Contingent Contract

Basing on the presence or absence of Conditions, Contracts can be classified into two groups namely; Absolute Contracts and Contingent Contracts. In case where there is no condition, it is called Absolute Contract. As there is no condition, absolute contract is to be performed under all circumstances.

In case where there is condition, then such contract is called Contingent Contract. Therefore Contingent Contract means Conditional Contract. When imposed and condition is fulfilled, the Contingent Contract becomes valid and then parties have to perform their obligations. If imposed and Condition is not fulfilled, the Contingent Contract become Void and then it need not be performed. So Contingent Contract is to be performed under some circumstances only.

·                     Example: There is a Contract between A and B according to which A has to sell his goods which are in voyage, to B if the ship reaches the harbor safely. Here condition can be seen and it is Contingent Contract. All indemnity contracts, guarantee contracts and insurance contracts are Contingent Contracts. According to Sec. 31 of Indian Contracts Act, a Contract performance of which depends upon happening or non happening of an un-certain event is called Contingent Contract.

Types of Contingent Contracts

Depending Upon Happening of an Uncertain Event: Sometimes Contingent Contract depends upon happening of uncertain event. Then if such uncertain event takes place, the Contingent Contract becomes valid and if that uncertain event does not take place, the Contingent Contract is Void.

·                     Example: According to Contract formed between A and B, A has to sell goods to B, if ship comes there safely, their Contract is valid and if the ship gets drowned, their Contract is void.

Depending upon non-happening of an uncertain event: At times the Contingent Contract may depend upon non-happening of uncertain event. Then if that event does not happen, the Contract is Valid and if that event takes place, the contract is void.

·                     Example: There is a contract between A and B according to which A has to sell goods to B, if the ship does not come back. Here, if the ship come back, the Contract is void and if the ship gets drowned away, then it is valid.

Depending upon happening of an Uncertain event in a fixed period: At times Contingent Contract may depend upon happening of uncertain event in a fixed period. If such event happens within fixed period, the contract is Valid. If such event does not take place with in fixed period, the contract is void.

·                     Example: As per the contract formed between A and B, A has to sell goods to B, if the ship comes back within 10 days. If it comes on 8th day (or) 9th day, the contract is valid and if it comes back on 12th day (or) 13th day, the contract is void.

Depending upon non-happening of an uncertain event in a fixed period: At times the Contingent Contract may depend upon non-happening of uncertain event in a fixed period then if such event place within that fixed period, the contract is void and if that event does not takes place within agreed period, then it is valid.

·                     Example: A has to sell goods to B if the ship does not come back within 10 days. If it comes on 8th day (or) 9th day, the contract is void and if it comes back on 12th day (or) 13th Day, the contract is valid.

Depending upon an Impossible Event: Sometimes the Contingent Contract may depend upon impossible event. Such a type of Contingent Contract is abinitio void.

·                     Example: there is a contract between A and B where A will pay Rs.100000/- to B if B marry C. Assume that C was dead 5 years ago, now element of impossibility can be seen and their contract is abinitio void.