Business Law BBA I Year Osmania University, Contingent Contracts, Features of Contingent Contract, Rules of Contingent Contracts, Discharge of Contracts, modes of discharge of contracts, Breach of Contract, Remedies for Breach of Contract, Types of Damages.

1. BUSINESS
LAW
UNIT-2
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2. Contingent Contracts
An agreement between two persons
to do or not to do something if
some future event happens or does
not happen is called a “Contingent
Contract” as per Section-31 of the
Indian Contract Act, 1872.

3. Features of Contingent Contract
a. The performance of the contract should be
made conditional
b. The event should be an uncertain future
event
c. It should not be controllable by the parties
d. The event should have collateral connection
with the main contract
e. It should be a valid contract and enforceable
at law.

4. Example1: Mr.A (a farmer) agrees to
supply 100 bags of paddy to
Mr.B(Rice miller) if there are good
rains in the season. This is a
contingent contract based on an
uncertain future event connected with
the main contract. This is a valid
contract.
 Example2: Mr.X agreed to supply 10
imported cars to Mr.Y, if there are
good rains in Hyderabad. This is not a

5. Rules of Contingent Contracts
1. If the event does not happen or becomes impossible
to happen, the contract becomes Void.(Sec. 32)
Ex: In the example1 above , Mr.A need not to supply
paddy to Mr.B if there are no rains in the season.
2. A contingent contract based on non-happening of an
uncertain future event becomes void if the event
happens. (Sec.33)
Ex: Mr.P agrred to supply 100 bags of paddy to Mr.Q,
if there is no cyclone. If the cyclone event happens,
the agreement become void.

6. 3. A contract based on a certain of definite
event cannot be called a contingent
contract. But a definite event can be made
uncertain by adding time factor. Then the
contract becomes a contingent contract. (
Sec-35)
Ex: Mr.A agrres to pay to Dr.B, a fee of
Rs.2000, if his normal fever is relieved with
his medication. This is not a contingent
contract as normal fever can be relieved.
But if there is time of 1 hour, it becomes
contingent contract.

7. 4. A contingent contract based
on impossible events becomes
void.
Ex: Mr. A agreed to pay Rs.2000
to Mr.B, if he can make two
parallel lines cross each other.

8. Discharge of Contracts
When a contract is made between
two persons, they are bound
together under a contractual
relationship. But this relationship is
not a permanent relation, it will
come to an end at some time . The
parties of a contract get
discharged from their respective
obligations when contract comes

9. There are 5 possible modes of discharge of
contracts, which are as,
1. Discharge by Performance
2. Discharge by Mutual
agreement
3. Discharge by Operation of
Law
4. Discharge by impossibility of
performance
5. Discharge by Breach of

10. Discharge of Contracts by
Performance
When both the parties of a
contract fulfill their obligations
under a contract, it is said to be
performed.
It is of two types,
(A) Actual Performance
(B) Attempted Performance

11. (A) Actual Performance:
When the parties fulfill their obligations
in accordance with the terms and
conditions of the contract, it is known as
Actual Performance.
Rules of Actual Performance:
1. Who is liable to perform: A contract
should be performed first by the
promisor or his agent.
2. Who can demand performance: The
promisee or his authorized agent can
demand performance of a contract.

12. 3. Application for Performance: The
promisor need not perform a contract
unless it is applied for or demanded by the
promisee or his agent or legal
representatives.
4. Time of Performance: A contract should
be performed within the time agreed
between the parties.
5. Place of Performance: A contract should
be performed at the place agreed between
the parties.

13. (B) Attempted Performance: When
one party tries to perform his
obligation under a contract in
accordance with the terms and
conditions of the contract but the
other party does not give him
opportunity to perform the
contract, it becomes an
“Attempted Performance”.
It is also known as “Offer of

14. An Attempt of Performance is
equivalent to Actual Performance
(Sec 38).
Attempted Performance should fulfill
the following conditions of the Indian
Contract Act,
i) The attempt or performance
should be unconditional.
ii) The attempt should be made at a
proper time and place agreed in

15. iii) The person making the
attempt of performance should
be ready and capable of
performing his obligation.
iv) The attempt should be made
during usual business
hours(10am to 5pm) unless any
other time is agreed between
the parties.

16. 2. Discharge of Contracts by
Mutual Agreement:
Agreements can be discharged
without performance with the
mutual consent of the concerned
parties.
It can be done in six ways:
1. By Rescission: When two
parties who have agreed to do
something, mutually agree to

17. 2. By Alteration: An agreement
between two parties which is due for
performance on a fixed date can be
discharged if the parties mutually
agree to postpone the date.
3. By Novation: An agreement
between two parties is discharged by
entering into a new agreement in
place of old agreement.
4. By Merger: An existing agreement
between two parties is merged with

18. 5. By Remission: Accepting part
performance in full discharge of
a contract is known as
Remission.
6.By Waiver: If one party give
up his right against another, is
known as waiver.

19. 3.Discharge by Operation of law:
Some agreements become
automatically discharged when the
provisions of a law come into
operation.
(a) By death of the Parties: When any one
of the parties or both of them die, they
are discharged from the obligation of
performance of the contract.
(b) By Insanity: When any one or both the
parties of an agreement become mad or

20. (c) By Insolvency: When a party to
a contract is declared as insolvent
by a competent Court of Law,
he/she will be discharged from all
his/her obligations.
(d) By lapse of Time: Some
agreements will become
discharged and become
unenforceable if they are not
performed within a reasonable

21. 4. Discharge of Contract by
Impossibility of Performance:
(a) Possibility known to the parties:
When two persons enter into a
contract knowing that it is
impossible to perform. The
agreement becomes void-ab-initio.
(b) Impossibility unknown to the
parties: When two persons enter
into a contract to do something
which is impossible but they believe

22. (i) Existing unknown impossibility: In case a
person agrees to sell a horse to other person
which was healthy but the horse dies before
the contract was signed between the parties.
The information about the death was neither
known to the seller nor the buyer.
(ii) Supervening unknown Impossibility: In
the above case, if the horse dies after the
contract was signed but before agreed date
of delivery, it is called “ Supervening
Impossibility”. The parties may be excused
depending upon the reasons of the
impossibility.

23. Excusable Reasons:
(a) Destruction of subject matter: When
the subject matter of the contract is
destroyed without any fault of the
parties, the parties are excused from
performance.
(b) Incapability of a Party: When a party
becomes incapable of performing
his/her obligation under a contract which
is based on his personal skill, he/she
may be excused by the Court of Law.

24. (c) Non-Existence of expected state of
things:
If the performance becomes impossible
due to any change in the circumstances,
the contract becomes discharged.
(d) Change in Law: Some times
performance of a contract becomes
impossible due to change in Law.
(e) Outbreak of War: When a war is
declared between two countries, all
agreements due for performance between
the people, of those two countries will

25. Not Excusable reasons:
1. Difficulty in performance
2. Commercial impossibility
3. Strikes or lockouts in the
manufacturing companies
4. Civil disturbances like bandh etc
5. Failure of a third party to fulfill his
obligation

26. 5. Discharge by Breach of Contract:
When a party did not perform his obligation
without any valid reason, it becomes a
breach of Contract.
Types of Breach:
1. Actual Breach: When one party fails to
perform a contract on its due date or during the
performance without prior intimation to the other
party, it is called “Actual Breach”.
2. Anticipatory Breach: When one party to a
contract informs other party about his inability to
perform the contract before due date for

27. Remedies for Breach of
Contract
When a party did not perform obligation
without any valid reason, it becomes
breach of contract.
It causes loss to the other party,
called as Aggrieved party.
The Aggrieved party have certain
remedies against the party causing
breach of contract.

28. Remedies for Breach of
contract are:
1. Suit for Rescission
2. Suit for specific
performance
3. Suit for Injunction (Stay
order)
4. Suit for Quantum Meruit

29. 1. Suit for Rescission: When
party A informs party B about his
inability to perform the contract,
party B can close the contract by
filing a suit for rescission or by
giving a legal notice to party A.
Then party A will not have any
chance to revoke notice of
anticipatory breach on the due
date.

30. 2. Suit for Specific Performance:
When a party gives a notice of
anticipatory breach or causes actual
breach, other party can file a suit for
specific performance of the contract
such as claiming for the damages.
3. Suit for Injunction: When a party
has agreed not to do something under
a contract, but the party is doing it or
attempting to do it, then the other
party can file a suit and obtain stay

31. Case Example:
Warner Bros. Vs Nelson(Actress)
In this case Nelson agreed with
Warner Bros. that she will not act
in any other films until their film is
released. But she signed to act in
other film before the release of
their film. The Court of Law
granted Injunction order in favor of
Warner Bros. restraining Nelson

32. 4. Suit for Quantum Meruit:
When party A stops party B
from doing a work after it is
partially performed, party A
should pay for the work
already done, otherwise
party B can file a suit for
Quantum Meruit or as much

33. Case Example:
Cort Vs Ambergate Railway
Company
In this case Ambergate Railway
company placed order to Cort to
supply 5000 chairs but they
stopped from supplying after
receiving 2600 chairs. Now they
refused to pay price of the chairs
already supplied. The Court of Law

34. 5. Suit for Damages: Every
party who has losses on
account of breach of contract
will have legal right to claim
damages. Claiming monetary
compensation for the loss
suffered by the aggrieved party
on the breach of a contract is
called “Suit for Damages”.

35. Types of Damages
Damages claimable on breach
can be classified into five types:
(1) Ordinary Damages
(2) Special Damages
(3) Vindictive Damages
(4) Nominal Damages
(5) Remote Damages

36. (1) Ordinary Damages: When one
party suffers a loss due to breach
of contract by the other party, he
can file a suit for damages. The
amount of damages should be
equivalent to the actual loss.
In case of supply of goods, the
difference between agreed price
and the market price on the date of
breach becomes ordinary

37. (2) Special Damages:
Claiming agreed amount of
damages on the breach of
contract is called “special
damages”. The amount of
such damages is fixed
between the parties at the
time of entering into the

38. Case Example:
Ford Motor Co. Vs Armstrong
Ford Co. supplied tyres to their
dealers on the condition that they
should not be sold at price less
than 200 pounds per tyre.
Otherwise damages of 250 pounds
per tyre should be paid. One
dealer sold a tyre for less than 200
pounds. So, suit was filed for

39. (3) Vindictive Damages or Exemplary
Damages: When the reputation or
goodwill of a person or his family or
business is damaged due to breach of
a contract, any amount of damages
can be claimed. This type of damages
are allowed in India only in the
following two cases:
(a) Breach of Marriage agreement(By the
bridegroom or his party)
(b) Dishonor of a cheque by a Banker even after

40. (4) Nominal Damages:
Sometimes party A claims
damages in a Court of Law on
the breach of agreement
caused by the party B, even
though party A suffered no
loss. In such cases the Court of
Law may either dismiss the suit
or award nominal amount of

41. (5) Remote Damages:
Damages can be claimed
only for the loss suffered
due to direct reasons but not
for indirect or distant
reasons. Any damages
claimed for distant reasons
are called “Remote