Contingent Contracts

In one line

A contingent contract is a contract to do or not to do something if some event, collateral to such contract, does or does not happen, and sections 32 to 36 say when each kind may be enforced and when it becomes void.

Section 31: the definition

A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.

Illustration: A contracts to pay B ten thousand rupees if B's house is burnt. This is a contingent contract.

The word that decides every problem is "collateral". The event must be outside the contract, not part of the promise itself.

Three consequences.

A contract of insurance is the model contingent contract, because the fire, the death or the accident is collateral to the promise to pay.

A contract of indemnity and a contract of guarantee are contingent, because the loss or the default is collateral.

But a contract to deliver goods on payment is NOT contingent, because payment is part of the performance, not an event collateral to it. A condition of performance is not a contingency, and that is the distinction the word carries.

Sections 32 and 33: the two basic rules

Section 32, contingent on an event happening. Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.

Illustrations: A contracts to buy B's horse if A survives C, and the contract cannot be enforced unless and until C dies in A's lifetime. A contracts to sell a horse to B if C, to whom it has been offered, refuses to buy, and the contract cannot be enforced until C refuses. A contracts to pay B when B marries C, and C dies without being married to B; the contract becomes void.

Section 33, contingent on an event not happening. Contingent 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.

Illustration: A agrees to pay B a sum if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.

The pair is symmetrical. Section 32 waits for the event; section 33 waits for the event to become impossible, which is the same moment viewed from the other side.

Section 34: future conduct of a living person

If the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.