CONTINGENTS CONTRACTS

CONTINGENT CONTRACTS

In this unit we shall briefly examine what is called a‘contingent contract’, its essentials and the rules regarding enforcement of this type of contracts. The Contract Act recognises certain cases in which an obligation is created without a contract. Such obligations arise out of certain relations which cannot be called as contracts in the strict sense. There is no ouer, no acceptance, no consensus ad idem and in fact neither agreement nor promise and yet the law imposes an obligation on one party and confers a right in favour of the other. We shall have a look on these cases of ‘Quasi-contracts’.

A contract may be absolute or a contingent. An Absolute contract is one where the promisor undertakes to perform the contract in any event without any condition.

Definition of‘Contingent Contract’ (Section 31)
“A contract to do or not to do something, if some event, collateral to such contract, does or does not happen”.

Contracts of Insurance, indemnity and guarantee fall under this category
Example: A contracts to pay B ` 1,00,000 if B’s house is burnt. This is a contingent contract. 

Meaning of collateral Event: Pollock and Mulla defined collateral event as “an event which is neither a performance directly promised as part of the contract, nor the whole of the consideration for a promise”.

Example: A contracts to pay B ` 100,000 if B’s house is burnt. This is a contingent contract. Here the burning of the B’s house is neither a performance promised as part of the contract nor it is the consideration obtained from B. The liability of A arises only on the happening of the collateral event.