Contingent contracts

1. Validity of Contingent
Contracts under ICA
Name – Bivabasu Kundu
Roll no. – A080

2. Introduction
 As per Sec 31 of ICA, Contingent contract is defined as the
contracts where the enforceability depends upon the
happening or non-happening of an uncertain event, which is
collateral to that contract
 As per Sec 32, validity of Contingent Contract depends upon
the occurrence of an specified uncertain event within a fixed
period
 Any supervening impossibility or non – occurrence of the
future event, renders the contingent contract void due to
frustration of Contract

3. Objectives
To study the legitimacy / validity of the contingent contract
and its applications in daily life

4. Commercial Applications of Contingent
contract
 Generally applied in Insurance Contracts & other contract of
Indemnity
 Has a wider scope in Merger & acquisitions (M&A) as well
 Anything which is collateral to the contract as a conditional
precedent
Indemnity

5. Essentials of Contingent contract
 There must be a valid contract to do or abstain from doing
something
 Performance of the contract must be conditional and should
not be at the discretion of the promisor
 The said event must be collateral to the contract as a
conditional precedent
 The occurrence of the event must be uncertain and
unprovoked
 Independent of the will of the parties unless there is non

6. Case Laws
 In the case of Nandkishor Lalbagh vs New Era Fabrics Pvt. Ltd. & ors.
[SCC 755] , a contract for the sale of land with a factory was to be
performed only if the labor unions agreed to the sale and further if the
change of land use was approved by the appropriate authority. None of
these contingencies could be fulfilled because neither there was
approval by the labor union nor by the relevant authority. The contract
was accordingly not allowed to be enforced against the seller.
 In another case law of Frost Vs Knight (1872); the defendant promised
to marry the plaintiff on the death of his father. While the father was
still alive, he married another woman. it was held that it had become
impossible that he should marry the plaintiff and she was entitled to sue

7. Conclusion
The application of contingent contract in daily life offers to
limit any loss or any breach & conflict which may be
involved in the said event. This type of contracts cannot be
enforced in normal circumstances as the condition which is
collateral to the performance of a contract is always a
conditional precedent. The legitimacy of contingent
contracts does not only depend upon the occurrence of the
specified uncertain event but also on the conduct of the
party involved. However, in that it would be an exception
to the rule of privity of contract and is subject to
arbitration clause.