Business Law BS-BBA (Asma Hameed Khan)
CONTINGENT CONTRACTS
If the performance of any contract is dependent upon the happening or not happening of
certain event of future, it is known as ‘Contingent Contract’.
Any contract can become contingent contract, if its performance is made dependent upon the
happening or not happening of an uncertain event, collateral to that contract is called contingent
contract.
Definition:
According to Section 31 of the Contract Act, 1872, “contingent contract is a contract to do or
not to do something, if some event, collateral to such contract, does or does not happen.
A contingent contract is one which ripens into an absolute obligation until on the happening
of the event or the fulfillment of the condition stipulated, till then the contract is not enforceable.
Example:
A person contracting to buy shares if he is appointed sole agent of company, is a contingent
contract (AIR 1925 ALL 658).
Where an agreement provided that the agent appearing in the case in the Supreme Court
would be paid the text cost if the case was successful; it was held that the obligation which
was contingent would ripen into an absolute obligation in the event of the success of the
case.
Conditions:
Following are the conditions/essentials of the contingent contract:
i) The performance of such contract dependent upon the happening or non-happening of
some future uncertain event. Conditional Contract.
ii) The event must be uncertain.
iii) The happening or non-happening of the event must be collateral (collateral means
connected event).
iv) Contingency related to future.
Rule of performance
1. Uncertain of Contract contingent on an event happening:
According to Section 32 of the Contract Act, contingent contact to do or not to do anything
if an uncertain future event happen cannot be enforced by law unless and until the event has
happened.
If the event becomes impossible, such contract become void.
Examples:
i) A makes a contract with B to sell a horse to be at a specified price, if C, to whom the
horse has been offered, refuses to buy him. The contract cannot be enforced by law
unless and until C refuses to buy the horse.
ii) A contracts to pay B a sum of money when B marries C. C dies without being
married to B. The contract becomes void.
2. Uncertain of Contract contingent on an event not happening:
According to Section 33 of the Contract Act, contingent contact 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.
Example:
A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk, the
contract can be enforced when the ship sinks.
3. When the event on which the contract is contingent to be deemed impossible, if it is the
future conduct of a living person:
According to Section 34 of the Contract Act, if a 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 then under further contingent.
If the future event which the contract is contingent is way which the person will act at an
unspecified time, the event shall be considered to become impossible when such person does
anything which renders it impossible. It will be void contract.
Example:
A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must
be considered impossible although it is possible that D may die and that C may afterwards
marry B.
4. When contracts become void which are contingent on the happening of specified event
within fixed time:
According to Section 35(i) of the Contract Act, 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.
Example:
A promises to pay B a sum of money if a 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 ear.
5. When contracts may enforce which are contingent on the specified event not happening
within fixed time:
According to Section 35(ii) of the Contract Act, 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:
A promises to pay B a sum of money if a certain train does not return within a day. The
contract may be enforced if the train does not return.
6. Agreement contingent on impossible events void:
According to Section 36 of the Contract Act, 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 was made.
Examples:
i) A agrees to pay B thousand rupees if 2 straight lines includes a space. The
agreement is void.
ii) A agrees to pay thousand rupees if B will marry A’s daughter C, C was dead at the
time of the agreement. The agreement is void.
Conditions must be fulfilled as stipulated:
A contingent contract becomes absolute when the condition is fulfilled strictly and
absolutely. Any diversion in that respect would not make the contract enforceable.
Conditions not fulfilled:
Where the condition in a contingent contract is not fulfilled the contract is not enforceable.
‘’//
