A contingent contract is a legal agreement to do or not do something based on the occurrence or non-occurrence of a future uncertain event. This event must be collateral, meaning it is separate from the main terms of the contract. For example, if A agrees to pay B Rs. 10,000 if B’s house burns down, it is a contingent contract.
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What Is The Enforceability of Contingent Contracts
Contingent contracts based on an uncertain future event can be enforced only after the event occurs. If the event becomes impossible, the contract becomes void. For instance, if A agrees to buy B’s horse only if A survives C, the contract can only be enforced if C dies during A’s lifetime.
When the contract is based on the non-occurrence of an uncertain event, it becomes enforceable once it is clear the event will not happen. For example, if A agrees to pay B if a ship does not return, and the ship sinks, the contract becomes enforceable.
If a contingent contract depends on a specific uncertain event happening within a fixed time, it becomes void if the event doesn’t happen within that time, or if it becomes impossible before the time ends.
However, if the contract is based on an event not happening within a fixed time, it becomes enforceable once the time passes or when it becomes clear the event won’t happen. For example, if A promises to pay B if a ship returns within a year, the contract is enforceable if the ship arrives in time and void if the ship burns during the year.
What About Impossible Events and Contingent Contracts
If the contract is based on an impossible event, it is void from the start, regardless of whether the parties knew about the impossibility. For instance, if A agrees to pay B if two straight lines enclose a space, the agreement is void, as such a thing is impossible.
Conclusion
Contingent contracts rely on future events to become valid. Their enforcement depends on whether the event happens, doesn’t happen, or becomes impossible. The Indian Contract Act treats these contracts differently based on the nature and timing of the event involved.
