The Contract Act 1872

CA. Manish Dafria

Unit 1 Part 6:  Contingent and Special Contracts

IPCC Paper 2 Business Laws, Ethics & Communication 

Learning Objectives

Contingent Contracts – What they are

Essentials of  a contingent contract

Rules regarding enforcement of contingent contracts

Difference between contingent contract and wagering contract

Quasi Contracts – Meaning

Types of Quasi Contracts

Contingent Contracts:  Introduction

Contingent Contract

• A contractmay be‐

An absolute contract

A contingent contract

Contingent Contract

• An “absolute contract”is one in which thepromisor binds himselfto perform the contractin any event.

• A “contingent contract”is a contract to do ornot to do something, ifsome event, collateralto such contract doesor does not happen.(Sec. 31).

MNO Ltd. contracts to pay Rs. 50,00,000 if  R’s house gets destroyed by earthquake.  This is a contingent contract. 

Pratham agrees to sell his house to  Tanu if he wins the court case related with his house. This is a contingent contract.

Contingent Contracts

Some Typical types of Contingent Contracts are :• Contracts of Insurance• Contracts of Indemnity

Essentials of Contingent Contract

3 Essentials of a Contingent Contract

Its performance depends upon happening or non happening of some event.

The eventmust be uncertain.

The eventmust be collateral.

3 Essentials of a Contingent Contract

1. Performance of acontingent contractdepends upon happeningor non‐happening ofsome event.

For ExampleNishank promises to pay Rs.10,00,0000 to the bank if hisfriend Shashank fails to repaythe loan.Nishank shall be required toperform only when event offailure by Shashank happens.

3 Essentials of a Contingent Contract

2. The event must beuncertain. If the event iscertain and the contract isbound to be performed inany case, it is not acontingent contract.

For ExampleJai promises the contractor,who is constructing his house,to pay Rs. 50000 if theconstruction is completedbefore June.The event is completion ofconstruction before Junewhich may or may nothappen.

3 Essentials of a Contingent Contract

3. The event should not bepart of the contract butshould be only collaterali.e. incidental to thecontract. The event should be

neither performancepromised nor aconsideration for apromise.

For ExampleWhen Raju hires a car for tripto Nagpur and promises topay after completion ofjourney , this is not acontingent contract.

This may be called aconditional contract but not acontingent contract.

Contingent Event V. Will of thePromisor Performance of contingentcontract depends uponhappening or non‐happening of an uncertain“event”.

The “event” may be an“act” and accordinglycontract may be contingenton act of party to thepromise or of a third party.

However the contingentevent should not be a

For Example• Rajesh promises to payManoj Rs. 1,00,000 ifRajesh desires‐ it is nocontract at all.

• Rajesh promises to payManoj Rs. 1,00,000 ifManoj goes to Delhi beforenext January‐ it is acontingent contract since itdepends upon act ofManoj going to Delhibefore next January, whichis an uncertain event.

Rules Regarding Enforcement Of Contingent Contracts

Rules Regarding Contingent Contracts

Sec. 32• When contingency is the “happening of an event”

Sec. 33• When contingency is the “non‐happening of an event”.

Sec. 34• When contingency is the “future conduct of a living person”.

Sec. 35• When contingency is the “happening  or non‐happening of an event within a fixed time”

Sec. 36 • When contingency is  “an impossible event”.

Rules Regarding Contingent Contracts

When contingency is the“happening of an event”(Sec. 32)

1. Contract cannot beenforced unless and untilthe event has happened.

2. If the event becomesimpossible, such contractsbecome void.

For Example• Raj makes a contract with

Hari to buy Hari' s house ifShyam dies before Raj. Thiscontract cannot be enforcedtill the death of Shyam.

• A makes a contract with B tosell a horse to B at a specifiedprice, if C, to whom the horsehas been offered, refuses tobuy him. The contract cannotbe enforced by law unlessand until C refuses to buy thehorse.

• A contracts to pay B a sum ofmoney when B marries C. Cdies without being married toB. The contract becomesvoid.

Rules Regarding Contingent Contracts

When contingency is the“non‐happening of an event”(Sec. 33)

• Contract can be enforcedonly when happening ofthe event becomesimpossible.

For Example• A agrees to pay B a sum of

money if a certain shipdoes not return. The shipis sunk. The contract canbe enforced only when theship sinks.

Rules Regarding Contingent Contracts

When contingency is the“future conduct of a livingperson” (Sec. 34)

• The contract becomes voidwhen such person doesanything to make the eventimpossible.

For Example• A agrees to pay B a sum of

money if B marries C. Cmarries D. The marriageof B to C must now beconsidered impossible,although it is possible thatD may die and that C mayafterwards marry B.

Rules Regarding Contingent Contracts

When contingency is the“happening of an eventwithin a fixed time”(Sec. 35)

• Contract becomes void :– If, at the expiration of thetime fixed, such event hasnot happened.

– If, before the time fixed,such event becomesimpossible.

For Example• A promises to pay B a sum

of money if a certain shipreturns within a year. Thecontract may be enforcedif the ship returns withinthe year, and becomesvoid if the ship is burntwithin the year.

Rules Regarding Contingent Contracts

When contingency is the“non‐happening of an eventwithin a fixed time”(Sec. 35)

• Contract may be enforced :– When the time fixed hasexpired and such event hasnot happened.

– When before the time fixedhas expired, it becomescertain that such event willnot happen.

For Example• A promises to pay B a

sum of money if acertain ship does notreturn within a year.The contract may beenforced if the ship doesnot return within theyear, or is burnt withinthe year.

Rules Regarding Contingent Contracts

When contingency is “animpossible event” (Sec. 36)

• The contract is void.• It is void even if theimpossibility of the eventwas not known to theparties to the agreement atthe time when it is made.

For Example• A agrees to pay B 1, 000

rupees if a triangle can bemade with only twostraight lines. Theagreement is void.

• A agrees to pay B 1, 000rupees if B will marry A' sdaughter C. C was dead atthe time of theagreement. Theagreement is void

Difference Between A ContingentContract And A Wagering ContractWagering Contract1. A promise to pay money or

money’s worth with reference toan uncertain event happening ornot happening.

2. It consists of reciprocal promises.3. The uncertain event is the core

factor.4. It is essentially contingent in

nature.5. Here, the contracting parties have

no interest in the subject matter.6. It is a game, losing and gaining

alone matters.7. Wagering agreement is void.

Contingent Contract1. A contract to do or not to do

something with reference to acollateral event happening or nothappening.

2. It may not contain reciprocalpromises.

3. The event is collateral.4. It may not be wagering in nature.5. Here, the contracting parties may

have interest in the subjectmatter.

6. It is not so in case of contingentcontract.

7. Contingent contract is valid.

Quasi ‐ Contracts

Quasi‐Contracts

An obligation that the law creates in the absence of an agreement between the parties.

In certain situations, a person may receive a benefit for which the law considers that he should pay to another person even though there is no contract between the parties. Such relationships are known as quasi contracts.  

These contracts create same obligations as in the case of regular contract.

Types of Quasi Contract

• Claim fornecessariessupplied topersons incapableof contracting.

Sec. 68

• Right to recovermoney paid foranother person.

Sec. 69

• Obligation ofperson enjoyingbenefits of non‐gratuitous act.

Sec. 70

• Responsibility offinder of goods.

Sec. 71

• Liability for moneypaid or thingdelivered bymistake or bycoercion.

Sec. 72

Claim For Necessaries Supplied ToPersons Incapable Of Contracting• If a person,

– incapable of entering into acontract, or

– any one whom he is legallybound to support,

– is supplied by anotherperson with necessariessuited to his condition inlife,

– the person who hasfurnished such supplies isentitled to be reimbursedfrom the property of suchi bl (S 68)

For Example• A supplies B, a minor,

necessary books for hisstudies. A is entitled tobe reimbursed from B’sproperty.

• A supplies daily rationto the wife and childrenof B, a lunatic. A isentitled to bereimbursed from B’sproperty.

Right To Recover Money Paid ForAnother Person• A person,

– who is interested in thepayment of money

– which another is bound bylaw to pay, and

– who therefore pays it,– is entitled to be reimbursedby the other. (Sec. 69)

For Example• A is tenant of house

owned by B. B has notpaid municipal taxes dueto corporation andcorporation has orderedseizure of the property. Apays the taxes tocorporation. A can recoverthis money from B.

Obligation Of Person EnjoyingBenefits Of Non‐gratuitous Act• Where a person

– lawfully does anything foranother person, or deliversanything to him, and

– he does not intend to do sogratuitously, and

– other person enjoys thebenefit thereof,

– the latter is bound tocompensate the former inrespect of the thing so doneor delivered. (Sec. 70)

For Example• A, a tradesman, leaves

goods at B' s house bymistake. B treats thegoods as his own. He isbound to pay A for them.

• A saves B' s propertyfrom fire. A is notentitled to compensationfrom B, if thecircumstances show thathe intended to actgratuitously.

Responsibility Of Finder Of Goods

• A person who finds goodsbelonging to another, andtakes them into hiscustody, is subject to thesame responsibility as abailee(Sec. 71)

• Thus a finder of goods has :– To take proper care of thegoods as a man of ordinaryprudence would take.

– No right to appropriate thegoods

h d if h

For ExampleShailendra, a shopkeeper findsa diamond bracelet in his shopand keeps it in an open shelffrom where it goes missing.Shailendra is liable tocompensate the owner since hehas not taken the proper carewhich a prudent man wouldhave taken.

Liability for money paid or thingdelivered by mistake or by coercion

– A person to whom moneyhas been paid, or anythingdelivered, by mistake orunder coercion,

– must repay or return it. (Sec.72)

For Example• A and B jointly owe 100 rupees

to C, A alone pays the amountto C, and B, not knowing of thisfact, pays 100 rupees overagain to C. C is bound to repaythe amount to B.

• An Airline refuses a passengerpermission to board a flightunless he pays extra baggagecharges though the baggageare within the permissiblelimit. Passenger pays the sumdemanded in order to boardthe flight. He is entitled torecover so much of the chargeas was excessive.

Summary

A contract may be either absolute or contingent.

Contingent Contract is one where the promisor undertakes to perform the contract which is  depended on the happening/ non‐ happening of a specified future uncertain event, which is collateral to the contract.

All wagering agreements are basically contingent agreements but all the contingent contracts are not wagering agreements.

Quasi Contracts / Constructive contracts are the contracts presumed by law. These are the contracts which are imposed by law.

Summary

Quasi Contract may be exercised under following five conditions‐

• Necessaries of  life supplied to incapable person  or to his dependents.

• Person pays money on behalf of the one, who is legally bound to pay.

• Person enjoying the benefits of non gratuitous act.• Person finds the goods belonging to others.• Person to whom money has been paid or anything delivered by mistake or under coercion.

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