Contingent Contract | Meaning, Definition and Rules of performance with Examples?

CONTINGENT CONTRACT 

Definition 

Sec. 31 States, "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." 

 

It is a contract the performance of which depends upon the happening or non happening of some future event called collateral event. The collateral  event is a subordinate part of the main contract. 

Example

C contract to pay Rs. 1000 to B, if B's house is burnt. It is a contingent contract 

Performance of Contingent Contract

The rules of performance of contingent contract are as under: 

1. Happening of 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. [Sec. 32] 

It means the performance of a contingent contract depends upon the happening of an uncertain event. If that event takes place, the contract becomes valid. But if that event does not take place, the contract becomes void. 

Example 

A contract to pay a sum of money to B, if B marries C. C dies before getting married to B. The contract become void. 

2. Non Happening of Event

Contingent contracts to do or not to do anything if n uncertain future event does not happen, can be enforced when the happening of that event becomes impossible, and not before. [Sec. 33]

It means where the performance of a contingent contract depends upon the non happening of a certain event and if that event does not happen, it is a valid contract. But if that event happens, the contract becomes void. 

Example 

A agrees to pay a sum of money to B if a certain ship does not return. The ship is sunk. The contract becomes enforceable when the ship is sunk. 

3. Dependent on Future Conduct 

If 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. [Sec. 34] 

It means the performance of a contingent contract depends upon the conduct of a person. The person may take the contract valid or void. 

Example 

A agrees to pay a sum of money to B, if B marries C. Later, C marries D. The marriage of B to C becomes impossible. 

4. Happening of Event within Fixed 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 event becomes impossible. [Sec. 35(1)] 

It means the performance of a contingent contract depends upon the happening of an uncertain event within fixed period. If such event happens within the fixed period, it becomes a valid contract. But if such event does not happen with the time fixed or becomes impossible before the time expires, it becomes a void contract. 

Example 

A promise to pay money to B, if a certain ship returns within 1 year. The contract becomes enforceable if ship returns within 1 year and becomes void if ship sinks within 1 year. 

5. Non Happening Event within Fixed Time 

Contingent contract 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 has not happen, or before the time fixed has expired, if it becomes certain that such event will not happen. [ Sec. 35(2)] 

It means the performance of a contingent contract depends upon the non happening of an event within a fixed period. If that even takes place within the fixed period, it is a void contract. But if that event does not take place with a fixed period, it is a valid contract. 

Example 

A promises to pay a sum of money to B, if a certain ship does not return within a year. The contract may be enforced if the ship does not return within a year or sinks within a year. 

6. Happening of Impossible Event

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 of formation. [Sec. 36] 

Where the performance of contract depends upon the happening of an impossible event, such an agreement is void from the beginning 

Example 

A agrees to pay Rs. 1000 to B, if he can run at 500 kilometers per hour. The agreement is void.