Definition
This kind of contracts are based on uncertain events. In this agreement the parties agree to fulfill obligations only if a specified event occurs in the future. The thing is not clear, something vogue. It is basically based on happening or not happening events. The occurrence of the stated event will determine whether the parties are going to perform an obligation or not.
For example:-
A agrees to pay B 30,000 rupees if B’s home is flamed. This is an example of a contingent contract.
Elements of Contingent Contract
These elements are includes in section 31 of the contract act which talks about the contingent contract. According to section 31 of Contract Act, a dependent contract must include these components.
1. Future Specific Conditions
This type of contract has a condition that it must be related to future events. If future occurrence happen the contract obligations will follows otherwise not.
2. Dependent on happening or non happening
It is kind of collateral to the contract. It is totally based on the situation of happening and not happening. The contract shall prevail if only an event occurs or does not occur but the occurrence must be there.
3. Conditional Contract Performance
A contract is need to be conditional in order to considered as contingent. The contingent contract definition - contract where collateral requirements must occur with certainty in the future. According to Sections 32 and 33 of ICA the condition can be divided in two - Happening and Not Happening.
Also read:- What Is a Power of Attorney
According to Indian Contract Act, 1872
Section 31 to 36 of ICA is related to Contingent Contracts. So we have discuss these sections one by one in simple language that you can easily understand these section.
Section 31 of the Indian Contract Act, gives the definition of a contingent contract. Which says "Contingent contract is a contract to do or to abstain from doing something, basically, it is based on the uncertain events". If some event does or does not happen then the obligations will arise.
Section 32 - Enforcement of contracts when event happening
The commitment to doing an act or to abstain from doing something. This will happen in the case of an uncertain future occurrence. If the event not happen or occurs, the contract cannot be enforced. Such agreements are invalid if the occurrence is became impossible.
Section 33 - Enforcement of contracts when event not happening
In this case, if the event has becomes impossible to occur or already happened, the contingent contract is void. The contract will only obligated to the parties to the contract when the event not happen. Otherwise contract becomes unenforceable.
Section 34 - Contingent contract deemed impossible by a conduct of the living person
If the future event disturbed by the act of the living person at an unspecified time. The event will becomes impossible when such person does any conduct which made it impossible that should be done under definite time or under contingencies.
Illustration
A agrees to pay 100$ to B, if B marries C. but C marries D. Now, the marriage of B to C is become impossible. However. it can be possible that D die and that C may afterwards marry B.
Section 35 - When contract becomes void within fixed time
When contracts become void which are contingent on happening of specified event within specified time. Example: A promises 200$ to pay B, if a ship returns within a year. The contract will be enforced if the ship returns within the year, and becomes void if the ship not come or burnt within the year.
When contracts may be enforced, that are contingent on specified event which is not occur within fixed time. Example; A promises 300$ to pay B if a boat does not return within a year. The contract can be enforced if the ship does not return within the year.
Section 36 - Agreement on impossible act are void
If an agreement to do or not to do is based on the impossible act, then such agreements are void. It does not matter, whether the possibility of not occurring the event is known or not known to the parties at the time while agreement is made.
Illustrations
(a) A agrees to pay B 1,000 rupees if two parallel lines make an intersection. The agreement is void.
(b) A agrees to pay B 2,000 rupees if B will marry A's daughter C. Afterwards it was found that C was dead at the time of the agreement. The agreement is void.
Scope
Contingent contracts has a wide range of situations, it can be as an employment contracts, real estate deals, insurance policies, and many more. They are often used to look after the risk and uncertainty because they let parties reach agreements while understanding the probability of future events that could or might not happen.
Commercial Applications Of Contingent Contracts
Contingent contracts are often uses for a variety of business purposes, there are some commercial applicability of such contract defined below:
Employment:
Contingencies utilize in employment sector to increase the job performance, pay, or other elements can be included. For example, if a salesman meets specific sales goals, they may be get a high commission.
Insurance:
Insurance policies covers particular adversity like accidents, illnesses, or natural disasters are fundamentally dependent contracts. If the insured event happen, the insurer promises to pay will arise otherwise not.
Real estate:
This kind of contracts are usually utilize in real estate transactions, in which a person agrees to buy a property only if a number of conditions are satisfied. Such as a house inspection, getting financing and resolving any other difficulties.
Commodities:
To look after the risk related with price volatility, contingent contracts are there to trade commodities. For example, a man could buy a specific amount of a commodity at a particular price, but only if the price stays within a specific range.
0 Comments