Description
Contingent contracts usually occur when both negotiating parties fail to reach an agreement. The contract is characterized as “contingent” because the terms are not final and are based on certain events or conditions occurring.
Contingent Contracts
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Contingent Contracts
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Examples of Contingent Contracts
1. A contracts to pay B, Rs two lakh, if B’s house is burnt. 2. A agrees to pay B a sum of money if B’s ship sinks. 3. A agrees to pay B a sum of money if it rains.
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Examples of Contingent Contracts
1. A contracts to pay B, Rs two lakh, if B’s house is burnt. (house insurance) 2. A agrees to pay B a sum of money if B’s ship sinks. (Ship insurance) 3. A agrees to pay B a sum of money if it rains. (insurance for an outdoor event, like a cricket match)
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Contract Act: Contingent Contract
31. Contingent contract defined.- 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.
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Contract Act: Enforcement
32. Enforcement of contracts 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
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… Cond
(a) A makes a contract with B to buy B's horse if A survives C. This contract cannot be enforced by law unless and until C dies in A's lifetime. (b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse.
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… Cond
(c) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.
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Contract Act: Event not happening
33. Enforcement of contracts 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 of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.
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Contract Act: Impossibility
34. When event on which contract is contingent to be deemed impossible, if it is the 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. Illustration
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… Cond
A agrees to pay B a sum of money if B marries C. C marries D .The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B.
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Contract Act: Specified Event
35. When contracts become void which are contingent on happening of specified event within fixed time.- 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 has not happened, or if, before the time fixed, such event becomes impossible.
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… Cond
When contracts may be enforced which are contingent on specified event not happening within fixed time.- 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 law when the time fixed has expired and such event has not happened or, before the time fixed has expired, if it becomes certain that such event will not happen.
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… Cond
Illustrations
(a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year.
(b) A promises to pay B 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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Harbakhsh Singh v. Ram Rattan
Sukhdev Singh entered into an agreement with Ram Rattan to sell his one-half share in the property in dispute for a consideration of Rs. 48,500/- and received Rs. 10,000/- as earnest money. The terms of the agreement provided as follows:
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… Cond
The parties shall be bound to get the sale deed executed and completed after one month of the final decision by a Court of competent jurisdiction of the suit for partition of the property and that the first party (Sukhdev Singh) shall be bound to inform the second party (Ram Rattan) about it. In case it takes more than a year for the decision of the partition proceedings, then the first party would be liable to pay on the earnest money of Rs. 10,000/- interest at the rate of 3 per cent per annum to the second party which would be payable monthly and would be adjusted against rent.
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Judgement: High Court
… it is evident that the contract of sale was not contingent and it was only the execution of the sale deed which was postponed to a future date. There is a clear difference between a contract under which a present obligation is created but the performance is postponed to a future date and a contract under which there is no present obligation at all and the obligation arises by reason of some condition being complied with or some contingency occurring. In the present case, the vendor had agreed to all his half a share in the property in dispute, but the sale deed was agreed to be executed after a month of the partition of the property and separation of his share.
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doc_257572494.ppt
Contingent contracts usually occur when both negotiating parties fail to reach an agreement. The contract is characterized as “contingent” because the terms are not final and are based on certain events or conditions occurring.
Contingent Contracts
1
Contingent Contracts
2
Examples of Contingent Contracts
1. A contracts to pay B, Rs two lakh, if B’s house is burnt. 2. A agrees to pay B a sum of money if B’s ship sinks. 3. A agrees to pay B a sum of money if it rains.
3
Examples of Contingent Contracts
1. A contracts to pay B, Rs two lakh, if B’s house is burnt. (house insurance) 2. A agrees to pay B a sum of money if B’s ship sinks. (Ship insurance) 3. A agrees to pay B a sum of money if it rains. (insurance for an outdoor event, like a cricket match)
4
Contract Act: Contingent Contract
31. Contingent contract defined.- 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.
5
Contract Act: Enforcement
32. Enforcement of contracts 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
6
… Cond
(a) A makes a contract with B to buy B's horse if A survives C. This contract cannot be enforced by law unless and until C dies in A's lifetime. (b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law unless and until C refuses to buy the horse.
7
… Cond
(c) A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.
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Contract Act: Event not happening
33. Enforcement of contracts 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 of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.
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Contract Act: Impossibility
34. When event on which contract is contingent to be deemed impossible, if it is the 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. Illustration
10
… Cond
A agrees to pay B a sum of money if B marries C. C marries D .The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B.
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Contract Act: Specified Event
35. When contracts become void which are contingent on happening of specified event within fixed time.- 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 has not happened, or if, before the time fixed, such event becomes impossible.
12
… Cond
When contracts may be enforced which are contingent on specified event not happening within fixed time.- 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 law when the time fixed has expired and such event has not happened or, before the time fixed has expired, if it becomes certain that such event will not happen.
13
… Cond
Illustrations
(a) A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year, and becomes void if the ship is burnt within the year.
(b) A promises to pay B 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.
14
Harbakhsh Singh v. Ram Rattan
Sukhdev Singh entered into an agreement with Ram Rattan to sell his one-half share in the property in dispute for a consideration of Rs. 48,500/- and received Rs. 10,000/- as earnest money. The terms of the agreement provided as follows:
15
… Cond
The parties shall be bound to get the sale deed executed and completed after one month of the final decision by a Court of competent jurisdiction of the suit for partition of the property and that the first party (Sukhdev Singh) shall be bound to inform the second party (Ram Rattan) about it. In case it takes more than a year for the decision of the partition proceedings, then the first party would be liable to pay on the earnest money of Rs. 10,000/- interest at the rate of 3 per cent per annum to the second party which would be payable monthly and would be adjusted against rent.
16
Judgement: High Court
… it is evident that the contract of sale was not contingent and it was only the execution of the sale deed which was postponed to a future date. There is a clear difference between a contract under which a present obligation is created but the performance is postponed to a future date and a contract under which there is no present obligation at all and the obligation arises by reason of some condition being complied with or some contingency occurring. In the present case, the vendor had agreed to all his half a share in the property in dispute, but the sale deed was agreed to be executed after a month of the partition of the property and separation of his share.
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doc_257572494.ppt