In contract law, not every agreement is straightforward. Some contracts only become enforceable when a specific event happens. These are called contingent contracts, and they are explained under Section 31 of the Indian Contract Act, 1872. The key feature of such contracts is that the promisor promises to do something only if a particular event takes place in the future. On the other hand, in absolute contracts, the promisor must perform the promise no matter what.
Examples of contingent contracts include insurance, indemnity, and guarantee. Take a life insurance policy the company only pays if the person dies during the policy term. Until that event occurs, the insurer has no duty to pay. In short, contingent contracts are based on uncertain future events and are different from regular contracts where the duty to perform is unconditional.
You can also read the Judgement of Mohori Bibee V. Dharmodas Ghose Case.
Key Features of Contingent Contracts
Some important characteristics of contingent contracts are:
- Their performance depends on whether a certain future event happens or not.
- They can’t be enforced unless that event occurs.
- If the event becomes impossible, the contract is no longer valid.
- If the contract is based on an event not happening, it becomes enforceable only when that event becomes impossible.
- If the event depends on someone’s future behavior and that person acts in a way that makes it impossible to perform the contract, then it is treated as void.
What Does Section 31 Say?
As per Section 31, a contingent contract is a contract to do or not do something only if an event, unrelated to the contract’s core subject, takes place. Illustration- A agrees to pay B ₹10,000 if B’s house burns down. Since the promise is based on the uncertain event of fire, it’s a contingent contract.
Essentials of a Contingent Contract
For a contract to be recognized as contingent, it must fulfill the following conditions:
Dependence on an Uncertain Event: The contract becomes active only if a specific uncertain event occurs or does not occur.
The Event Must Be Collateral: The event must not be a direct part of the contract. For example, if A agrees to pay B ₹5,000 if B’s car meets with an accident, the accident is the collateral event the main contract is about payment.
No Control Over Event by Parties: The event must not be something that is entirely within the control of one party. It should depend on factors beyond their will.
Uncertainty of the Event: The event must be uncertain — if its occurrence or non-occurrence is already known, the contract is not contingent.
Conclusion
Contingent contracts are important in situations where obligations depend on future events, like in insurance or indemnity agreements. These contracts are valid only if the conditions outlined under Sections 31 to 36 of the Indian Contract Act are met. The most crucial aspect is that the event must be uncertain and collateral. If these conditions are not satisfied, the contract either becomes void or never enforceable in the first place. Understanding contingent contracts helps in drafting conditional agreements that are both legally sound and commercially practical.
