What is contingent contract in business law? A contingent contract has been defined under section 31 as follows: “A contingent contract is a contract to do something if some event collateral to such contract does or does not happen”.
A contingent contract is also known as a conditional contract. The performance of such contract is not absolute but depends on the happening or not happening in the uncertain event.
A contract is said to be absolute or unconditional when the promisor binds himself to perform it in any manner.
It is said to be contingent or conditional when it is performed only on the happening or not happening of some uncertain future event.
Examples of Contingent Contract
The contracts of Insurance. Indemnity and Guarantee are common examples of contingent contract. Such as, A promised to pay B $1000 if B’s car gets an accident. This contract is a contingent contract.
See Also: Examples of Void Contract
Essentials of Contingent Contract
The following are the essential elements of a contingent contracts;
Performance of the Contract
The performance of this contract is not absolute but depends on the happening or not happening of an uncertain event.
Contingency Relate to Collateral Matters
The contingency of happening or not happening of an uncertain event must relate to the matter, collateral to subject matter and not of the subject matter itself.
Illustration: A promise to pay $5000 to B, if B’s can get an accident. Here the contingency is the collateral matter which is the accident and not about the payment of $5000 or car which are the subject matters of the contract.
Will of the Party
The contingency does not depend on the will of the party, but it must depend on the act of the party.
Uncertain Event
The contingency relates to the event which is uncertain and no one party has known results before time.
See Also: What is Voidable Contract
Rules of Contingent Contract
The following are the rules regarding the performance of the contingent contracts:
Happening of Event
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 Sec. 32.
Simply, if the contingency is about the happening of the event, the contract will only be performed if the event happens and a contract will become void. If the event does not happen or the happening of the event becomes impossible.
Illustration: A Contract to pay $10000 to B If B marries C, is a contingent contract which depends on the happening of the event and
- It Will be performed if B marries with C
- It will become void if C dies without being married to B because now the happening of the event has become impossible
- It will also become void if B married with D. Now again the happening of the event will be considered as impossible.
Not Happening of the Event
Contingent contracts to do or to not do something if an unsure future event doesn’t happen is implemented when the happening of that event becomes not possible and not before sec. 33. When such event happens, the contract can become void.
Illustration: A agrees to pay SUM of cash if a definite ship doesn’t come. The ship is undone. The contract is implemented when the ship is undone.
When Time is not Fixed
If the longer-term event on that the contract is contingent is that the method during which the person can act at associate degree unspecified time, the event, shall be thought-about to become impossible.
See Also: What is the Wagering Contract
When such person will something that renders it not possible when the event becomes not possible, the contract can become void.
Illustration: A agrees to pay B an SUM of cash if B marries with C., however, C married to D. the wedding of B and therefore the C should currently be thought-about potential though it’s possible that D might die and C might, later on, marry to B.
When time is fixed
Contingent contracts to try to or to not do something, if a mere unsure event happens among a set time become void if at the expiration of the time mounted, such event has not happened, or if before the time fixed, such event becomes not possible sec. 35.
Illustration: A guarantee to pay B a SUM of cash if a definite ship returns within a year. The contract could also be implemented if the ship returns within the year, and becomes void if the ship is undone among the year.
When Time is mounted for not happening of Event
Contingent contracts to do or not to do something if a mere unsure event doesn’t happen with. A fixed time could also be implemented by law when the time fixed has invalid and such event has not happened, or before the time mounted has invalid, if it becomes sure that such event won’t happen.
See Also: What is Contract of Sale
Illustration: A guarantees to pay B a SUM of cash if a definite ship doesn’t come within a year. The contract could also be implemented if the ship doesn’t come within the year, or ship is undone among the year.
Impossible Event
Contingent agreements to try (and do) or to not do something if it is not possible event happens, are void, wherever the impossibility of the event is thought or to not the parties to the agreement at the time when it’s created Section 36.
Illustration: A agrees to pay $5000 to B If two straight parallel lines enclose an area, The agreement is void.
