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".55 Example: A contracts to indemnify B upto Rs. 20,000 in consideration of B paying Rs. 1,000 annual premium, if B's factory is burnt. This is a contingent contract. Contracts of insurance and contracts of indemnity and guarantee are other examples of contingent contracts. 3.14.2 Essentials of Contingent Contract The essential features of a contingent contract are as follows: a. Dependence on a future event: The performance of a contingent contract depends upon the happening or non happening of some future event. b. Collateral event: The event must be collateral (i.e. incidental) to the contract. c. Uncertain event - The event must be uncertain.

Rules regarding Contingent Contracts a. Enforcement of contracts contingent on happening of a future uncertain event. Contingent contracts to do or not to do anything if an uncertain future event happens can be enforced only when the event happens. Illustration A makes a contract with B to buy B's house if A survives B. This contract cannot be enforced by law unless and until C dies in A's lifetime. b) Enforcement of contracts on the non-happening of a future uncertain event .Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced only when the happening of the event becomes impossible, and not before. Illustration 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.

c.

Contracts contingent on 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 future contingencies. illustration A agrees to pay B a sum of money if B marries C. C married D. The marriage of B to C must now be considered impossible although it is possible that D may die and that C may afterwards marry B. d) Contracts contingent on a specified event happening within a fixed time:" Contracts contingent to do or not to do anything if a specified uncertain event happens within a fixed time would become void if, at the expiration of the time fixed, such event does not happen or if before the time fixed, such event becomes impossible. Illustration A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year.

e)

Enforcement of contingent contracts on specified event not happening within a 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 when such event has not happened, or shall not happen within the time fixed. Illustration A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year, or is burnt within the year. f) Agreements contingent on impossible eoenis:" Contingent agreements to do or not .to do anything if an impossible event happens, are void. Illustration A agrees to pay B Rs. 1,000 if B will marry A's daughter, C. C was dead at the time of the agreement. The agreement is void.

Quasi-Contract
Meaning of Quasi-Contract
A Quasi-Contract is not a contract at all because the essential elements for the formation of a contract are absent. It is an obligation imposed by law upon a person for the benefit of another even in the absence of a contract. It is based on the principle of equity, (i.e., fairness, moral justice or ethics) which means no person shall be allowed to unjustly enrich himself at the expense of another. Such obligations are called quasi-contracts or implied contracts because the outcome of such obligations resemble those created by a contract.

Kinds of Quasi-Contracts The various kinds of quasi contract (or quasi-contractual obligations) are given below: a. Claim for necessaries supplied to a person incapable of contracting or on his account: "If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person. Example: A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B's property. b. Reimbursement of person paying money due by another, in payment of which he is interested: "A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other". For example: A, sub-tenant pays the arrears of rent due by the tenant to the landlord,

b. in order to save the tenancy from forfeiture. The subtenant is entitled to recover from the tenant, the amount paid by him to the landlord, although there is no contract between the two. c. Obligation of person enjoying benefit of nongratuitous act: "Where a person lawfully does anything for another person, 0r delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or deliverer's' For example: A, a tradesman, leaves goods pay A for them.

e)

Responsibility of finder of goods: "A person who finds goods belonging to another and takes them into his custody, is subject to the same responsibility as a bailee". For example: X a guest found a diamond ring on a birthday party of Y. X told Y and other guests about it. He has performed his duty to find the owner. If he is not able to find the owner he can retain the ring as bailee. e) Liability of person to whom money is paid, or thing delivered by mistake or under coercion: "A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it". For example: A and B jointly owe Rs. 1000 to C. A alone pays the amount to C, and B, not knowing this fact, pays Rs. 1000 over again to C. C is bound to repay the amount to B.

Performance of Contracts
Meaning of Performance Performance of contract means fulfilling of the terms of the contract by the respective parties to the contract. The Act lays down "The parties to a contract must either perform, or offer to perform, their respective promises, unless performance is dispensed with or excused under the provisions of this Act, or of any other law". 67 It means that the performance may be either actual - by fulfilling all obligations by the parties under the contract or attempted where an offer to perform one's obligations has been made by the promise, but the performance is not complete unless the offer of performance is accepted by the promise. Such offer to perform one's obligation under a contract is called tender. The second part of the definition lays down that the parties are excused from performance under the provisions of this Act or any other law. For example, an insolvent is excused from performing his part of the contract by law.

Promises bind the legal representatives of the promisors in case of death of such promisors before performance, unless a contrary intention appears from the contract. The liability of the legal representative is limited to the extent of the value of the property inherited from the deceased. Illustrations A promises to deliver goods to B on a certain day on payment of Rs. 1,000. A dies before that day. A's representatives are bound to deliver the goods to Band B is bound to pay Rs. 1,000 to A's representatives. A promises to paint a picture for B by a certain day, at a certain price. A dies before the day. The contract cannot be enforced either by A's representatives or by B.

Who can demand performance It is only the promisee who can demand performance of the promise. The general rule is that "a person cannot acquire rights under a contract to which he is not a party. "68 3.16.3 Who should perform the promise? a. In case of personal contract by the promisor personally. b. In case of non-personal contract: i. By the promisor personally. ii. By a third person on behalf of the promisor. iii. In the event of the death of promisor - by his legal representatives. c) In case of Joint promisor - by the promisors jointly or third person on behalf of the promisors or their legal representatives.

Remedies for Breach of Contract

Meaning of Breach of Contract A breach of contract occurs if any party refuses or fails to perform his part of the contract or by his act makes it impossible to perform his obligation under the contract. In case of breach, the aggrieved party (i.e., the party not at fault) is relieved from performing his obligation and gets a right to proceed against the party at fault. A breach of contract may either be anticipatory or actual.

Remedies of Breach of Contract A remedy is the courses of action which are available to an aggrieved party for the enforcement of a right under a contract. The various remedies available are: Rescission of Contract": Rescission means a right not to perform obligations. In case of breach of a contract, the promisee may put an end to the contract. In such a case, the aggrieved party is discharged from all the obligations under the contract and is entitled to claim compensation for the damage which he has sustained because of the nonperformance of the contract. Suit for Damages: Damages are monetary compensation allowed for loss suffered by the aggrieved party due to breach of contract. Damages may be of five kinds:

I.

II.
III. IV. V.

Ordinary or general or compensatory damages: (i.e., damages arising naturally from the breach). ii. Special damages: (i.e., damages in contemplation of the parties at the time of contract). iii. Exemplary, Punitive or Vindictive damages: (i.e., damages which are in the nature 'of punishment). iv. Nominal damages: (i.e., awarded only for the namesake). Liquidated damages: Means a sum fixed up in advance, which is a fair and genuine pre-estimate of the probable loss that is likely to result from the breach. _

c) Suit for Specific Performance: Means demanding the court's direction to the defaulting party to carry out the promise according to the terms of the contract. For example: X agreed to sell an old painting to Y for Rs. 50000. Subsequently X refused to sell the painting. Here, Y may file a suit against X for the specific performance of the contract.

d)

e)

Suit for Injunction: Means demanding court's stay order Injunction means an order of the court which prohibits a person to do a particular act. For example: W agreed to sing at L's theatre only during the contract period. During the contract period, W made contract with Z to sing at another theatre and refused to perform the contract with L. It was held that W could be restrained by injunction from singing for Z. Suit for Quantum meruit: Quantum-meruit means as much as is earned. In this suit, claim is made to compensate for the work already done. For. example: C an owner of a magazine engaged P to write a book to be published by installments in his magazine. After a few installments were published, the publication of the magazine was stopped. It was held that P could claim payment for the part already published.

Indemnity and Guarantee

Contract of Indemnity Meaning The term 'Indemnity' means to make good the loss or to compensate the party who has suffered some loss. "A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity"." For example: A and B go into a shop. B says to the shopkeeper "Let A have the goods, I will see that you are paid". The contract is one of Indemnity. Parties The person who promises to make good the loss is called the 'Indemnifier' (promisor), and the person whose loss is to be made good is called the 'Indemnified or Indemnity holder' (promisee).

Kinds of Guarantee Guarantee may be classified under the following two categories: Specific Guarantee: A guarantee which extends to a single debt or specific transaction is called a 'specific guarantee'. The liability of the surety comes to an end when the guaranteed debt is duly discharged or the promise is duly discharged. Continuing Guarantee: A guarantee which extends to a series of transactions is called a 'continuing guarantee'. A surety's liability continues until the revocation of the guarantee.

Discharge of Surety from Liability A surety is said to be discharged when his liability as surety comes to an end. A surety is freed from his obligation under a contract of guarantee under any of the following circumstances: a. Notice of revocation: A specific guarantee cannot be revoked once it is acted upon. But a continuing guarantee may at any time, be revoked by the surety as to future transactions by giving notice to the creditor.?' b. Death of Surety": In case of a continuing guarantee the death of a surety also discharges him from liability as regards transactions after his death, unless there is a contract to the contrary. c. Variance in terms of contract": Any variance made without the surety's consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.

d)

e)

f)

g)

Release or discharge of principal debtor: The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act of omissions of the creditor, the legal consequence of which is the discharge of the principal debtor. Arrangement by creditor with principal debtor without surety's consent": A contract between the creditor and principal debtor, by which creditor makes a composition with, or promises to give time to, or not to sue the principal debtor, discharges the surety, unless the surety assents to such contract. Creditor's act or omission impairing surety's eventual remedv": If a creditor does any act which is inconsistent with the rights of the surety, or omits to do any act, which is his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged .. Loss of Surety": If the creditor loses (by negligence or carelessness) OJ' without the consent of the surety, parts with security given to him, the surety is discharged from liability to the extent of the value of security