agreement nor promise and
yet the law imposes an obligation on one party and confers a right in favour of the other. We shall have a look on
these cases of ‘Quasi-contracts’.
© The Institute of Chartered Accountants of India
1.110 BUSINESS LAWS
A contract may be absolute or a contingent. An Absolute contract is one where the promisor undertakes to perform
the contract in any event without any condition.
Definition of ‘Contingent Contract’ (Section 31)
“A contract to do or not to do something, if some event, collateral to such contract, does or does not
happen”.
Contracts of Insurance, indemnity and guarantee fall under this category.
Example 1: A contracts to pay B ` 1,00,000 if B’s house is burnt. This is a contingent contract.
Example 2: A makes a contract with B to buy his house for ` 5,00,000 if he is able to secure to bank loan for
that amount. The contract is contingent contract.
Meaning of collateral Event: Pollock and Mulla defined collateral event as “an event which is neither a
performance directly promised as part of the contract, nor the whole of the consideration for a promise”.
Example 3: A contracts to pay B ` 100,000 if B’s house is burnt. This is a contingent contract. Here the burning
of the B’s house is neither a performance promised as part of the contract nor it is the consideration obtained
from B. The liability of A arises only on the happening of the collateral event.
Example 4: A agrees to transfer his property to B if her wife C dies. This is a contingent contract because the
property can be transferred only when C dies.
Essentials of a contingent contract
(a) The performance of a contingent contract would depend upon the happening or non-happening
of some event or condition. The condition may be precedent or subsequent.
Example 5: ‘A’ promises to pay ` 50,000 to ‘B’ if it rains on first of the next month.
(b) The event referred to as collateral to the contract. The event is not part of the contract. The event
should be neither performance promised nor a consideration for a promise.
Thus (i) where A agrees to deliver 100 bags of wheat and B agrees to pay the price only afterwards, the
contract is a conditional contract and not contingent; because the event on which B’s obligation is made
to depend is part of the promise itself and not a collateral event. (ii) Similarly, where A promises to pay
B ` 1,00,000 if he marries C, it is not a contingent contract. (iii) ‘A’ agreed to construct a swimming pool
for ‘B’ for ` 200,000. And ‘B’ agreed to make the payment only on the completion of the swimming pool.
It is not a contingent contract as the event (i.e. construction of the swimming pool) is directly connected
with the contract.
(c) The contingent event should not be a mere ‘will’ of the promisor. The event should be contingent
in addition to being the will of the promisor.
Example 6: If A promises to pay B ` 100,000, if he so chooses, it is not a contingent contract. (In fact,
it is not a contract at all). However, where the event is within the promisor’s will but not merely his will,
it may be contingent contract.
Example 7: If A promises to pay B `100,000 if it rains on 1st April and A leave Delhi for Mumbai on a
particular day, it is a contingent contract, because going to Mumbai is an event no doubt within A’s will,
but raining is not merely his will.
© The Institute of Chartered Accountants of India
111 THE INDIAN CONTRACT ACT, 1872 1.111
(d) The event must be uncertain. Where the event is certain or bound to happen, the contract is due to be
performed, then it is a not contingent contract.
Example 8: ‘A’ agreed to sell his agricultural land to ‘B’ after obtaining the necessary permission from
the collector. As a matter of course, the permission was generally granted on the fulfilment of certain
formalities. It was held that the contract was not a contingent contract as the grant of permission by the
collector was almost a certainty.
6.2 RULES RELATING TO ENFORCEMENT
The rules relating to enforcement of a contingent contract are laid down in sections 32, 33, 34, 35 and 36 of the
Act.
(a) Enforcement of contracts contingent on an event happening: Where a contract identifies happening
of a future contingent event, the contract cannot be enforced until and unless the event ‘happens’. If the
happening of the event becomes impossible, then the contingent contract is void.
Section 32 says that “where a contingent contract is made to do or not to do anything if an uncertain
future event happens, it cannot be enforced by law unless and until that event has happened. If the event
becomes impossible, such contracts become void”.
Example 9: A contracts to pay B a sum of money when B marries C. C dies without being married to B.
The Contract becomes void.
(b) Enforcement of contracts contingent on an event not happening: Where a contingent contract is
made contingent on a non-happening of an event, it can be enforced only when it’s happening becomes
impossible. Section 33 says that “Where a contingent contract is made to do or not do anything if an
uncertain future event does not happen, it can be enforced only when the happening of that event
becomes impossible and not before”.
Example 10: Where ‘P’ agrees to pay ‘Q’ a sum of money if a particular ship does not return, the contract
becomes enforceable only if the ship sinks so that it cannot return.
Where A agrees to pay sum of money to B if certain ship does not return however the ship returns back.
Here the contract becomes void.
(c) A contract would cease to be enforceable if it is contingent upon the conduct of a living person
when that living person does something to make the ‘event’ or ‘conduct’ as impossible of
happening.
Section 34 says that “if a contract is contingent upon as to how a person will act at an unspecified time,
the event shall be considered to have 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”.
Example 11: Where ‘A’ agrees to pay ‘B’ a sum of money if ‘B’ marries ‘C’. ‘C’ marries ‘D’. This act of
‘C’ has rendered the event of ‘B’ marrying ‘C’ as impossible; it is though possible if there is divorce
between ‘C’ and ‘D’.
© The Institute of Chartered Accountants of India
1.112 BUSINESS LAWS
In Frost V. Knight, the defendant promised to marry the plaintiff on the death of his father. While the
father was still alive, he married another woman. It was held that it had become impossible that he should
marry the plaintiff and she was entitled to sue him for the breach of the contract.
(d) Contingent on happening of specified event within the fixed time: Section 35 says that 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 time fixed, such event has not happened, or if, before the time fixed, such
event becomes impossible.
Example 12: A promises to pay B a sum of money if certain ship returns within a year. The contract may
be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year.
(e) Contingent on specified event not happening within fixed time: Section 35 also says that -
“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”.
Example 13: 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.
(f) Contingent on an impossible event (Section 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 to the
parties to the agreement at the time when it is made.
Example 14: ‘A’ agrees to pay ‘B’ `one lakh if sun rises in the west next morning. This is an impossible
event and hence void.
Example 15: X agrees to pay Y `1,00,000 if two straight lines should enclose a space. The agreement
is void.
Difference between a contingent contract and a wagering contract
Basis of difference Contingent contract Wagering contract
Meaning A contingent contract is a A wagering agreement is a
contract to do or not to do promise to give money or
something with reference to a money’s worth with reference to
collateral event happening or an uncertain event happening or
not happening. not happening.
Reciprocal promises Contingent contract may not A wagering agreement consists
contain reciprocal promises. of reciprocal promises.
Uncertain event In a contingent contract, the In a wagering contract, the
event is collateral. uncertain event is the core
factor.
Nature of contract Contingent contract may not be A wagering agreement is
wagering in nature. essentially contingent in nature.
Interest of contracting parties Contracting parties have The contracting parties have no
interest in the subject matter in interest in the subject matter.
contingent contract.
© The Institute of Chartered Accountants of India
113 THE INDIAN CONTRACT ACT, 1872 1.113
Doctrine of mutuality of lose Contingent contract is not based A wagering contract is a game,
and gain on doctrine of mutuality of lose losing and gaining alone
and gain. matters.
Effect of contract Contingent contract is valid. A wagering agreement is void.
6.3 QUASI CONTRACTS
A valid contract must contain certain essential elements, such as offer and acceptance, capacity to contract,
consideration and free consent. But sometimes the law implies a promise imposing obligations on one party and
conferring right in favour of the other even when there is no offer, no acceptance, no genuine consent, lawful
consideration, etc. and in fact neither agreement nor promise. Such cases are not contract in the strict sense,
but the Court recognises them as relations resembling those of contracts and enforces them as if they were
contracts. Hence the term Quasi –contracts (i.e. resembling a contract). Even in the absence of a contract,
certain social relationships give rise to certain specific obligations to be performed by certain persons. These are
known as quasi contracts as they create same obligations as in the case of regular contract.
Quasi contracts are based on principles of equity, justice and good conscience.
A quasi or constructive contract rest upon the maxims, “No man must grow rich out of another person’s loss”.
Example 16: T, a tradesman, leaves goods at C’s house by mistake. C treats the goods as his own. C is bound
to pay for the goods.
Example 17: A pays some money to B by mistake. It is really due to C. B must refund the money to A.
Example 18: A fruit parcel is delivered under a mistake to R who consumes the fruits thinking them as birthday
present. R must return the parcel or pay for the fruits. Although there is no agreement between R and the true
owner, yet he is bound to pay as the law regards it a Quasi-contract.
These relations are called as quasi-contractual obligations. In India it is also called as ‘certain relation
resembling those created by contracts.
Salient features of quasi contracts:
(a) In the first place, such a right is always a right to money and generally, though not always, to a liquidated
sum of money.
(b) Secondly, it does not arise from any agreement of the parties concerned, but is imposed by the law; and
(c) Thirdly, it is a right which is available not against all the world, but against a particular person or persons
only, so that in this respect it resembles a contractual right.
Cases Deemed as
Quasi - Contracts
Obligation of a
Claims for Payment by person Responsibility Money paid by
necessaries an interested enjoying of finder of mistake or
supplied person benefit of non goods [Section under coercion
[Section 68] [ Section 69] gratuitous act 71] [Section 72]
[Section 70]
© The Institute of Chartered Accountants of India
1.114 BUSINESS LAWS
Under the provisions of the Indian Contract Act, the relationship of quasi contract is deemed to have come to
exist in five different circumstances which we shall presently dilate upon. But it may be noted that in none of
these cases there comes into existence any contract between the parties in the real sense. Due to peculiar
circumstances in which they are placed, the law imposes in each of these cases the contractual liability.
(a) Claim for necessaries supplied to persons incapable of contracting (Section 68): If a person,
incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by
another person with necessaries suited to his condition in life, the person who has furnished such
supplies is entitled to be reimbursed from the property of such incapable person.
Example 19: A supplies B, a lunatic, or a minor, with necessaries suitable to his condition in life. A is
entitled to be reimbursed from B’s property.
To establish his claim, the supplier must prove not only that the goods were supplied to the person who
was minor or a lunatic but also that they were suitable to his actual requirements at the time of the sale
and delivery.
(b) Payment by an interested person (Section 69): A person who is interested in the payment of money
which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the
other.
Example 20: B holds land in Bengal, on a lease granted by A, the zamindar. The revenue payable by A
to the Government being in arrear, his land is advertised for sale by the Government. Under the revenue
law, the consequence of the sale will be the annulment of B’s lease. B, to prevent the sale and the
consequent annulment of his own lease, pays to the government the sum due from A. A is bound to
make good to B the amount so paid.
(c) Obligation of person enjoying benefits of non-gratuitous act (Section 70): In term of section 70 of
the Act “where a person lawfully does anything for another person, or delivers anything to him not
intending to do so gratuitously and such other person enjoys the benefit thereof, the latter is bound to
pay compensation to the former in respect of, or to restore, the thing so done or delivered”.
It thus follows that for a suit to succeed, the plaintiff must prove:
(i) that he had done the act or had delivered the thing lawfully;
(ii) that he did not do so gratuitously; and
(iii) that the other person enjoyed the benefit.
The above can be illustrated by a case law where ‘K’ a government servant was compulsorily retired
by the government. He filed a writ petition and obtained an injunction against the order. He was
reinstated and was paid salary but was given no work and in the meantime government went on appeal.
The appeal was decided in favour of the government and ‘K’ was directed to return the salary paid to
him during the period of reinstatement. [Shyam Lal vs. State of U.P. A.I.R (1968) 130]
Example 21: A, a tradesman, leaves goods at B’s house by mistake. B treats the goods as his own. He
is bound to pay A for them.
(d) Responsibility of finder of goods (Section 71): ‘A person who finds goods belonging to another and
takes them into his custody is subject to same responsibility as if he were a bailee’.
© The Institute of Chartered Accountants of India
115 THE INDIAN CONTRACT ACT, 1872 1.115
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.
In Hollins vs. Howler L. R. & H. L., ‘H’ picked up a diamond on the floor of ‘F’s shop and handed over
the same to ‘F’ to keep till the owner was found. In spite of the best efforts, the true owner could not be
traced. After the lapse of some weeks, ‘H’ tendered to ‘F’ the lawful expenses incurred by him and
requested to return the diamond to him. ‘F’ refused to do so. Held, ‘F’ must return the diamond to ‘H’ as
he was entitled to retain the goods found against everybody except the true owner.
Example 22: ‘P’ a customer in ‘D’s shop puts down a brooch worn on her coat and forgets to pick it up
and one of ‘D’s assistants finds it and puts it in a drawer over the weekend. On Monday, it was discovered
to be missing. ‘D’ was held to be liable in the absence of ordinary care which a prudent man would have
taken.
(e) Money paid by mistake or under coercion (Section 72): “A person to whom money has been paid or
anything delivered by mistake or under coercion, must repay or return it”.
Every kind of payment of money or delivery of goods for every type of ‘mistake’ is recoverable.
[Shivprasad Vs Sirish Chandra A.I.R. 1949 P.C. 297]
Example 23: A payment of municipal tax made under mistaken belief or because of mis-understanding
of the terms of lease can be recovered from municipal authorities. The above law was affirmed by
Supreme Court in cases of Sales tax officer vs. Kanhaiyalal A. I. R. 1959 S. C. 835
Similarly, any money paid by coercion is also recoverable. The word coercion is not necessarily governed
by section 15 of the Act. The word is interpreted to mean and include oppression, extortion, or such
other means [Seth Khanjelek vs National Bank of India].
In a case where ‘T’ was traveling without ticket in a tram car and on checking he was asked to pay `5/-
as penalty to compound transaction. T filed a suit against the corporation for recovery on the ground that
it was extorted from him. The suit was decreed in his favour. [Trikamdas vs. Bombay Municipal
Corporation A. I. R.1954]
In all the above cases the contractual liability arose without any agreement between the parties.
Difference between quasi contracts and contracts
Basis of distinction Quasi- Contract Contract
Essential for the valid contract The essentials for the formation of The essentials for the formation of
a valid contract are absent a valid contract are present
Obligation Imposed by law Created by the consent of the
parties
© The Institute of Chartered Accountants of India
1.116 BUSINESS LAWS
SUMMARY
♦ Contingent Contracts are the contracts, which are conditional on some future event happening or not
happening and are enforceable when the future event or loss occurs. (Section 31)
RULES FOR ENFORCEMENT
(a) If it is contingent on the happening of a future event, it is enforceable when the event happens.
The contract becomes void if the event becomes impossible, or the event does not happen till
the expiry of time fixed for happening of the event.
(b) If it is contingent on a future event not happening. It can be enforced when happening of that
event becomes impossible or it does not happen at the expiry of time fixed for non-happening
of the event.
(c) If the future event is the act of a living person, any conduct of that person which prevents the
event happening within a definite time renders the event impossible.
(d) If the future event is impossible at the time of the contract is made, the contract is void ab initio.
♦ Wagering Contracts are void.
♦ Quasi Contracts arise where obligations are created without a contract. The obligations which they give
rise to are expressly enacted:
(a) If necessaries are supplied to a person who is incapable of contracting, the supplier is entitled
to claim their price from the property of such a person.
(b) A person who is interested in the payment of money which another is bound to pay, and who
therefore pays it, is entitled to be reimbursed by the other.
(c) A person who enjoys the benefit of a non-gratuitous act is bound to make compensation.
(d) A person who finds lost property may retain it subject to the responsibility of a bailee.
(e) If money is paid or goods delivered by mistake or under coercion, the recipient must repay or
make restoration.
TEST YOUR KNOWLEDGE
Multiple Choice Questions
1. A contract dependent on the happening or non-happening of future uncertain event, is
(a) Uncertain contract (b) Contingent contract
(c) Void contract (d) Voidable contract
2. A contingent contract is
(a) Void (b) Voidable
(c) Valid (d) Illegal
© The Institute of Chartered Accountants of India
117 THE INDIAN CONTRACT ACT, 1872 1.117
3. A contingent contract dependent on the happening of future uncertain even can be enforced when the
event
(a) happens (b) becomes impossible
(c) does not happen (d) either of these
4. A agrees to pay ` One lakh to B if he brings on earth a star from sky. This is a contingent contract and
(a) Illegal (b) Valid
(c) Voidable (d) Void
5. Which of the following is not a contingent contract:
(a) A promise to pay B if he repairs his scooter.
(b) A promise to pay B ` 10,000 if B’s scooter is stolen.
(c) A promise to pay B ` 10,000 if B’s burnt his hands.
(d) A promise to pay B ` 10,000 if it rains on first of the next month.
6. Which of the following statements regarding Quasi-contracts is incorrect:
(a) It resembles a contract
(b) It is imposed by law
(c) It is based on the doctrine of unjust enrichment
(d) It is voluntarily created
7. For a contingent contract the event must be:
(a) Certain (b) Uncertain
(c) Independent (d) Uncertain and collateral
8. Which one of the following is not a characteristic of a contingent contract?
(a) Performance depends upon a future event
(b) The event must be uncertain
(c) The event must be collateral to the contract
(d) There must be reciprocal promises
9. Wagering contracts are:
(a) Void (b) Voidable
(c) Valid (d) Illegal
10. A contract of insurance is:
(a) Wagering contract (b) unilateral contract
(c) Quasi contract (d) contingent contract
© The Institute of Chartered Accountants of India
1.118 BUSINESS LAWS
11. Finder of goods should take care of goods as
(a) bailee (b) owner
(c) insurer (d) custodian
12. A swiggy man wrongly delivered the food to Mr. Ishaan. Ishaan who took the delivery ate the food
immediately. The swiggy boy returned soon once he got information about wrong delivery. Ishaan should
make the payment as his case is deemed to be a quasi-contract under:
(a) Claim for necessaries supplied to persons incapable of contracting
(b) responsibility of finder of goods
(c) Payment by an interest person
(d) obligation of person enjoying benefits under non-gratuitous act
Answers to MCQs
1. (b) 2. (c) 3. (a) 4. (d) 5. (a)
6. (d) 7. (d) 8. (d) 9. (a) 10. (d)
11. (a) 12. (d)
Descriptive Questions
1. Explain the-term ‘Quasi Contracts’ and state their characteristics.
2. X, a minor was studying in M.Com. in a college. On 1st July, 2019 he took a loan of ` 1,00,000 from B
for payment of his college fees and to purchase books and agreed to repay by 31st December, 2019. X
possesses assets worth ` 9 lakhs. On due date, X fails to pay back the loan to B. B now wants to
recover the loan from X out of his (X’s) assets. Referring to the provisions of Indian Contract Act, 1872
decide whether B would succeed.
3. P left his carriage on D’s premises. Landlord of D seized the carriage against the rent due from D. P
paid the rent and got his carriage released. Can P recover the amount from D?
Answers to Descriptive Questions
1. Quasi Contracts: Under certain special circumstances, obligation resembling those created by a
contract are imposed by law although the parties have never entered into a contract. Such obligations
imposed by law are referred to as ‘Quasi-contracts’. Such a contract resembles with a contract so far as
result or effect is concerned but it has little or no affinity with a contract in respect of mode of creation.
These contracts are based on the doctrine that a person shall not be allowed to enrich himself unjustly
at the expense of another. The salient features of a quasi-contract are:
1. It does not arise from any agreement of the parties concerned but is imposed by law.
2. Duty and not promise is the basis of such contract.
3. The right under it is always a right to money and generally though not always to a liquidated
sum of money.
© The Institute of Chartered Accountants of India
119 THE INDIAN CONTRACT ACT, 1872 1.119
4. Such a right is available against specific person(s) and not against the whole world.
5. A suit for its breach may be filed in the same way as in case of a complete contract.
2. Yes, B can proceed against the assets of X. According to section 68 of Indian Contract Act, 1872, if a
person, incapable of entering into a contract, or any one whom he is legally bound to support, is supplied
by another person with necessaries suited to his condition in life, the person who has furnished such
supplies is entitled to be reimbursed from the property of such incapable person.
Since the loan given to X is for the necessaries suited to the conditions in life of the minor, his assets
can be sued to reimburse B.
3. Yes, P can recover the amount from D. Section 69 states a person who is interested in the payment of
money which another person is bound by law to pay, and who therefore pays it, is entitled to get it
reimbursed by the other.
In the present case, D was lawfully bound to pay rent. P was interested in making the payment to D’s
landlord as his carriage was seized by him. Hence being an interested party P made the payment and
can recover the same from D.
© The Institute of Chartered Accountants of India
