Contingent ContractsContingent Contracts

The word contingent is used in this Act to mean ‘conditional’. Thus a contingent contract is a conditional contract.

Sec.31- ‘ 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.’

The performance of a contingent contract is dependent on a future uncertain event, and such event should be collateral to the contract. The performance becomes due on happening or non happening of such event. e.g. insurance contracts.

Event collateral to a Event collateral to a contractcontract

The collateral event on which the performance of a contract is dependant must be independent or ancillary to the contract.

‘ A collateral event is an event which is neither a performance directly promised as a part of contract, nor the whole of the consideration for the promise.’ Pollock & Mulla.

RulesRulesAct of party- the word event include ‘act

of the party.’ The act may be of the party to the contract or a third party.

Happening of an event- Sec 32. ‘ 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.’ thus it can be enforced only when ‘that’ event happens. If such event becomes impossible, it renders the contract void.

..Rules..RulesNon happening of an event. Sec 33

‘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’.

Thus a contract contingent up on non happening of an event can be enforced only when such event becomes impossible.

..Rules..RulesHappening of an event within a

fixed time- Sec.35. “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.”

……RulesRulesNon-happening of an event within a

fixed time- Sec.35. ‘contingent contracts to do or not to do anything if an uncertain future 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.’

……RulesRulesHappenning of an impossible

event- Sec.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.’

Effect of contingent Effect of contingent contractscontractsContingent contracts are perfectly

valid contracts, though their enforceability by law depends up on the happening or non happening of a future uncertain event.

When the event has occurred, the contract rests on the same footing as if it had been made positively and without reference of any contingency.