Meaning of Contingent Contract:
When the performance of a contract is not immediately due but it becomes so only after the happening or non-happening of some contingency (i.e., some uncertain event) it is known as Contingent Contract.
The contract of insurance, contract of indemnity and guarantee are the examples of contingent contract. In simple words, it is a conditional contract.
Definition
A contingent contract is a contract indicating to do or not to do something, if some event, collateral to such contract, does or does not happen (Sec. 31).
Characteristics of Contingent Contract
There are three essential characteristi character istics cs of a contingent co ntingent contract, viz. :
Its performance depends upon the uncertainty of happening or non-happening in future of some event. It is this dependence on a future which distinguishes a contingent contract from other contracts.
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The event must be collateral, i.e., incidental to the contract.
The contingent event should not be mere will of the promis p romisor. or.
egarding Rules R egarding
Performance of Contingent Contingent Contracts
The Happening of a Future Uncertain Event According to 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. If the event becomes impossible, such contracts co ntracts become void".
egarding Rules R egarding
Performance of Contingent
Contracts Examples: (1) A makes a contract with B to buy B's horse if A survives C. This contract cannot be enforced by law u nless and until C dies in A's life time.
(2) A makes a contract with B to sell a horse to B 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.
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(3) A contracts to pay B a sum of money when B marries C, C dies without being married to B. The T he contract become void.
egarding Rules R egarding
Performance of Contingent
Contracts The Non-happening of an Uncertain Future Event - According to Sec. 33, "Contingent contracts to do or not to do anything if any 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. Because when the ship sinks the event becomes impossible as the ship can never return.
Thus enforceability depends upon the impossibility of the contingent event. Until the event becomes beco mes impossible, impossible, the contract co ntract cannot be enforced
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egarding Rules R egarding
Performance of Contingent
Contracts
When
Event to be Deemed Impossib le
According to Sec. 34, "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".
egarding Rules R egarding
Performance of Contingent
Contracts The Happening of an Event within Fixed Time According to Sec. 35, "Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time beco me void if at the expiration of the time t ime fixed, such event has not happened, or if, before the time fixed such event becomes impossible".
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egarding Rules R egarding
Performance of Contingent
contracts
The Non-happening of an Event within a Fixed Time
Accordi ordin ng to S e c . 3 5 , "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 eve nt has not happened, o r, before the time fixed has expired, if it it becomes certain that such event will not happen".RULES REQUARDING PER
ULES R EGUA EGUARDING R ULES
OF CONTINGENT
CONTR ACT ACT
IMPOSSIBLE EVENTS
According to 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".
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Difference
between Contingent Contracts and Agreements
Wagering
Mutual Promise:
A wagering agreement consists of mutual promises each of which are conditional on the happening or non-happening of a certain event. A contingent contract may not consist of the mutual promise. It may be said that all wagers are contingent contracts co ntracts but all contingent contracts are not wagers. For example, insurance contracts, contracts of indemnity and guarantee are contingent contracts but not wagers.
Validity: A wagering agreement is absolutely void. It is illegal in Maharashtra and England. But a contingent contract is a valid contract.
Difference
between Contingent Contracts and Agreements
Wagering
Performance:
In a wagering agreement, neither party intends to perform the contract, but only to deal in differences.This is not so in contingent contracts.
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Interest in the s ubject matter :
In wagering agreement, the parties to the agreement have no other interests in
the subject matter of the agree ment, except for the stake. co ntingent contract, parties do have some ot her interest in the subject But in a contingent matter. They are interested in the occurrence or non-occurrence of the event.
Difference
between Contingent Contracts and Agreements
Wagering
Future Event:
In a wagering agreement the future event is the sole determining factor of the contract while in a contingent contract, the future event is merely collateral or incidental to the contract.
Na ture:
All contingent contracts are not of a wagering nature, because all the contingent contracts co ntracts are not void. All wagering agreements are also contingent contracts because they are dependent on uncertain event.
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Effect of Contingent contract
Contingent contracts are perfectly valid contracts, though heir enforceability by law depends up on the happening or non happening of a of a future uncertain event. W h e n the event has occurred, the contract rests on the same footing as if it if it had been made positively and without reference of any of any contingency.
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Conclusion
This unusual contract arrangement clearly falls within the meaning of "contingent," in that the full implementation, and particularly the payment of the fee to the engineering firm, is dependent on the happening of an outside event, i.e., that the lowest acceptable construction bid saves the state money compared to the construction cost for the bridge designed by t he in-house staff.
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