"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." Thus it is a contract, the performance of which is dependent upon, the happening or non-happening of an uncertain event, collateral to such contract.
Illustration A contract to indemnify B upto Rs20,000, in consideration of B paying Rs1,000 annual premium, if B’s factory is burnt. This is a contingent contract.
Any ordinary contract can be changed into a contingent contract, if its performance is made dependent upon the happening or non-happening of an uncertain event, collateral to such contract. For example, the following are contingent contracts:
(a) A contracts to sell B 10 bales of cotton for Rs20, 000, if the ship by which they are coming returns safely.
(b) A promises to give a loan of Rs1, 000 to B, if he is elected the president of a particular association.
(c) A promises to pay Rs50, 000 to B if a certain ship does not return, of course after charging usual premium. (It is a contract of insurance.)
(d) C advances a loan of Rs10, 000 to D and M promises to C that if D does not repay the loan, M will do so. (It is a contract of guarantee.)
Contracts of insurance and contracts of indemnity and guarantee are popular instances of contingent contracts.
As the performance of a contract is made dependent upon a contingency, contingent contracts are also known as ‘conditional’ contracts. But in certain cases a contract may look like a ‘conditional’ contract, whereas in fact it may be simply an ordinary absolute contract where the promisor undertakes to perform the contract in all events. For example, where A promises to pay Rs.500 to B, a property broker, if B manages to get a two rooms accommodation for him at a rental of Rs2,500 per months, it is not a contingent contract, though on the face of it, it appears like a conditional contract. It is an ordinary absolute contract because the uncertain event (namely, managing to get an accommodation) itself forms the consideration of the contract and is not a collateral event. Hence it must be clearly understood that in the case of contingent contracts the uncertain events must be collateral to such contracts. Collateral event. According to Pollock and Mulla, a collateral event, means an event which is “neither a performance directly promised as part of the contract, nor the whole of the consideration for a promise.”
Illustration A contract to indemnify B upto Rs20,000, in consideration of B paying Rs1,000 annual premium, if B’s factory is burnt. This is a contingent contract.
Any ordinary contract can be changed into a contingent contract, if its performance is made dependent upon the happening or non-happening of an uncertain event, collateral to such contract. For example, the following are contingent contracts:
(a) A contracts to sell B 10 bales of cotton for Rs20, 000, if the ship by which they are coming returns safely.
(b) A promises to give a loan of Rs1, 000 to B, if he is elected the president of a particular association.
(c) A promises to pay Rs50, 000 to B if a certain ship does not return, of course after charging usual premium. (It is a contract of insurance.)
(d) C advances a loan of Rs10, 000 to D and M promises to C that if D does not repay the loan, M will do so. (It is a contract of guarantee.)
Contracts of insurance and contracts of indemnity and guarantee are popular instances of contingent contracts.
As the performance of a contract is made dependent upon a contingency, contingent contracts are also known as ‘conditional’ contracts. But in certain cases a contract may look like a ‘conditional’ contract, whereas in fact it may be simply an ordinary absolute contract where the promisor undertakes to perform the contract in all events. For example, where A promises to pay Rs.500 to B, a property broker, if B manages to get a two rooms accommodation for him at a rental of Rs2,500 per months, it is not a contingent contract, though on the face of it, it appears like a conditional contract. It is an ordinary absolute contract because the uncertain event (namely, managing to get an accommodation) itself forms the consideration of the contract and is not a collateral event. Hence it must be clearly understood that in the case of contingent contracts the uncertain events must be collateral to such contracts. Collateral event. According to Pollock and Mulla, a collateral event, means an event which is “neither a performance directly promised as part of the contract, nor the whole of the consideration for a promise.”
What is Contingent Contracts?
![What is Contingent Contracts?]()
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