ESSENTIAL OF A CONTINGENTS CONTRACT

Essentials of a contingent contract

(a) The performance of a contingent contract would depend upon the happening or non-happening of some event or condition. The condition may be precedent or subsequent.

Example: ‘A’ promises to pay ` 50,000 to‘B’ if it rains on first of the next month.

(b) The event referred to is collateral to the contract. The event is not part of the contract. The event should be neither performance promised nor a consideration for a promise.
Thus (i) where A agrees to deliver 100 bags of wheat and B agrees to pay the price only afterwards, the contract is a conditional contract and not contingent; because the event on which B’s obligation is made to depend is part of the promise itself and not a collateral event. (ii) Similarly, where A promises to pay B ` 1,00,000 if he marries C, it is not a contingent contract. (iii) ‘A’ agreed to construct a swimming pool for ‘B’ for ` 200,000. And‘B’ agreed to make the payment only on the completion of the swimming pool. It is not a contingent contract as the event (i.e. construction of the swimming pool) is directly connected with the contract.

(c) The contingent event should not be a mere ‘will’ of the promisor. The event should be contingent in addition to being the will of the promisor.

Example 1: If A promises to pay B ` 100,000, if he so chooses, it is not a contingent contract. (In fact, it is not a contract at all). However, where the event is within the promisor’s will but not merely his will, it may be contingent contract.

Example 2: If A promises to pay B `100,000 if A left Delhi for Mumbai on a particular day, it is a contingent contract, because going to Mumbai is an event no doubt within A’s will, but is not merely his will.

(d) The event must be uncertain. Where the event is certain or bound to happen, the contract is due to be performed, then it is a not contingent contract.

Example: ‘A’ agreed to sell his agricultural land to ‘B’ after obtaining the necessary permission from the collector. As a matter of course, the permission was generally granted on the fulfillment of certain formalities. It was held that the contract was not a contingent contract as the grant of permission by the collector was almost a certainty.