CONTIGENT CONTRACT

By | May 6, 2017
Introduction

Section 31 of the Indian Contracts Act, 1872 defines a contingent contract as ‘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.’

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent.

These are the following essentials :
  1. There must be a valid contract to do or not to something: Sections 32 and 33 of The Indian Contract Act, 1872 refer to the enforcements of contracts on an event happening and on an event not happening respectively. A contingent contract will be valid only if it is a contract to do or not to do something.
  2. The performance of the Contract must be conditional: The event contemplated should be some future, uncertain event. If the performance of obligation is dependent on a future event which has to occur, the contract will not be a contingent contract. Mere postponement of the time of performance will not make the contract contingent as at some future time.
  3. The said event must be collateral to such contract: The event on the happening or non-happening of which, the performance of the contract is dependent, must not form a part of the consideration of the contract.
  4. The Event Should Not Be At The Discretion Of The Promisor: The event so considered as for contingency should not at all be dependent on the promisor. It should be totally a futuristic and uncertain event.
Conditions when a contingent contract needs to be enforced
  1. On the happening of the event: Section 32 of The Indian Contract Act, 1872 provides that contingent contracts to do or not to do anything of an uncertain future event happen cannot be enforced by law unless and until that event has happened.
  2. On the event not happening: Section 33 of The Indian Contract Act, 1872 clearly states that :“ Contingent contracts to do or not to do anything if an uncertain future event does not happen, can be enforced when the happening of the event becomes impossible, and not before.”
  3. On the event not happening within a specified Act: Section 35 of the Act lays down 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 has not happened, or, before the time fixed has expired, and such event has not happened, or, before the time has expired, if it becomes certain that such event will not happen.

By – Shradha Arora

(Editor @ Legal Bites)

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