The word contingent means an event or situation is depends on some other event or fact. A contingent contract is defined under Section 31 of the Indian Contract Act.

Section 31 states that- A contingent contract is a contract to do or not to do something if some event collateral to such contract doesn’t happen.

When the contract is dependent or conditional upon the happening or non-happening of a certain future event, the contract is contingent. For example- A contracts to pay Rs 1000 if B’s house is burnt, this is a contingent contract.

All the contracts of Insurance and indemnity aim at the payment of money only after a certain event happens, or the loss is caused and therefore they are contingent contracts.

Case Law

Chandulal Harjivandas vs. CIT – In this case, it was held that all contracts of insurance and indemnity are contingent.

ESSENTIALS ELEMENTS OF THE CONTINGENT CONTRACT

• There must be a valid contract to do or to abstain from doing something.
• The performance of the contract must be conditional.
• The said event must be collateral to such a contract.
• The event should not be at the discretion of the promisor.

ENFORCEMENT OF CONTINGENT CONTRACT

Enforcement of the contingent contract is given under Section 32 to 36 as follows-

1. Contracts Contingent on an event happening– The contingent contracts to do or abstain from doing something if an uncertain future event happens. However, the contract cannot be enforced by law unless the event takes place. If the event becomes impossible, such contracts become void.  (SECTION 32)

Illustration: A promises to pay B, Rs. 100,000 if he marries C, the prettiest girl in the neighbourhood. This is a contingent contract. Unfortunately, C dies in a car accident. Since the happening of the event is no longer possible, the contract is void.

• Contracts Contingent on the event not happening– The contingent contracts to do or abstain from doing something if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible. If the event takes place, then the contingent contract is void. (Section 33)

Illustration: A promises 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. On the other hand, if the ship returns, then the contract is void.

• Contracts contingent on the future conduct of a living person– If a contract is a contingent upon how a person will act at a future time, the event shall be considered impossible when such person does anything which makes it impossible for the event to happen. (Section 34)

Illustration: A agrees to pay B, Rs. 100,000 if C marries D. However, D marries A. The marriage of C to D  must now be considered impossible, although it is possible that A may die and that D afterward marries C.

• Contracts contingent on happening of specified event within fixed time- Contingent contracts to do or not to do anything 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 is fixed, the happening of the event becomes impossible.[Section 35(para 1)]

Illustration: A promises to pay B a sum of money if a certain ship returns before 1st April 2021. The contracts may be enforced if the ship returns within the fixed time. On the other hand, becomes void if the ship sinks.

• Contracts contingent on not happening of specified event within a fixed time- Contingent contract to do or not to do anything if an uncertain event does not happen within a fixed time may be enforced by law when the fixed time 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.[Section 35(para 2)]

Illustration: A promises to pay B a sum of money if a certain ship does not return before 31st May 2021. The contract may be enforced if the ship does not return before 31st May 2021. Also, if the ship burnt before the given time, the contract is enforced by law since the return is impossible.

• Agreements contingent on the impossible event–  If an agreement to do or not to do is based on the impossible event, then such agreement is void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made. (Section 36)

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