1.v.=VERSES
2.etc=ETCETRA
3.i.e.=THAT IS
4.eg.=EXAMPLE
5.A.I.R.=ALL INDIA RECORD
6.pg.=PAGE
7.no.=NUMBER
8.U.O.I=union of india
9.id=IDEM
10.Co.=Company
11.Ltd.=Limited
LIST OF CASES
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TABLE OF CONTENT
List of abbreviation and figure
List of cases
1.ABSTRACT..6
2.RESEARCH METHODS..7
2.1.REVIEW OF LITERATURE..7
2.2.RESEARCH OBJECTIVES..8
2.3.RESEARCH QUESTIONS.............9
2.4.RESEARCH METHODS..10
3.CHAPTERISATION.10
3.1INTRODUCTION:CONTINGENT CONTRACT11
bibliography
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1.ABSTRACT
In this project, I present a systematic criteria and concept of such contract that are
dependant on the happening or non-happening of an uncertain events. It discusses the
nature of a contingent contract and its essentials. It distinguish such a contract from
agreement subject to contract,wagers and aggrements to do impossible acts.
The project also study the situations when a cotingent contract can be enforced and he
circumstances when such contracts become void.
This project study when both negotiating parties fail to reach an agreement and the
contract is characterized as contingent because the terms are not final and are based on
certain events or conditions occurring.
This project also covers that a contingency contract can also be viewed as protection against
a future change of plans. Contingent contracts can also lead to effective agreement when
each party has different time preferences. For example, one party may desire immediate
payoffs, while the other party may be interested in more long-term payoffs. Further,
contingency contracts can foster an agreement in negotiations involving resolute
differences of expectations about the future.
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2.RESEARCH METHODS
2.1.REVIEW OF LITERATURE
In this Article, I present a broad concept of these various accounts of the contingent
requirement in contract law and building on that criteria,I construct a comprehensive new
account which hopefully be satisfactory than any of the earliar accounts.
This project of enforcement of contingent contract is divided into three parts. Par one
discusses the nature of contingent contract and its essentials. Part two distinguish such a
contract from agreements sunject to contract wagers and agreement to do impossible acts.
Part three studies the situations when a contingent contract can be enforced and the
circumstances when such a contract becomes void.
In this project,I also present that a contingency contract can also be viewed as protection
against a future change of plans. Contingent contracts can also lead to effective agreement
when each party has different time preferences. For example, one party may desire
immediate payoffs, while the other party may be interested in more long-term payoffs.
Further, contingency contracts can foster an agreement in negotiations involving resolute
differences of expectations about the future.
Contingent contracts can be used in many types of settings such as work, school, home, etc. In
regards to work, a common example of contingent contracts comes in the form of job negotiations.
It usually involves the opportunity to discuss salary, position, promotion, etc. However, contingent
contracts can often include negotiations regarding flextime, job sharing, responsibilities, etc.
Although contingent contracts concerning employment packages are more the exception than the
norm, these types of negotiations can be very successful, allowing both parties to walk away feeling
very satisfied with the newly agreed upon arrangement .
The following examples are everyday agreements that may occur in the workplace:
The employee and employer agree on a 1% bonus increase at the end of the year if the employee
receives all excellent marks on her performance review.
The employee will be allowed to work two days a week from home after having worked at the
company for one year, and if he submits all reports on time.
The employee will receive full insurance coverage after having worked at the company for one full
year, with less than five sick days.
The following example illustrates a behavioral contract between a teenager and parents to be used
in the home:
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The teenager agrees to attend all classes, complete homework on time, return home before curfew,
communicate with parents in a respectful manner, etc.
If the teenager violates any of the agreed upon rules, he will choose to suffer the consequences
which involve being grounded, no television or Internet, not using the family car, etc.
The parents agree that if the teenager performs the agreed upon behaviors, then the teenager will
be able to keep his privileges.
In order to be most effective, contingent contracts should possess some of the following
characteristics:
The promise is based on an uncertain event: the action required of one party is only dependent
upon the occurrence of some event in the future .
The event must be minor to the contract: the performance of a promise is not the event; rather it is
part of the contract .
The event is independent of the promising party: the occurrence of an event is not controlled by the
promising partys will or desire .
The parties must mutually decide how the terms of agreement will be measured .
A contingency contract can also be viewed as protection against a future change of plans.
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2.2.RESEARCH OBJECTIVE
4. illustrates all sections(31-36) of Indian contract act 1872 which covers contingent contract
2.3.RESEARCH QUESTION
2.Which section under Indian contract act deals with contingent contracts and its
illustrartions?
2.3.RESEARCH METHODS
As whole research work for this work is confined to the library and books and no field work
has been done hence researcher in his research work has opted the doctrinal methodology of
research. Researcher has also followed the uniform mode of citation throughout the project
work
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2.5.HYPOTHESIS
Contracts that are dependant on the happening and non-happening of an uncertain event is
called contingent contract,which is different from absolute contract,in which the promisor
binds himself to perform the contract in any events.
2.6.SOURCES OF DATA
For doing the research work various sources has been used. Researcher in the research work
has relied upon the sources like many books of the law of torts, Articles, and Journals. The
online materials have been remained as a trustworthy and helpful source for the research.
Though the researcher has tried his level best to not to left any stone unturned in doing his
research work to highlight the various aspects relating to the topic, but the topic being so vast
and dynamic field of law and whose horizon and ambit cannot be confined and narrowed
down, the research work has sought with some of the unavoidable limitations.
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CHAPTERISATION
SYNOPSIS
1.Introduction:Contingent contracts
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CHAPTER-1
INTRODUCTION:CONTINGENT CONTRACT
An absolute contract:It is a contract in which the promise bind himself to perform the contract in any
event
A contract is an agreement enforceable by law. [Section 2(h) of The Indian Contract Act, 1872]. For
every contract, there should be an agreement that is made by the free consent of parties competent
to contract, for a lawful consideration and with a lawful object. The agreement should not be
declared void hereby to form a contract. This definition of contracts as per Indian Contract Act, 1872
is based on Sir Pollocks definition which states that every agreement and promise enforceable at
law is a contract. Thus for the formation of a contract, there must be an agreement and something
in addition to that, i.e., an agreement, and its enforceability at law.1
The word contingent ordinarily means subject to chance. In the Indian Contract Act, 1872, this
word has been used to mean conditional, just the way we use it generally. Uncertainty is the hall-
mark of the future. Estimating the chances of an uncertainty becoming certain, calculating the
results if the event doesnt happen and then measuring the potentiality to deal with its
consequences are all about contingent contracts. Parties may stipulate that performance of
obligations under a contract is dependent on a contingency, even though the contract is validly
formed.2The parties agreeing to the conditions agree that the rights will be enforced and the
obligations will be due on the happening of the contingency on the contracting of a valid contract.
Section 31 to 36 of The Indian Contract Act, 1872 deal with this type of contract. Section 31 of the
Act defines contingent contract thus:
Every contingent contract is thus a contract primarily. Like any other contract, it is also a contract to
do or not to do something. It is not, however, an absolute and unconditional one, without any
reservations or conditions, which is to be performed under any event. Its performance is dependent
on some events happening or not happening- the contingency.
1
Aggarawal Rohini, Mercantile and Commercial Laws, Taxmann, 2012 Print
2
Rao V Kesava, Contract I, Lexisnexis, 2004 Print
3
The Indian Contact Act, 1872 Bare Act, Professional Book Publishers, 2014 Print
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This case of Chandulala vs. Commissioner of Income Tax is the best example of a contingent
contract.4
On June 23, 1959, a policy called Childrens Deferred Endowment Assurance for a sum of Rs.
50,000/- was issued by the Life Insurance Corporation of India. The proposer was Harjivandas
Kotecha, the father of the appellant (hereinafter called the assesse) and the life assured was that of
the assesse. The premium payable in respect of the policy was Rs. 1,925/ per annum. That amount
was paid as premium out of the taxable income of the assesse. In the course of the assessment for
the assessment year 1960-61, the assesse claimed rebate on the insurance premium of Rs. 1,925/
under the provisions of s. 15(1) of the Income-tax Act, 1922 (hereinafter called the Act). The
Income-tax Officer rejected the claim on the ground that under the said policy the life of the minor
assesse had not been assured. The Appellate Assistant Commissioner agreed with the Income- tax
Officer and held that the claim of the assesse was rightly rejected. The assesse took the matter in
further appeal before the appellate Tribunal but the appeal was dismissed. The appellate Tribunal
stated a case to the High Court on the following question of law: Whether rebate under s. 15(1) of
the Income- tax Act, 1922 is admissible on the premium payable as per Annexure A during the
minority of the assesse?
The High Court of Gujarat answered the reference in favour of the respondent. It held that the
contract of insurance with the Life Insurance Corporation was entered into by the father of the
assesse and under the terms thereof the contract was to become the assesses contract only by his
adopting it on attaining majority. The High Court further held that on the true interpretation of the
terms of the contract, even if the minor were to be alive on the deferred date it was the assessees
father who was entitled to receive the cash option unless the assesse adopted the contract as his
own. The High Court, accordingly observed that the real contracting parties were the father of the
assesse and the Life Insurance Corporation and it was only under certain contingency on the
happening of which the contract was to become the contract of the assesse.
1.Contract of insurance
2.Contract of indemnity
4
Gujarat 1967 AIR 816, 1967 SCR (1) 921
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CHAPTER-2
For a contract to be a contingent contract, certain essential elements have to be there. These
elements form a contingent contract and without them, a contract will not be contingent.
These are the following essentials:
5
AIR 1976 (P & H) 59
6
Contingent Contracts, available at http://icai.org/resource_file/16815Contingent.pdf , 27/03/2014, 09:10 IST
7
Rao V Kesava, Contract I, Lexisnexis, 2004 Print
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enforceable only on the happening of the uncertain event- destruction of Ys house by fire-
which event is independent of the consideration and collateral to the contract.8
These are the most essential elements of a contingent contract. A contract when fulfills the
above discussed criteria, it can be deemed to be a valid contingent contract. A contingent
contract is also a contract; but with some specific requirements and these essential
requirements make a contract a contingent contract.
5.The Contrast
Contingent contracts form a very important part of The Indian Contract Act, 1872. These
contracts have certain elements in them which make them different from every other type
of contracts.
8
Rao V Kesava, Contract I, Lexisnexis, 2004 Print
9
AIR 1954 SC26
10
Rao V Kesava, Contract I, Lexisnexis, 2004 Print
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There is a huge difference between wagering and contingent contract. The biggest difference
being, a contingent contact is a valid contract but a wagering contract is absolutely void.11A
wagering agreement is a promise to give money or money s worth upon the determination
or ascertainment of an uncertain event.12In these, the parties are not interested in the
occurrence and non-occurrence of the event. There must be determination of the event as
the sole condition of the contract. One party losing and the other party losing on the
happening of the event is the major criteria here. On the other hand, in contingent contract,
the major factor is the happening or not happening itself and it is not about winning or losing
money or its worth. Wagering is looked upon as an existing evil of the society. In the case,
Badridas Kothari vs Meghraj Kothari 13the plaintiffs pleading was that on the 5th January,
1956 he lent and advanced a sum of Rs. 775 for business purpose and the defendant
acknowledged the sum in writing agreeing to pay interest at -/4/- annas per cent per month.
The plaintiff based his claim on a promissory note or hand-note dated 5th January, 1956. The
defense was that the plaintiff and the defendant were speculators in the share market , the
plaintiff incurred some losses in the share business on account of the laches of the defendant
and therefore the defendant executed the Promissory Note. This defence was based on the
allegation that the transaction between the plaintiff and the defendant was fatka or share
speculation business and was a wagering contract. The court believed the plaintiff to be true
and the payment slip given by the defendant as fraud but the fact that it was in regard to
fatkas, the contract was set void. This is a case law in regard to wagering. This distinguishes a
contingent contract from an agreement made by way of wager.
11
Differences between Contingent and Wagering Contracts, available at
http://mercantilelaws.blogspot.in/2012/05/distinguish-between-contingent.html, 28/03/2014, 17:40 IST
12
Wagering Contract, available at http://gradestack.com/CA-CPT-Exam-Prep-by-AOC/Difference-Between-
Wagering-Agreeme/14455-2914-1207-study-wtw , 28/03/2014, 18:20 IST
13
AIR 1967 Cal 25
14
Rao V Kesava, Contract I, Lexisnexis, 2004 Print
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two straight lines in an enclosed space is an agreement to do impossible act and void. We
can thus clearly see how different these two agreements. Possibility of the event is the most
important aspect of a contingent contract and the agreement to do impossible acts negates
this feature of a contingent contract.
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CHAPTER-3
1.Contract cannot be enforced until and unless the event has happened.
2.If the event becomes impossible then such contract becomes void.
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Section 33 of Indian Contract Act,1872 says about enforcement of contract contingent on an
event not happening,which states that Contintent contracts to do or not to do anything if
an uncertain future event does not happen,can be enforced when the happening of that
event becomes impossible,and not before.
Contract can be enforced only when happening of the event becomes impossible.
If a person promises to pay another a sum of money if a ship does not return back, he will
be obliged to pay only and only after the possibility of the ship returning becomes
impossible. In this illustration, if the ship sinks, the possibility of it returning becomes nil.
Thus, the contract has to be enforced. The person has to pay money and he cannot wait
with the hope of the ship returning. In the case of Frost vs Knight,17the defendant promised
to marry the plaintiff on the death of her father. While the father was still alive, he married
another woman and thus, it was held that there was no chance left that the defendant
would marry the plaintiff. Thus, she was entitled to sue him. As soon as the man married
another woman, it was sure that the event of the marriage of the plaintiff and the
defendant would not occur. Thus, the plaintiff had the right to sue him.
The contract becomes void when such person does anything to make the event impossible.
17
(1840) 49 ER 58
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1.When contracts become void,which are contingent on happening of specified event within
fixed time,which states that Contingent contracts to do or not to do anything if a specified
uncertain event happens within a fixed time become void if,at the expiration of the time
fixed,such event becomes impossible .
1.If,at the expiration of the time fixed,such event has not happened.
For instance, If a man promises to pay another man some money if a ship does not return
within a year, the contract becomes void if the ship is burnt or sinks within that year.
2.When contracts may be enforced,which are contingent on specified event not happening
within fixed time,ehich states that Contingent contracts to do or not to do anything if a
specified uncertain event does not happen within a fixed time may be enforced by a when
the time fixed has expired,and such event has not happened,or ,before the time has
expired,if it becomes certain that such event will not happen .
1.When the time fixed has expired and such event has not happened.
2.When before the time period has expired,it become certain that such event will not
happen.
For instance,If X promises Y a sum of money if a certain ship does not return within a year.
The contract may be enforced if the ship does not return within the year, or is burnt within
the year.
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1.The contract is void.
2.It sis void even if the impossibility of the event was not known to the parties to the
agreement at the time when it is made.
If X contracts to pay Y if Y marries Z and Z dies without being married to Y, the contract
becomes void. A contingent contract will become void if the future uncertain event
becomes impossible to occur. Section 32 of the act states that:
18
Kapoor S.K. , Contracts I, Cental Law Agency, 2007 Print
19
AIR 1954 SC44
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CHAPTER-4
CONTINGENT CONTRACT
1.Contingent Contract is a valid contract in nature.
2.Under Contingent Contract, future uncertain events are collateral to the main purpose of the
contract.
WAGERING AGREEMENT
1.Wagering agreements are void in nature.
2.Under Wagering agreement, future uncertain event is the key element of the agreement.
4.Parties are not interested in the happening of an event except for the winning or loosing of the bet
amount.
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CHAPTER-5
A contract is an agreement enforceable by law. For every contract, there should be an agreement
which is made by the free consent of parties competent to contract, for a lawful consideration and
with a lawful object. The agreement should not be declared void hereby to form a contract. Every
contingent contract is a contract primarily. Like any other contract, it is also a contract to do or not
to do something. It is not, however, an absolute and unconditional one, without any reservations or
conditions, which is to be performed under any event. Its performance is dependent on some
events happening or not happening- the contingency.
For a contract to be a contingent contract, certain essential elements have to be there. These
elements form a contingent contract and without them, a contract will not be contingent. There
must be a valid contract to do or not to do something. The performance of the contract must be
conditional. The said event must be collateral to such contracts and the event should not be at the
discretion of the promisor. These are some rules that have to be followed for a contingent contract
to be enforceable. For instance, on the happening of an event, on the event not happening and on
the event not happening within a specified time. There are some situations when a contingent
contract becomes void. Some of them are: the event being impossible, not happening of event
within fixed time, agreements contingent on impossible events and on the conduct of a living
person.
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BIBLIOGRAPHY
1.BOOKS:-
iv.LAW OF CONTRACT-1 AND SPECIFIC RELIEF ACT by Dr.Kailash Rai,3rd edition 2011,central law
publication,page-295-299
2.WEBSITES:-
i.https://en.m.wikipedia.org
ii.https://.lawnerds.com
iii.https://.wustl.edu
iv.https://.harvard.edu
v.https://.bilsoflaw.org
vi.https://.casebrief.com
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