Date: 16 November, 2020
by Nishtha Girdhar, UILS, Panjab University
The word “contingent” signifies something which is subject to change. It suggests something fortuitous, and denotes a conditional interest or right which will become effective only on the happening or non-happening of a particular event.
Contingent contract, simply stated, is a contract dependent on the happening or non-happening of an uncertain event.
Section 31 of the Indian Contract Act, 1872, defines a contingent contract- “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 hallmark of a contingent contract is uncertainty.
Examples of contingent contract:
i. Contract of insurance
ii. Contract of indemnity
iii. Contract of guarantee
Illustration: A promises to pay B Rs 10,000 if B’s ship sinks at sea. This is a contingent contract.
Contingent contracts under Indian law are dealt with under chapter III of the Indian Contract Act, 1872 and Sections 31-36 of the Act lay down rules as to where a contingent contract is enforceable and where it is not.
ESSENTIALS OF CONTINGENT CONTRACT
It must be a valid contract as provided under Section 10 of the Act.
The performance of the contract must be conditional.
Enforceability of said contract depends upon a contingency.
Such contingency is based upon the happening or non-happening of an event.
Said event must be uncertain.
SECTIONS 32-36 of INDIAN CONTRACT ACT,1872
Section 32: Enforcement of contracts contingent on an event happening
Where enforceability of contract depends upon the happening of a certain event, such contract cannot be enforced by law until that event has happened.
Illustration: A promises to pay B an amount of Rs 50,000 if B marries C. C dies before getting married to B. Contract becomes void.
Section 33: Enforcement of contracts contingent on event not happening
Where contract to do or not to anything depends on the non-happening of a certain event, the contract will be enforceable only when the said event does not happen.
Illustration: A agrees to sell his car to B if a certain ship does not return. If the ship does not return, the contract would be valid. However, if it returns the contract would be void.
Section 34: Contracts contingent on the future conduct of a living person
A contingent contract becomes VOID if the event (which is not certain) is based upon the future conduct of a person, since the person’s future conduct may make the happening of the event impossible.
Illustration: A promises to pay B an amount of Rs 10,000 if B marries C. C marries D. Thus, the marriage of B and C is rendered impossible. However, there exists a possibility of C marrying B on the death of D.
Section 35: Contracts contingent on happening of certain events at fixed time
A contingent contract dependent upon the happening of a certain event within a stipulated event becomes void if such event does not happen before the expiration of the stipulated time.
Illustration: A promises to pay B if the latter gets married within a year. B marries before the expiration of a year. A is liable to pay him.
Section 36: Agreements contingent on impossible event
Contingent agreements dependent on an impossible event are VOID regardless of whether such impossibility is known or not to the parties.
Illustration: A agrees to pay B if he marries C. C is dead at the time of agreement. The contract is void.
Chandulal Harjivandas, Jamnagar vs Commissioner Of Income-Tax 1967 SCR (1) 921
In this case, all contracts of indemnity and insurance were held to be contingent contracts.