CONCEPT OF CONTINGENT CONTRACT

An absolute contract is the one in which the party performs the contract without any condition. Contingent contract, on the other hand, will be performed only when the particular condition will get fulfilled.

If you look into the contract of insurance, guarantee or indemnity then there is the condition which needs to be fulfilled for the contract to be get activated. For example: in the case of car insurance, the party will get the money only when the car meets with the accident.

Under section 31 of the Indian Contract Act, 1872, a contingent contract is defined as follows “If two or more parties enter into a contract to do or not do something if an event which is collateral to the contract does or does not happen, then it is a contingent contract.” For example, LIC provides life insurance to Suman and promised that amount worth Rs. 1000000 if she will die before the age of sixty years. LIC’s liability arises only when she will die before the age of sixty.

Essentials of Contingent Contract:

1. Depends on happening or non-happening of a certain event: The contract is contingent on the happening or non-happening of a certain event. These actions can be subsequent or precedent that doesn’t matter. For example, A promises to B that he will give him Rs. 50000 if Herry weds Sejal. This is the contingent contract.
2. The event is collateral to the contract: The condition mustn't be the part of the contract. It cannot be performance, consideration or promise. For example: If Sohan promised to sent 10 badminton kits to Mohan and for which Mohan agrees to pay Rs. 100000 then this will not be the contingent contract as it is the part of the contract (delivery of goods) and hence not a collateral event. 

If Sohan promised to send 10 badminton kits on the condition that PV Sindhu will win gold in Australia open but before that Mohan has to give Rs. 20000. This is a contingent contract as Sohan’s obligation arises only when PV Sindhu will win the gold in Australia open which is a collateral event.

1. The event should not be the mere wish of the promisor: The evet cannot solely depend on the promisor. For example, Tanuj promised Nehal to pay Rs. 500 if Virat make the century in the upcoming test match and he also wants the same then it won’t be a contingent contract rather not a contract at the first place. But if Tanuj asked Nehal that he will give him Rs 400000 if he will leave Bangalore and get settled in America. Now here, Nehal may or may not have the will to go to America and hence it’s a contingent contract.
2. The event should be uncertain: To make the condition contingent it should be uncertain. For example, if Sharukh promised to pay Rs 5000 if it rains in Kerala in June. Rain usually happens in Kerala in the month of June hence it’s not uncertain.