contingent contract assignment pdf

How A Contingent Contract Works

Jump to section, what is a contingent contract.

Contracts generally exist in two types: contingent and absolute. A contingent contract requires the promisor to perform an outlined obligation only when certain conditions are met. It differs from an absolute contract in that absolute contracts require the promisor to perform on the terms agreed upon within the contract without any conditions. The Indian Contract Act of 1872 provides a more detailed contingent agreement definition: “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.”

Although this act doesn't apply to those in the U.S., the definition clearly states the terms of a contingent contract and what types of agreements would apply.

Essential Components of a Contingent Contract

In order to qualify as a contingent contract, an agreement must meet certain criteria and contain several key components. The first is a dependence on a certain event happening or not happening and the condition that if this future event does or doesn't happen, the agreement is valid and both parties must act upon their outlined duties. The events can be subsequent or precedent, as the order or timing doesn't matter.

For example, if a person entered into a contract with another person that the first would pay the second $500 if they arrived at a particular location at a certain time, this would qualify as dependence on a certain event happening. If the second person arrived in the location within the timeframe established, the first person would be contractually obligated to pay them the $500. A common example of a contingent contract is a contingency clause in an employment contract , which might stipulate that the terms are valid only if the individual can pass a background check or drug test before accepting the position.

Another essential component of a contingent contract is the event serving as collateral for the contractual agreement. Whether a situation arises may qualify as the collateral event, such as in the example above. If the second person in that example didn't arrive at the location within the timeframe, they would not have met the collateral requirements of the contingency agreement and thus would not receive the $500.

Another example is a contract that involves betting on the outcome of a sports match. If the contract specifies that when one team wins, those who bet on that team's success would receive a payout, the winning of the event is the collateral in the agreement. The event also cannot be a wish or will of the person entering into the contract, nor can it be certain to occur. It shouldn't be dependent on the promisor's desires, nor should it be at their discretion.

Types of Contingent Contracts

Some of the most common types of contracts used by insurance companies are contingent contracts, including those related to guarantees, indemnity, and providing insurance. For example, in a contract entered into by a policyholder and a life insurance company, the payout is made only if the insured individual dies under specific conditions. Until the death occurs, the contract payout amount is not eligible, and it will be paid only if the individual dies under the outlined circumstances. This type of contract qualifies as a contingent agreement.

Other types of insurance policies utilize contingent contracts. Homeowners insurance policies agree to pay out under certain conditions that cause damage to the property, but unless a situation occurs that causes the applicable damage, the funds would not be issued.

Another type of contingent contract is an agreement based on the non-occurrence of a particular event. For example, if Company A contracts to sell goods in transit to Company B if the boat carrying those goods does not return, the goods are sold only if the boat doesn't return. If the boat does return, the contract would become void because the non-occurrence of an event did not happen, or the event did occur.

The contingent contract definition allows for the specification of a timeframe, although this is not a requirement for the agreement to be considered valid. In the previous example of the boat carrying goods, Company A may agree to sell the goods to Company B only if the boat doesn't return within 10 days. As long as the occurrence or non-occurrence of the event happens or doesn't happen within the timeframe outlined, the terms of the contract must be enforced.

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Advantages of Contingent Contracts

Contingent contracts have several benefits for those who choose to enter into them. One benefit is the elimination of the need to come to an agreement right away, or allowing both parties to bet on what they predict will happen. Contingent contracts allow commitments to become self-enforcing by eliminating the need to renegotiate or make adjustments when situations occur. Additionally, this type of contract can limit the need for future litigation, as the terms for what will happen in response to a particular event are clearly outlined in the agreement.

Here is an article that further explains the benefits of contingent contracts.

Enforcement of a Contingent Contract

In order to enforce a contingent contract, the event outlined in the agreement must either occur or not occur, depending on the terms. If the event does not take place and the contract was based on that particular event occurring, the contract cannot be enforced.

If any action renders the event outlined impossible, the contract would be considered void. For example, if a person entered into a contract that they would receive $1,000 for teaching another person how to cook, that contract would become void if either party died, as the event (cooking lessons) would no longer be able to take place in the future.

Additionally, a contract that is contingent on an impossible event cannot be enforced. An example of an impossible event is bringing a person back from the dead. In order to qualify as an enforceable contingent contract, the event must be reasonably able to occur or not occur.

Contingent Contracts in Real Estate

Real estate is an industry that often includes contingent contracts since buyers may issue contingent offers based on a particular event. A buyer may make an offer to a seller for a home that is contingent on the buyer selling their current home. Another contingency in a real estate contract is the condition of the property, and determining that condition usually requires the completion of a professional home inspection and/or appraisal. The three main clauses in a real estate purchase contract fall under three main categories:

• Mortgage/lender approval
• Home inspection

The contingencies exist in a real estate contract to protect the potential buyer from entering into an agreement that doesn't fairly represent the property being purchased.

Negotiating a Contingent Contract

If you are considering entering into a contingency contract or are entering the negotiation phase of the contract, it's helpful to understand the main factors that go into this type of agreement. The first factor is the level of risk you're willing to take on by entering into the agreement. The odds of the event happening or not happening on which the agreement is contingent on is usually the key factor in evaluating the risk. You should also consider the potential reward of entering into a contingent contract.

As you better understand the meaning of a contingent contract, you can gain insights into the benefits available to you by entering into this type of agreement.

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Contingent Contracts

By Yashu Bansal, Chanakya National Law University, Patna

“ Editor’s Note: Contingent contracts are contracts that are dependent on the happening or non-happening of an uncertain event. This paper analyses the concept of such contracts. it discusses the nature of a contingent contract and its essentials. It also distinguishes such a contract from agreements subject to contract, wagers and agreements to do impossible acts. The paper also studies the situations when a contingent contract can be enforced and the circumstances when such a contract becomes void.”

Introduction  

A contract is an agreement enforceable by law. [Section 2(h) of The Indian Contract Act, 1872]. For every contract, there should be an agreement that is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object. The agreement should not be declared void hereby to form a contract. This definition of contracts as per Indian Contract Act, 1872 is based on Sir Pollock’s definition which states that every agreement and promise enforceable at law is a contract. Thus for the formation of a contract, there must be an agreement and something in addition to that, i.e., an agreement, and its enforceability at law. [i]

The word contingent ordinarily means ‘subject to chance’. In the Indian Contract Act, 1872, this word has been used to mean conditional, just the way we use it generally. Uncertainty is the hall-mark of the future. Estimating the chances of an uncertainty becoming certain, calculating the results if the event doesn’t happen and then measuring the potentiality to deal with its consequences are all about contingent contracts. Parties may stipulate that performance of obligations under a contract is dependent on a contingency, even though the contract is validly formed. [ii] The parties agreeing to the conditions agree that the rights will be enforced and the obligations will be due on the happening of the contingency on the contracting of a valid contract.

Section 31 to 36 of The Indian Contract Act, 1872 deal with this type of contract. Section 31 of the Act defines ‘contingent contract’ thus:

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. [iii]

Every contingent contract is thus a contract primarily. Like any other contract, it is also a contract to do or not to do something. It is not, however, an absolute and unconditional one, without any reservations or conditions, which is to be performed under any event. Its performance is dependent on some event’s happening or not happening- the contingency.

This case of Chandulala vs. Commissioner of Income Tax is the best example of a contingent contract. [iv]

On June 23, 1959, a policy called “Children’s Deferred Endowment Assurance” for a sum of Rs. 50,000/- was issued by the Life Insurance Corporation of India. The proposer was Harjivandas Kotecha, the father of the appellant (hereinafter called the ‘assesse’) and the life assured was that of the assesse. The premium payable in respect of the policy was Rs. 1,925/ per annum. That amount was paid as premium out of the taxable income of the assesse. In the course of the assessment for the assessment year 1960-61, the assesse claimed rebate on the insurance premium of Rs. 1,925/ under the provisions of s. 15(1) of the Income-tax Act, 1922 (hereinafter called the ‘Act’). The Income-tax Officer rejected the claim on the ground that under the said policy the life of the minor assesse had not been assured. The Appellate Assistant Commissioner agreed with the Income- tax Officer and held that the claim of the assesse was rightly rejected. The assesse took the matter in further appeal before the appellate Tribunal but the appeal was dismissed. The appellate Tribunal stated a case to the High Court on the following question of law: “Whether rebate under s. 15(1) of the Income- tax Act, 1922 is admissible on the premium payable as per Annexure ‘A’ during the minority of the assesse?”

The High Court of Gujarat answered the reference in favour of the respondent. It held that the contract of insurance with the Life Insurance Corporation was entered into by the father of the assesse and under the terms thereof the contract was to become the assesse’s contract only by his adopting it on attaining majority. The High Court further held that on the true interpretation of the terms of the contract, even if the minor were to be alive on the deferred date it was the’ assessee’s’ father who was entitled to receive the cash option unless the assesse adopted the contract as his own. The High Court, accordingly observed that the real contracting parties were the father of the assesse and the Life Insurance Corporation and it was only under certain contingency on the happening of which the contract was to become the contract of the assesse.

Essential Elements

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent. These are the following essentials:

There Must Be A Valid Contract To Do Or Not To Do Something

Sections 32 and 33 of The Indian Contract Act, 1872 refer to the enforcements of contracts on an event happening and on an event not happening respectively. A contingent contract will be valid only if it is a contract to do or not to do something. For instance, if a person A contracts to pay B, another person, a sum of 10,000 if B’s house is burnt, it is a valid contingent contract. On the other hand, the agreement to pay minimum demand charges, there is no event happening and the consumer has to pay it. This is a reference to the case Northern India Iron and Steel Co. Ltd. vs The State of Haryana and another, [v] in which the Court held that Section 31 of the Act has no applicability in that case since there was no event.

The Performance Of The Contract Must Be Conditional [vi]

The event contemplated should be some future, uncertain event. If the performance of obligation is dependent on a future event which has to occur, the contract will not be a contingent contract. Mere postponement of the time of performance will not make the contract contingent as at some future time. [vii] The event has to be very futuristic and uncertain. Dues and obligations don’t come under the definition of being uncertain. An event becomes uncertain only if its occurrence is not in the hands of any individual and the time is in future. It should be totally unpredictable for anyone.

The Said Event Must Be Collateral To Such Contract

The event on the happening or non-happening of which, the performance of the contract is dependent, must not form a part of the consideration of the contract. For example, X contracts to pay 100000 rupees to Y if Y’s house is destroyed by fire, in consideration of Y paying 400 rupees per month. The consideration for the promise of X to pay 100000 rupees is the payment by Y, monthly of 400 rupees. The obligation to pay 100000 rupees will be enforceable only on the happening of the uncertain event- destruction of Y’s house by fire- which event is independent of the consideration and collateral to the contract. [viii]

 The Event Should Not Be At The Discretion Of The Promisor

The event so considered as for contingency should not at all be dependent on the promisor. It should be totally a futuristic and uncertain event. In the case of Firm of N.P.O. Ballayya vs K.V.Srinivasayya Setty & Sons [ix] , a person agreed with his agent to pay him the expenses of costing, taxes and others if he succeeded in litigation. In this, the event was not at all at the discretion of the promisor. He won the case in subject and was thus held liable to pay the agent. The promisor should have no capacity to guide the event which makes the contract a contingent contract.

These are the most essential elements of a contingent contract. A contract when fulfills the above discussed criteria, it can be deemed to be a valid contingent contract. A contingent contract is also a contract; but with some specific requirements and these essential requirements make a contract a contingent contract.

The Contrast

Contingent contracts form a very important part of The Indian Contract Act, 1872. These contracts have certain elements in them which make them different from every other type of contracts.

Contingent Contract And Agreements Subject To Contract

There is a very great difference between these two contracts. An agreement subjected to contract is not a contract at all. In this case, the parties agree not to be bound to contract until and unless a formal contract is executed, which takes place only at the will of the parties. A contract is formed only on the happening of an uncertain event. On the other hand, a contingent contract is something totally different. Contingent contracts suspend the performance till the happening of an uncertain and futuristic event. [x] Agreements subjected to contract negate the very existence of a contract. A contracting with B to pay a sum of 10000 rupees of his house burns down is a contingent contact. On the other hand, A agreeing with B to form a contract once his house burns down is an agreement subject to contract. This is the major difference between a contingent contract and an agreement which is subjected to contract.

 Contingent Contract And Agreements By Way Of Wager

Contingent contract and agreement to do impossible act.

An agreement to do an impossible act, either when the impossibility is inherent or is in the very nature of the agreement, is not a contingent contract. If a man agrees to pay some money to another man if he makes a dead person alive, it is not a contingent contract and the contract is definitely void. A contingent contract presupposes the prospect of either the happening or non-happening of an event and not the impossibility of the happening and non-happening of the event. [xiv] Entering into an agreement whose event has no possibility to occur is as good as not entering into any contract. Contingent contracts are to do or not to do something on the happening or non- happening of a possible event. If a contingent contract is formed for an event which is impossible to occur, the contract becomes void. If A promises to pay B if he he marries his daughter C, the daughter being dead 3 years ago, there is no contract. The event to be performed is not at all possible. Contingent contract can be the promise to pay money if a person wins litigation. A promise to pay money if a person draws two straight lines in an enclosed space is an agreement to do ‘impossible act’ and void. We can thus clearly see how different these two agreements. Possibility of the event is the most important aspect of a contingent contract and the agreement to do impossible acts negates this feature of a contingent contract.

Conditions When A Contingent Contract Can Be Enforced

There are some certain conditions on which an event can be fulfilled. These are some rules which have to be followed for a contingent contract to be enforceable.

On The Happening Of An Event

Section 32 of The Indian Contract Act, 1872 provides that contingent contracts to do or not to do anything of an uncertain future event happen cannot be enforced by law unless and until that event has happened. For instance, if X makes a contract with Y to buy Y’s horse if X survives Y. this contract cannot be enforced by law unless and until Y dies in X’s lifetime. In the case of Bashir Ahmed & others vs Government of Andhra Pradesh [xv] , the respondent contracted to purchase a book of medical prescriptions in order to start a company for the manufacture and sale of Unani Medicines. The book was taken into possession after part payment but the purpose of taking the book couldn’t be fulfilled. The appellant filed a suit to recover the balance amount. The defence was that the contingent event of forming a company wasn’t yet fulfilled. The court rejected this contention and held that the contract was not contingent on the event of the formation of the medical company. This case law is a good example as to differentiating the event and making a contract enforceable only after the occurrence of the event. The enforcement of the contract is envisaged when, primarily, the contract is contingent on the happening of an event. If it is not contingent on an event, it is not enforceable. [xvi] Therefore, for any contingent contract to be contingent, the event has to occur before fulfillment of the conditions of the performance of the contract.

 On The Event Not Happening

Section 33 of The Indian Contract Act, 1872 clearly states that :

“ Contingent contracts to do or not to do anything if an uncertain future event does not happen, can be enforced when the happening of the event becomes impossible, and not before.”

On The Event Not Happening Within A Specified Time

Section 35 of the Act states 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, and such event has not happened, or, before the time has expired, if it becomes certain that such event will not happen. [xviii] If X promises Y 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.

Situations When A Contingent Becomes Void

The event being impossible.

If X contracts to pay Y if Y marries Z and Z dies without being married to Y, the contract becomes void. A contingent contract will become void if the future uncertain event becomes impossible to occur. Section 32 of the act states that:

“If the event becomes impossible, such contracts become void.”

 Non-Happening Of Event Within Fixed Time

Section 35 of The Indian Contract Act, 1872 states that:

 Agreements Contingent On Impossible Events

Section 36 of the act clearly states that:

Contingent agreements to do or not to do anything if an impossible event happens, are void, whether the impossibility of the event is known to the parties to the agreement at the time when it is made. If X agrees to pay Y 1000 rupees if Y will marry X’s daughter but at the time of the agreement, the daughter was dead. Thus, this contract is void.

 Conduct Of A Living Person [xxi]

Section 34 of The Indian Contract Act states that:

“When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person.”

Thus, these are the conditions when a contingent contract can become void and it cannot be enforced.

 Conclusion

A contract is an agreement enforceable by law. For every contract, there should be an agreement which is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object. The agreement should not be declared void hereby to form a contract. Every contingent contract is a contract primarily. Like any other contract, it is also a contract to do or not to do something. It is not, however, an absolute and unconditional one, without any reservations or conditions, which is to be performed under any event. Its performance is dependent on some event’s happening or not happening- the contingency.

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent. There must be a valid contract to do or not to do something. The performance of the contract must be conditional. The said event must be collateral to such contracts and the event should not be at the discretion of the promisor. These are some rules that have to be followed for a contingent contract to be enforceable. For instance, on the happening of an event, on the event not happening and on the event not happening within a specified time. There are some situations when a contingent contract becomes void. Some of them are: the event being impossible, not happening of event within fixed time, agreements contingent on impossible events and on the conduct of a living person.

 Edited by Kudrat Agrawal

[i] Aggarawal Rohini, Mercantile and Commercial Laws, Taxmann, 2012 Print

[ii] Rao V Kesava, Contract I, Lexisnexis, 2004 Print

[iii] The Indian Contact Act, 1872 Bare Act, Professional Book Publishers, 2014 Print

[iv] Gujarat 1967 AIR 816, 1967 SCR (1) 921

[v] AIR 1976 (P & H) 59

[vi] Contingent Contracts, available at http://icai.org/resource_file/16815Contingent.pdf , 27/03/2014, 09:10 IST

[vii] Rao V Kesava, Contract I, Lexisnexis, 2004 Print

[viii] Rao V Kesava, Contract I, Lexisnexis, 2004 Print

[ix] AIR 1954 SC26

[x] Rao V Kesava, Contract I, Lexisnexis, 2004 Print

[xi] Differences between Contingent and Wagering Contracts, available at http://mercantilelaws.blogspot.in/2012/05/distinguish-between-contingent.html, 28/03/2014, 17:40 IST

[xii] Wagering Contract, available at http://gradestack.com/CA-CPT-Exam-Prep-by-AOC/Difference-Between-Wagering-Agreeme/14455-2914-1207-study-wtw , 28/03/2014, 18:20 IST

[xiii] AIR 1967 Cal 25

[xiv] Rao V Kesava, Contract I, Lexisnexis, 2004 Print

[xv] AIR 1970 SC 1089

[xvi] Kapoor S.K. , Contracts I, Cental Law Agency, 2007 Print

[xvii] (1840) 49 ER 58

[xviii] The Indian Contact Act, 1872 Bare Act, Professional Book Publishers, 2014 Print

[xix] Kapoor S.K. , Contracts I, Cental Law Agency, 2007 Print

[xx] AIR 1954 SC44

[xxi] Rao V Kesava, Contract I, Lexisnexis, 2004 Print

[xxii] The Indian Contact Act, 1872 Bare Act, Professional Book Publishers, 2014 Print

1 thought on “Contingent Contracts”

what is the position if the contigent contract is with regard to the immovable property or where the person is not owner a the time of execution of contigent contract give case law and suggestions

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A Behavior Analyst’s Guide to Supervising Fieldwork pp 691–707 Cite as

Contingency Contracting

• Tonya N. Davis 3 &
• Jessica S. Akers 3  
• First Online: 06 January 2023

329 Accesses

Behavioral contracts are documents that outline the behavior of both the client and the deliverer of the reinforcement and the contingencies which must be met to earn reinforcement. The contract must be negotiated and agreed upon by all contract signees. In this chapter, you will introduce your supervisees to the components of effective behavioral contracts and compound schedules that can be incorporated into behavioral contracts. During the group supervision meeting, you will review the steps for developing a contingency contract including identifying a behavior of interest, outlining the contingencies of the contract, and negotiating the contract. In addition, your supervisees will practice developing a hypothetical behavioral contract. During the individual supervision meeting, you and your supervisee will review the plan that they developed for using a behavioral contract with their client. During the first individual supervision meeting with a client, you will instruct your supervisee to negotiate with their client regarding the contingencies within the draft behavioral contract. During the final supervision meeting, you will instruct your supervisee to implement the behavioral contract with their client.

• Behavioral contract
• Contingency contracting
• Contract negotiations
• Alterative reinforcement schedules
• Adjunctive reinforcement schedules

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Alwahbi, A., & Hua, Y. (2021). Using contingency contracting to promote social interactions among students with ASD and their peers. Behavior Modification, 45 (5), 671–694. https://doi.org/10.1177/0145445520901674

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Tonya N. Davis & Jessica S. Akers

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514245_1_en_29_moesm1_esm.pptx, appendix a: plan for behavioral contract development.

Define the behavior of change (e.g., completing homework assignments)

□ Specify minimum performance requirements for the response to count (e.g., completes each assignment with 80% accuracy)

□ Specify when the behavior must occur

Identify the target outcomes

□ Identify long-term outcomes

□ Identify short-term outcomes

Select rewards that will be provided contingent on meeting performance requirements according to the contract

□ Specify when and how rewards will be delivered

□ Specify who will deliver rewards

Develop a system for progress monitoring

Include a location for signatures of all involved parties

Appendix B: Graph Component Checklist

Appendix C: Contingency Contract Procedural Fidelity Checklist

Appendix D: Negotiation Checklist

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Davis, T.N., Akers, J.S. (2022). Contingency Contracting. In: A Behavior Analyst’s Guide to Supervising Fieldwork. Springer, Cham. https://doi.org/10.1007/978-3-031-09932-8_29

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• Contingent Contracts

Contracts are of different types. Since people can get into various kinds of agreement for performance or non-performance of certain acts. One way of understanding contracts is by dividing them into two types: Absolute and Contingent. Let us take a detailed look at contingent contracts.

An absolute contract is one where the promisor performs the contract without any condition. Contingent contracts, on the other hand, are the ones where the promisor performs his obligation only when certain conditions are met.

If you look at the contracts of insurance , indemnity or guarantee, they have one thing in common – they create an obligation on the promisor if an event which is collateral to the contract does or does not happen.

For example, in a life insurance contract, the insurer pays a certain amount if the insured dies under certain conditions. The insurer is not called into action until the event of the death of the insured happens. This is a contingent contract.

Under Section 31 of the Indian Contract Act, 1872 , contingent contracts are defined as follows: “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.”

Example: Peter is a private insurer and enters into a contract with John for fire insurance of John’s house. According to the terms, Peter agrees to pay John an amount of Rs 5 lakh if his house is burnt against an annual premium of Rs 5,000. This is a contingent contract.

Here, the burning of the house is neither a performance promised as a part of the contract nor a consideration. Peter’s liability arises only when the collateral event occurs.

Essentials of Contingent Contracts

1] depends on happening or non-happening of a certain event.

The contract is contingent on the happening or the non-happening of a certain event . These said events can be precedent or subsequent, this will not matter. Say for example Peter promises to pay John Rs 5,000 if the Rajdhani Express reaches Delhi on time. This is a contingent event.

2] The event is collateral to the contract

It is important that the event is not a part of the contract. It cannot be the performance promised or a consideration for a promise.

Peter enters into a contract with John and promises to deliver 5 television sets to him. John promises to pay him Rs 75,000 upon delivery. This is NOT a contingent contract since John’s obligation depends on the event which is a part of the contract (delivery of TV sets) and not a collateral event.

Peter enters into a contract with John and promises to deliver 5 television sets to him if Brazil wins the FIFA World Cup provided John pays him Rs 25,000 before the World Cup kicks-off. This is a contingent contract since Peter’s obligation arises only when Brazil wins the Cup which is a collateral event.

3] The event should not be a mere will of the promisor

The event cannot be a wish of the promisor. Say for example Peter promises to pay John Rs 5,000 if Argentina wins the FIFA World Cup provided he wants to. This is NOT a contingent contract. Actually, this is not a contract at all.

Peter promises to pay John Rs 50,000 if he leaves Mumbai for Dubai on August 30, 2018. This is a contingent contract. Going to Dubai can be within John’s will but is not merely his will.

4] The event should be uncertain

If the event is sure to happen, then the contract is due to be performed. This is not a contingent contract. The event should be uncertain.

Peter promises to pay John Rs 500 if it rains in Mumbai in the month of July 2018. This is not a contingent contract because in July rains are almost a certainty in Mumbai.

Enforcement of Contingent Contracts

Sections 32 – 36 of the Indian Contract Act, 1872, list certain rules for the enforcement of a contingent contract.

Rule # 1 – Contracts Contingent on the happening of an Event

A contingent contract might be based on the happening of an uncertain future event. In such cases, the promisor is liable to do or not do something if the event happens. However, the contract cannot be enforced by law unless the event takes place. If the happening of the event becomes impossible, then the contingent contract is void. This rule is specified in Section 32 of the Indian Contract Act, 1872.

Peter promises to pay John Rs 50,000 if he can marry Julia, the prettiest girl in the neighborhood. This is a contingent contract. Unfortunately, Julia dies in a car accident. Since the happening of the event is no longer possible, the contract is void.

Rule # 2 – Contracts Contingent on an Event not happening

A contingent contract might be based on the non-happening of an uncertain future event. In such cases, the promisor is liable to do or not do something if the event does not happen. However, the contract cannot be enforced by law unless happening of the event becomes impossible. If the event takes place, then the contingent contract is void. This rule is specified in Section 33 of the Indian Contract Act, 1872.

Peter promises to pay John Rs 50,000 if the ship named Titanic which leaves on a dangerous mission does not return. This is a contingent contract. This contract is enforceable by law if the ship sinks making its return impossible. On the other hand, if the ship returns, then the contract is void.

Rule # 3 – Contracts contingent on the conduct of a living person who does something to make the event or conduct as impossible of happening

Section 34 of the Indian Contract Act, 1872 states that if a contract is a contingent upon how a person will act at a future time, then the event is considered impossible when the person does anything which makes it impossible for the event to happen.

Peter promises to pay John Rs 5,000 if he marries Julia. However, Julia marries Oliver. Julia’s act thus renders the event of John marrying her impossible. (A divorce is still possible though but the happening of the event is considered impossible.)

Rule # 4 – Contracts Contingent on an Event happening within a Specific Time

There can be a contingent contract wherein a party promises to do or not do something if a future uncertain event happens within a fixed time. Such a contract is void if the event does not happen and the time lapses. It is also void if before the time fixed, the happening of the event becomes impossible. This rule is specified in Section 35 of the Indian Contract Act, 1872.

Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous mission returns before June 01, 2019. This contract is enforceable by law if the ship returns within the fixed time. On the other hand, if the ship sinks, then the contract is void.

Rule # 5 – Contracts Contingent on an Event not happening within a Specific Time

Contingent contracts might be based on the non-happening of an uncertain future event within a fixed time. In such cases, the promisor is liable to do or not do something if the event does not happen within the said time. The contract can be enforced by law if the fixed time has expired and the event has not happened before the expiry of the time. Also, if it becomes certain that the event will not happen before the time has expired, then it can be enforced by law. This rule is specified in Section 35 of the Indian Contract Act, 1872.

Peter promises to pay John Rs 5,000 if the ship named Titanic which leaves on a dangerous mission does not return before June 01, 2019. This contract is enforceable by law if the ship does not return within the fixed time. Also, if the ship sinks or is burnt, the contract is enforced by law since the return is not possible.

Rule # 6 – Contracts Contingent on an Impossible Event

If a contingent contract is based on the happening or non-happening of an impossible event, then such a contract is void. This is regardless of the fact if the parties to the contract are aware of the impossibility or not. This rule is specified in Section 36 of the Indian Contract Act, 1872.

Peter promises to pay John Rs 50,000 if the sun rises in the west the next morning. This contract is void since the happening of the event is impossible.

Solved Question on contingent contracts

Q: What are the differences between Contingent Contracts and Wagering Contracts?

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Indian Contract Act 1872: Part II

• Who Performs the Contract?
• Expressly Void Agreements
• Legality of Object and Consideration
• Quasi Contract
• Liquidated Damages and Penalty
• Performance of Reciprocal Promise
• Suit for Damages
• Anticipatory and Actual Breach of Contract
• Discharge of a Contract

4 responses to “Discharge of a Contract”

K and A had entered into a contract where K was to supply 50,000 phones to A within 2 months from the date of signing of contract. K was to procure the phones from China and deliver the same to A. The rate of the phone was Rs. 5000/- a piece (inclusive of all taxes and duties). At the time of the execution of the contract, the duty was at 5% (five percent). Immediately after the execution of the Agreement, India had increased the duties to 1000% (one thousand percent). Therefore, K was finding it difficult to sell the phones at the price agreed earlier. In the circumstances, kindly advise:

a. How can K discharge such a contract?

b. How can A enforce such a contract?

K can “Discharge of Contract” Under Impossibility of performance, during post-contractual impossibility While the following conditions are satisfying The act should have become impossible after the formation of the contract. 2. The impossibility should have been caused by a reason of some event which was beyond the control of the promissory. 3. The impossibility must not be the result of some act or negligence of the promisor himself.

K can discharge the contract by imposibility or frustration due to unseen changes

In light of the case of registered trustees of the cashew nuts industry development fund V cashew nuts board of Tanzania,civil appeal no:18 of 2001 court of appeal of Tanzania at Dar es saalam (unreported) and the cashew nuts industry act no 18 of 2009. Explain the parties to an agency (name of parties) it provided case and the way in which it was created

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Section 31 in the indian contract act, 1872, 31. "contingent contract" defined.—.

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Contingent Contract And Wagering Agreement

• by Nikhleshchand
• February 23, 2021
• 7 minutes read
• 3 years ago

Contingent Contract: Written By Tarleen Kaur

Table of Contents

INTRODUCTION

According to Sec. 31 of The Indian Contract Act, “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”. This contract is dependent on some uncertain future event. The point to be noted is that the uncertain event on the happening of which the contract is conditional must be collateral to the contract and must not form part of the consideration. The condition may be a condition precedent or a condition subsequent.

An agreement is an essential element for a contract. Without agreement, there can be no contract. A proposal when accepted becomes a promise. A promise with consideration forms agreement. An agreement enforceable by law is a contract. All contracts are agreements but all agreements are not contracts. According to Sec. 2(e) of The Indian Contract Act, “Every promise and every set of promises, forming the consideration for each other, is an agreement. According to Sec. 2(h) of The Indian Contract Act, “An agreement enforceable by law is a contract.”

WAGERING AGREEMENTS

Sec. 30 of The Indian Contract Act explains the wagering agreement. According to Sec. 30, “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.” These wagering agreements are only based on winning or losing, just for money. There is no real interest in the contract. They are not enforceable by law and thus, void.

Essentials of a Wagering Agreement

• Parties have opposite views.
• There is chance of gain or loss.
• There is no other interest in the contract. (Exception; horse-racing).

CONTINGENT CONTRACTS (Sec. 31 of The Indian Contract Act, 1872)

“Contingent contract defined”. –  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.

For example  

A contract to pay B Rs. 10,000 if  B’s house is burnt. This is a contingent contract.  

In other words, When the contract is dependent or conditional upon the happening or non-happening of a certain future event the contract is contingent. In the above illustration, the payment of the amount is contingent on the happening of a collateral event, i.e. the burning of the house. All the contracts of insurance or indemnity aim at the payment of money only after a certain event happens, or the loss is caused, and, therefore, they are contingent contracts.

Essential features of a Contingent Contract

• It is a contract to do or not to do something.
• It is dependent upon happening or non-happening of an event.
• The event is uncertain.
• The event is collateral to contract.

Uncertain future event

In the case of Bashir Ahmed v. Govt. of Andhra Pradesh [1] It was held that the contract was not a contingent one and the plaintiff had a right to enforce the contract . The Supreme Court held that for a contingent contract, it should be necessary that there should be an uncertain future event.

In the case of M.M. Rizvi vs. Subhash Singh [2] The Supreme court gave a redefined definition of a contingent contract. It was held that uncertain future event is an essential element for a contingent contract.

Enforcement of a Contingent Contract

Read Also: What are the Essentials of the Valid Contract in India

• Enforcement of contracts contingent on an event happening (Sec. 32 of The Indian Contract Act,1872)

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 becomes void.

• Enforcement of contracts contingent on an event not happening (Sec.33 of The Indian Contract Act)

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 event becomes impossible, and not before.

• When event on which contract is contingent to be deemed impossible, if it is the future conduct of a living person (Sec. 34 of The Indian Contract Act)

If the future event on which a contract is contingent is the way in which 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.

• When contracts become void, which are contingent on happening of specified event within fixed time (Sec. 35 of The Indian Contract Act,1872)

Contingent contracts to do or not to do anything, if a specified uncertain event happens within a fixed time, become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.

When contracts may be enforced, which are contingent on specified event not happening within 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 such event will not happen.

• Agreements contingent on impossible event void. ( Sec.36 of The Indian Contract Act,1872)

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.

DIFFERENCE BETWEEN CONTINGENT CONTRACT AND WAGERING AGREEMENT

A contract is an agreement enforceable by law. For every contract, there should be an agreement which is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object 1 .  The agreement should not be declared void hereby to form a contract. Every contingent contract is a contract primarily. Like any other contract, it is also a contract to do or not to do something. It is not, however, an absolute and unconditional one, without any reservations or conditions, which is to be performed under any event. Its performance is dependent on some event’s happening or not happening- contingency.

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent. There must be a valid contract to do or not to do something. The performance of the contract must be conditional. The said event must be collateral to such contracts and should not be at the discretion of the promisor. There are some rules that have to be followed for a contingent contract to be enforceable. For instance, on the happening of an event, on an event not happening and on the event not happening within a specified time. There are some situations when a contingent contract becomes void. Some of them are: the event being impossible, not happening of event within fixed time, agreements contingent on impossible events and on the conduct of a living person.

Though both contingent agreements and wagering contracts both depend upon the future events, but their legal consequences are completely opposite to each other. Contingent contracts are perfectly valid, while wagering agreements are illegal and therefore void in nature.

[1] AIR 1970 SC 1089

[2] AIR 2014 SC 1261

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