1.

Introduction

A contract is an agreement enforceable by law as defined under Section 2(h) 1 of the Indian
Contracts Act, 1872. A contractual promise may be absolute or conditional. With the
advancement of time and changing needs of the society, there are many new forms of
agreements and contracts that are being performed. Since it is obvious that law is dynamic in
nature; these contracts, as and when becomes validated, becomes a provision under the Indian
Contract Act. Some contracts are dependent on the happening or not happening of a
particular event. These contracts, being contingent in nature are termed as contingent
contracts.2

The word contingent ordinarily means ‘subject to chance’. In the Indian Contract Act, 1872,
this word has been used to mean conditional, just the way we use it generally. 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. Sections 313 to 364 of The Indian Contract Act, 1872 deal with
this type of contract. Section 31 of the Act defines ‘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. Every contingent contract is thus a contract primarily. Like any
other contract, it is also a contract to do or not to do something. It is not, however, an
absolute and unconditional one, without any reservations or conditions, which is to be
performed under any event. Its performance is dependent on some event’s happening or not
happening- the contingency.5

1
Section 2(h)- “An agreement enforceable by law is a contract.”
2
Pollock and Mulla, The Indian Contract and Specific Relief Acts.
3
Section 31- Contingent contract “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.”
4
Section 36- Agreements contingent on impossible events, void “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.”
5
Pollock and Mulla, The Indian Contract and Specific Relief Acts.

1
 2. Objectives

The main objective of the researcher is to discuss in detail about contingent contracts. There
exists a prime focus on the features of contingent contract. The contingent contracts are,
under certain conditions, declared to be void. The condition of uncertainty of happening or
not happening of the event makes the research topic all the more detailed to research upon.
The objective is to be descriptive about conditions when contingent contract becomes void.
The researcher aims at discussing these features in detail to have a better understanding on
the topic. This also implies that there is a detailed discussion on every condition and essential
element of a contingent contract along with its features. The research paper would enhance
the knowledge of the reader through proper analysis of each feature and element.

2
3. Research Questions

 What are contingent Contracts?

 What are the features of a contingent contract?
 What are the conditions under which a contingent contract may become void?

3
 4. Research Methodology

The research methodology used by researcher is mainly doctrinal form for research
methodology. Since the description and discussion as done in the research paper is to quite an
extent, based on principles and provisions as described and provided in various books and
websites, there was less of hollow space left for empirical research. The doctrinal research
method is derived through credible source of information and creates no scope of doubt, and
as a result, provided authentic information collectively. Therefore, doctrinal research
methodology has been adopted to complete this project. Also, both primary and secondary
data collection methods are used to gather enough information about the project. Both the
sources of information helped the researcher enhance the knowledge on this topic and also
helped to be clearer about the other conditions relating to contingent contracts. The researcher
gained useful information from various websites, books, and other important sources of
information which improvised the scope of knowledge. The overall information needed for
completion of this research paper was with the help of provided texts in the books which
imply doctrinal form of research methodology.

Cases Referred

1. Aberfoyle Plantations Ltd. v. Cheng (1959)2 All ER 910

2. Bashir Ahmad v. Andhra Pr. Govt. AIR 1970 SC 1089

3. Bentworth Finance Ltd. v. Lubert (1967) 2 All ER 810

4. N.P.O. Ballayya v. K.V. Srinivasayya Setty & Sons AIR 1954 SC 26

5. Northern India Iron and Steel Co. Ltd. v. State of Haryana and Anr. AIR 1954 SC 26

6. Satyabrata Ghose v. Mugneeram Bangur & Co. AIR 1954 SC 44

4
 5. Contingent Contract

Section 31 of the Indian Contracts Act defines contingent contract as ‘a contract to do or not
to do something, if some event, collateral to such contract, does or does not happen.’6

A contract may be unconditional or absolute on the one hand and conditional or contingent
on the other. The absolute or unconditional contract is one without any reservations or
conditions and is to be performed under any event. On the other hand, conditional or
contingent contract is one in which a promise is conditional and the contract shall be
performed only on the happening or not happening of some future uncertain event. The event
must be collateral to the contract. The condition may be precedent or subsequent. Basically,
we can infer that a conditional promise is one where the liability to perform the promise
depends upon something or event which may or may not happen, or on one of the parties
doing or abstaining from doing an act7. A collateral event is defined as one which is neither a
performance directly promised as part of the contract, nor the whole of the consideration for a
promise8. The event, therefore, is, independent of the contract and does not form part of
consideration to it. The performance of such a contract depends on contingency and such
contingency is uncertain. The test of determining whether the contract is contingent or not, is
uncertainty. If contingency is certain it is not a contingent contract.9

Example: 1. A contracts to pay to B Rs.45,000 if B’s house is burnt. This is a contingent

contract.

Here, A contracts to pay B Rs. 45,000 no doubt for a consideration which is not mentioned,
like, a quarterly or yearly payment of a sum money by B, if B’s house is burnt. The
consideration of the promise to pay Rs. 45,000 is the payment by B, but the contract to pay
Rs. 45,000 will be enforceable only on the happening of this uncertain event, viz, on B’s

6
Section 31- Contingent contract “ A contingent contract is a contract to do or not to do something, is some
event, collateral to such contract, does or does not happen.”
7
Pollock and Mulla, The Indian Contract and The Specific Relief Acts
8
Dutt on The Indian Contract Act, 1872
9
https://www.citeman.com/4316-contingent-contracts.html

5
house being burnt down, an event which is independent of the consideration. The condition,
therefore, should be distinct from consideration. 10

6. Landmark cases on Contingent Contract

In Aborfyle Plantations Ltd. v. Cheng11, P agreed to buy a plantation part of which was held
under a lease which had already expired. The agreement provided that the purchase was
conditional on the vendor obtaining a renewal of the lease, and the agreement would become
null and void if the vendor proved unable to fulfill that condition. The vendor having failed to
obtain the renewal it was held that there was no contract.12

In Bashir Ahmad v. Andhra Pr. Govt13, Bashir purchased the copyright of B’s book of
medicinal prescriptions with a view to start a company for the manufacture of medicines and
made a part payment for the book. Here, the contract is not contingent on the formation of the
company, and Bashir could sue for the balance even if the company was not formed.

In Bentworth Finance Ltd. v. Lubert14, Bent, under a hire purchase agreement, let a car to
Mrs. Lubert, who is to pay 24 monthly installments and the payment of installments is made
dependent upon the delivery of the log-book by Bent to Mrs. Lubert, the obligation to pay the
installments cannot be enforced if the log book is not delivered. Bent is relieved of the
obligation to pay not because there was no contract between the two, but because he failed to
fulfill the condition precedent. But it was held that he was relieved of his obligation as there
was no contract at all until the event happened, i.e., the log book was supplied.

10
Dutt on The Indian Contract Act, 1872
11
Aberfoyle Plantations Ltd. v. Cheng (1959)2 All ER 910
12
Dutt on The Indian Contract Act, 1872
13
Bashir Ahmad v. Andhra Pr. Govt. AIR 1970 SC 1089
14
Bentworth Finance Ltd. v. Lubert (1967) 2 All ER 810

6
 7. Features of a Contingent Contract

1. There must be a valid contract to do or not to do something.15

Sections 3216 and 3317 of The Indian Contract Act, 1872 refer to the enforcement 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. The agreement to pay minimum
demand charges, there is no event happening and the consumer has to pay it. This is a
reference to the case Northern India Iron and Steel Co. Ltd. v. The State of Haryana and
Anr.18 in which the Court held that Section 3119 of the Act has no applicability in that case
since there was no event.20

2. The performance of the contract must be conditional.21

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. The event has to be very futuristic and uncertain.
Dues and obligations don’t come under the definition of being uncertain. 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.22

15
http://icai.org/resource_file/16815Contingent.pdf.
16
Section 32- Enforcement of contracts contingent on an event happening “Contingent contracts to do or not to
anything if an uncertain future event happens cannot be enforced by law unless and until that event has
happened.”
17
Section 33- Enforcement of contracts contingent on an event not happeneing “ 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 becomes impossible, and not before.”
18
Northern India Iron and Steel Co. Ltd. v. State of Haryana and anr.AIR 1954 SC 26
19
Section 31- Contingent contract “ 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.”
20
Dutt on The Indian Contract Act, 1872

21
http://icai.org/resource_file/16815Contingent.pdf.
22
Dutt on The Indian Contract Act, 1872.

7
 3. The said event must be collateral to such contract.23

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. If there is an offer of a
reward for the recovery of lost goods, there is no contingent contract, in fact, there is no
contract at all unless and until someone, acting on the offer, finds the goods and brings them
to the offeror.24

4. The event should not be at the discretion of the promisor.25

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. In the case of Firm of N.P.O. Ballayya vs
K.V.Srinivasayya Setty & Sons26 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 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.27 These are the most essential elements of a contingent contract. A
contract when fulfills the above discussed criteria, it can be deemed to be a valid contingent
contract. A contingent contract is also a contract; but with some specific requirements and
these essential requirements make a contract a contingent contract.28

23
http://icai.org/resource_file/16815Contingent.pdf.

24
Mulla, The Indian Contract Act

25
http://icai.org/resource_file/16815Contingent.pdf.

26
N.P.O. Ballayya v. K.V. Srinivasayya Setty & Sons AIR 1954 SC 26
27
Mulla, The Indian Contract Act
28
Dutt on The Indian CXontract Act, 1872

8
 8. When contingent contract becomes void

1. The event being impossible29.

If the event on the happening of which the contract is contingent becomes impossible, the
contract becomes void.30. All the parties to contract are discharged from any liability arising
of any performance, or of payment of damages. A contingent contract will become void if the
future uncertain event becomes impossible to occur. Section 3231 of the act states that: “If the
event becomes impossible, such contracts become void.” The Doctrine of Frustration or
impossibility of performance can be discussed here but in India, principles and theories
related to it are not applicable. In the case of Satyabrata vs Mugneeram32, an integral part of a
development scheme of an extensive area of land was started by the defendant company. It
entered into a contract with the plaintiff’s predecessor for the sale of a plot of land to the
latter accepting a small sum of money as earnest. It undertook to construct roads and drains
and the conveyance was to be completed soon after the completion of tile roads on payment
of the balance of the price. As a considerable portion of the area comprised in the scheme was
requisitioned by the Government for military Purposes in 1941, the company wrote to the
defendant that the road construction could not be taken up for an indefinite period and
required him to treat the agreement as cancelled and receive back his earnest. It was held that
having regard to the nature and terms of the contract, the actual existence of war condition at
the time when it was entered into the extent of the work involved in the scheme fixing no
time limit in the agreement for the construction of the roads etc., and the fact that the order of
requisition was in its very nature of a temporary character, the requisition did not affect the
fundamental basis of the contract nor did the performance of the contract become illegal by
reason of the requisition, and the contract had not therefore become impossible.33

29
Section 32- Enforcement of contracts contingent on an event happeneing “Contingent contracts to do or not to
do anything f an uncertain future event happens cannot be enforced by law unless and until that event has
happened.”
30
Satyabrata Ghose v. Mugneeram Bangur & Co. AIR 1954 SC 44
31
Section 32- Enforcement of contracts contingent on an event happening “Contingent contracts to do or not to
doanything if an uncertain future event happens cannot be enforced by law unless and until that event has
happened.”
32
Ibid
33
Mulla, The Indian Contract Act, 1872

9
 2. Non-happening of event within fixed time34

Section 3535 of The Indian Contract Act, 1872 states that: Contingent contracts to do or not to
do anything is a specified uncertain event happens within a fixed time becomes void if, at the
expiration of the time fixed, such event has not happened, or if, before the time fixed, such
event becomes impossible.36 If a man promises to pay another man some money, if a ship
does not return within a year, the contract becomes void if the ship is burnt or sinks within
that year.37

3. Agreements contingent on impossible events38

Section 3639 of the act clearly states that: Contingent agreements to do or not to do anything
if an impossible event happens, are void, whether the impossibility of the event is known to
the parties to the agreement at the time when it is made.40

4. Conduct of a living person41

34
Section 35- When contracts become void, which are contingent on happening of spe cified 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.

When contracts may be enforced, which are contingent on specified event not happening within fixed time.—
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, if it becomes certain that such event will not happen. —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, if it becomes
certain that such event will not happen.”

35
Supranote.
36
Ibid.
37
Dutt on The Indian Contract Act, 1872
38
Section 36- Agreements contingent on impossible event void “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.”

39
Ibid
40
Mulla, The Indian Contracts Act.
41
Section 34- When event on which contract is contingent to be deemed impossible, if 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.”

10
Section 3442 of The Indian Contract Act states that: “When event on which contract is
contingent to be deemed impossible, if it is the future conduct of a living person.”

If the future event on which 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.43 The impossibility is only for the time-
being and the prospect of the event becoming possible due to the future conduct of that
person in certain future contingencies, is of no avail. Thus, these are the conditions when a
contingent contract can become void and it cannot be enforced.44

42
Ibid

43
Dutt on The Indian Contract Act, 1872

44
Pollock and Mulla, The Indian Contract and The Specific Relief Acts

11
 9. Conclusion

An agreement enforceable by law is termed as a contract.45 The contract, if contingent by

nature, has to be based on uncertainty of happening or not happening of event. There is an
obscure picture of the actual enforcement of this type of contract since it will be enforceable
only if the event happens and not otherwise. An agreement subjected to contract is not a
contract at all. In this case, the parties agree not to be bound to contract until and unless a
formal contract is executed, which takes place only at the will of the parties. A contract is
formed only on the happening of an uncertain event. On the other hand, a contingent contract
is something totally different. Contingent contracts suspend the performance till the
happening of an uncertain and futuristic event. If a contract provides that it is not binding
until a specified event occurs, it is subject to a condition precedent. If a contract provides for
its determination on the occurance of a specified event in future, it is subject to a condition
subsequent. A contingent contract is enforceable under certain conditions but there are also
conditions under which contingent contract becomes void. Firstly, when the event becomes
impossible to perform. Secondly, when there exists a condition of non-happening of event
within fixed time. Thirdly, it depends on the conduct of a living individual. If any of the three
conditions are fulfilled, there would arise a condition where the contract would be rendered
void.

45
Section 2(h) – An agreement enforceable by law is a contract.

12