What is a Contingent Contract?

A contract can be entered into by parties for the performance or non-

performance of an action or an event. There are primarily two types of
contracts: Absolute Contracts and Contingent Contracts. Let us explain
contingent contracts in detail.

Contingent Contract Meaning

In a contingent contract, the performance of the promisor is dependent
on the fulfillment of certain conditions. These contracts create an
obligation on the promisor only if the conditions collateral to the contract
are met.

Contingent Contract as Per Section 31 of the Indian Contract

Act, 1872
According to the Indian Contract Act, “If two or more parties enter into a
contract to do or not do something if an event which is collateral to the
contract does or does not happen, then it is a contingent contract.”

Insurance contracts, indemnity contracts, and guarantee contracts are

some examples of contingent contracts.

Contingent Contract Example: A promises to pay B a sum of 20

thousand rupees if there is damage to his house from fire. The payment of
the amount is contingent on the house being destroyed by fire. If there is
no fire, B cannot claim the amount from A who is not liable to pay since
the fire that was the collateral condition, did not happen.

What Constitutes Contingent Contracts?

There are certain essential elements of a contingent contract as stated
under section 31 of the Contract Act.
 Depends on the Occurrence or Non-Occurrence of an Event
A contingent contract will be deemed valid only if an event occurs or
does not occur and it is collateral to the contract.
 Contract Performance Must be Conditional
The meaning of a contingent contract is that the conditions
collateral to the contract must be certain to happen in the future.
The presence of a condition is essential for a contract to be
contingent. Section 32 and Section 33 of the Contract Act state that
the enforcement of a contingent contract is subject to the collateral
conditions being fulfilled.

Example: X agrees to employ Z as an employee if he clears the

exams with 85 percent marks or more. X is liable to give the job to Z
only when he meets the condition specified of clearing the exams
with the required percentage.
 The Condition of the Contract must be a Future Event
A contract will be considered a contingent contract only if the event
specified is a future event that may or may not happen.

 The Condition Specified must be Collateral to the Contract

A contingent contract is based on the occurrence or non-occurrence
of an event. This event must be collateral to the contract and not a
part of the consideration mentioned in the contract. The
contingency must be an independent event.

Example: X enters into a contract with Y to pay him 10000 rupees

on the delivery of some books. This is not a contingent contract
since X has an obligation to pay for an event that is part of the
contract and not collateral to it.
 Example: X enters into a contract with Y to pay him 10000 rupees if
the books are delivered to him by Friday. In this case, delivery by
Friday is collateral to the contract and not a part of the
consideration. Hence this is a contingent contract.

 The Event must not Depend on the Mere will of the Promisor
The event must not be influenced only by the will or wish of the
promisor.

Example: X promises to pay a certain sum to Y if Y leaves for Delhi

on 1st June. Going to Delhi is Y’s will but is not an event completely
dependent on his will.

Q1. In What Ways a Contingent Contract is Different from a Wagering

Contract?
Ans: A contingent contract is different from a wagering contract in the
following ways.
 A wagering agreement is a void agreement but a contingent contract
is a valid contract.
 In the wagering contract, the occurrence or non-occurrence of an
event or action forms the premise of the contract but in a
contingent contract, the contingency or the condition is merely
collateral.
 The parties of a wagering contract do not have any interest in the
event/ condition specified in the contract other than it resulting in
the winning or losing of an amount. In a contingent contract, the
parties have an active interest in the occurrence or non-occurrence
of an event.
 All wagering contracts are contingent contracts but not all
contingent contracts include a wager.
Q2. What are the Conditions for the Enforcement of a Contingent
Contract?
Ans: There are certain essential conditions for the performance of a
contingent contract. These are also different types of contingent contracts.
 The contract is contingent on the happening of an event- The
contract is not enforceable if the event does not happen.
 The contract is contingent on the non-happening of an event- In
case of a contingent contract based on the non-occurrence of an
uncertain future event, the promisor is liable for his performance if
the event does not happen. In case the specified event takes place,
the contract becomes void.
 The contract is contingent on the conduct of a person whose action
makes fulfilling of the condition impossible.
Example: A promises to pay ten thousand rupees to B if he marries C. In
case C marries D, then the event of B marrying C is rendered impossible. A
divorce between C and D or the death of D is possible later and only, in
such a case, the contract will become valid. Otherwise, the contract
becomes void.
 The contract is contingent on the happening of the event within a
fixed time.
 The contract is contingent on the non-happening of the event within
a fixed time.

Rules for the Contingent Contract

In the Indian Contract Act, sections 32 to 36 define some rules for the
enforcement of contingent contracts between parties. These rules are
mentioned below.
1. Contracts contingent on the occurrence of an event
A contingent contract is usually based on the occurrence of some
uncertain events. In these cases, the promisor is liable to do or not
do something when that event occurs. However, the law cannot
enforce the contract until the occurrence of the event. If the
 occurrence of the event becomes impossible due to any reason,
then the contingent contract becomes void.

1. Contracts contingent when the event does not occur

A contingent contract can also be based on a non-happening event.
In this case, the promisor will do or not do something when the
event does not occur. Contrary to the above rule, the contingent
contract becomes void when the event takes place.

1. When a living person does something to make the occurrence

of the event impossible
As per section 32 of the Indian Contract Act, if the contract is
contingent depending on the actions of a person, then the
occurrence of the event becomes impossible when that person does
something to make the event impossible to happen.

1. Contracts Contingent when the event occurs within a Specific

Time
In some contingent contracts, a party promises to do or not do
something on the occurrence of an uncertain event within a specific
time period. The contract becomes void when the event does not
occur or the time period is over.