DR.

RAM MANOHAR LOHIYA NATIONAL LAW

CONTRACT-1

Topic- CONTINGENT CONTRACT

Submitted To: Submitted By:

I take this opportunity to express my profound gratitude and deep regards to my Assistant

Professor Ms. Priya Anuragini for her exemplary guidance, monitoring and constant

encouragement to give shape to this project. The blessing, help and guidance given by him time

to time shall carry me a long way in the journey of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my respected seniors who

share their cordial support, valuable information and guidance, which helped me in completing

this task through various stages.

Lastly, I thank the almighty, my parents, brother, sisters and friends for their constant

encouragement without which this assignment would not have been possible.
 TABLE OF CONTENT

1) RESEARCH METHODOLOGY

2) INTRODUCTION

3) ESSENTIALS OF CONTINGENT CONTRACT

4) ENFORCEMENT OF CONTINGENT CONTRACT

5) LANDMARK CASE ANALYSIS

The research methodology used in this project is Doctrinal(empirical) which means it is a

MEANING OF CONTINGENT CONTRACT

The word contingent means when an event or situation is contingent, i.e. it depends on some
other event or fact.

As per Section 31 of The Indian Contract Act, 1872 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.1

Now, the ‘contingent contract’ means enforceability of that contract is directly depends upon
happening or not happening of an event.

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. 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.

In simple words, contingent contracts, are the ones where the promisor perform his obligation
only when certain conditions are met. The contracts of insurance, indemnity, and guarantee are
some examples of contingent contracts.

1
Section 31 The Indian Contract Act
ESSENTIALS OF CONTINGENT CONTRACT

1. A CONTRACT MUST BE A VALID CONTRACT TO DO OR NOT TO

Section 32 and 33 of the Act talks about enforcement of the contingent contract on the
happening or not happening of the events respectively. The contract will be valid only if
there’s an obligation to do or not do something.
For example: A makes a contract with B to buy B’s horse if A survives C. This contract
cannot be enforced by law unless and until C dies in A’s lifetime.
2. PERFORMANCE OF THE CONTRACT MUST BE UNCERTAIN
The condition for which the contract has been entered into must be a future event, and it
should be uncertain. If the performance of the contract is dependent on an event, which is
although a future event, but certain and sure to happen, then it’ll not be considered as a
contingent contract. 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.
3. THE EVENT SHOULD BE 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. The happening or not happening of an event
should be collateral to the contract and occur independently.
For example: Ram enters into a contract with Shyam and promises to deliver 5 television
sets to him. Shyam promises to pay him Rs 75,000 upon delivery. This is NOT a contingent
contract since Shyam’s obligation depends on the event which is a part of the contract
(delivery of TV sets) and not a collateral event.
4. THE EVENT SHOULD NOT BE THE WISH OF THE PROMISOR
The event considered should not at all be dependent on the wish of the Promisor. It
should be totally a futuristic and uncertain event. In Firm of N.P.O. Ballayya vs
K.V.Srinivasayya Setty & Sons2, 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

2
AIR 1954 SC 26
 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.

ENFORCEMENT OF CONTINGENT CONTRACT

 ON HAPPENING OF AN EVENT
Contingent contract 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.3
In the case of Bashir Ahmed & others vs Government of Andhra Pradesh4, 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.
 WHEN AN EVENT DOES NOT HAPPEN
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 becomesimpossible, and not
before.5
For 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.
In the case of Frost v Knight6, the defendant promised to marry the plaintiff on the death
of her father. While the father was still alive, he married another woman and thus, it was
held that there was no chance left that the defendant would marry the plaintiff. Thus, she
was entitled to sue him. As soon as the man married another woman, it was sure that the
event of the marriage of the plaintiff and the defendant would not occur. Thus, the
plaintiff had the right to sue him.

3
Section 32 of The Indian Contract Act 1872
4
AIR 1970 SC 1089
5
Section 33 of The Indian Contract ACT 1872
6
Frost v Knight (1872) LR 7 Exch 111
  WHEN IT IS THE FUTURE CONDUCT OF A LIVING PERSON
“ 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”.7
For example: A agrees to pay B a sum of money if B marries C , C marries D. The
marriage of B to C must not be considered impossible, although it is possible that D may
die and that C may afterwards marry B.
 EVENT HAPPENING WITHIN A SPECIFIED TIME
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 events become impossible.8
For example: X promises to pay Y a sum of money if a certain ship returns before 1st
April 2019. The contracts may be enforced if the ship returns within the fixed time. On
the other hand, becomes void if the ship sinks.
 EVENT NOT HAPPENING WITHIN A SPECIFIED TIME
Contingent contracts to do or not to do anything, if a specified uncertain event does not
happens within a fixed time, may be enforced by law when the time fixed has expired,
and such an event has not happened, or before the time fixed has expired, if it become
certain that such an event will not happen.
For example: X promises to pay Y a sum of money if a certain ship does not return before
31st March 2019. The contract may be enforced if the ship does not return before 31st
March 2019. Also, if the ship burnt before the given time, the contract is enforced by law
since the return is impossible.

7
Section 34 of The Indian Contract Act 1872
8
Section 35 of The Indian Contract Act 1872
  WHEN AN EVENT IS IMPOSSIBLE
Contingent contracts 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.9

For example: X promises to pay Y, Rs 500 if two straight lines should enclose a space.
The agreement is void.

9
Section 36 of The Indian Contract Act 1872
 LANDMARK CASES OF CONTINGENT CONTRACT

ABERFOYLE PLANTATIONS LTD. V. CHENG10

 A purchase had been made conditional on the renewal of certain leases. Accordingly the
successful negotiation of those renewals with a third party had been made a condition of
the contract. The consequences of failure had been spelt out in detail. All depended upon
the true construction of the agreement in question. Until the condition was fulfilled, there
was no contract of sale to be accepted.

It was held that in the absence of any contrary indication, a date fixed by a contract
subject to a condition precedent, for performance of a duty must be strictly adhered to,
and the time allowed is not to be extended by reference to equitable principles.

Lord Jenkins said: ‘But, subject to this overriding consideration, their Lordships would
adopt, as warranted by authority and manifestly reasonable in themselves, the following
general principles: (i) Where a condition or contract of sale fixes a date for the
completion of the sale, then the condition must be fulfilled by that date; (ii) where a
condition or contract of sale fixes no date for completion of the sale, then the condition
must be fulfilled within a reasonable time; (iii) where a condition or contract of sale fixes
(whether specifically or by reference to the date fixed for completion) the date by which
the condition is to be fulfilled, then the date so fixed must be strictly adhered to, and the
time allowed is not to be extended by reference to equitable principles.’

10
ABERFOYLE PLANTATIONS LTD. V. CHENG (1992)2 AII ER910
 HARBAKSH SINGH GILL V. RAM RATAN11

Facts- Sukhdev Singh, entered into an agreement on July 19, 1972 with Ram Ratan, to
sell his one-half share in the property in dispute for a consideration of Rs. 48,500/- and
received Rs. 10,000/- as earnest money. He undertook to get his share separated by filing
a suit and the deed was to be executed within one month of the passing of the final
judgment. If the suit was not disposed of within one year, he agreed to pay interest on the
earnest money at the rate of 3 per cent per annum. A suit was filed for partition by him,
but was dismissed for non-prosecution. The application filed by him to get the suit
restored was also dismissed. On the same day on which the suit was dismissed for non-
prosecution, Sukhdev singh filed this suit for permanent injunction restraining respondent
No. 2 from committing the breach of the agreement and transferring his share to any one
except the plaintiff. The responedent argued that it was a contingent contract and now
when the condition is not fulfilled the contract gets void.

It was held that the defendant did not mentioned the condition at the time of contract and
therefore it is not a contingent contract. The matter can be looked from another angle
also. The clause that the vendor shall get his half share separated prior to the completion
of the sale deed was for the benefit of the vendee and it was, therefore, open to him to
waive the same. No doubt, the initiation and the completion of the proceedings for the
separation of the share depended on the volition of the vendor, but for that reason it
cannot be said that the contract became a contingent one and could be frustrated by the
vendor by his own wrong.

11
HARIBAKSH SINGH GILL V. RAM RATAN AIR 1988 P H 60