A contingent contract is a contract to do or not do something, if some event, collateral to such contract, does or does not happen. Thus its essentials are –
The agreement must be valid
The performance is conditional
Conditional on happening or not happening of an uncertain event
The event must be collateral to the contract.
The event must not be part of contract, that is, the event should be neither performance of promise nor a consideration for a promise.
For example, A promises to pay B Rs. One lakh, if B’s house is destroyed by fire. This is a contingent contract.
But where A promises to deliver 100 bags of wheat and B agrees to pay after delivery. The contract is a conditional one and not a contingent contract.
Rules Relating to Enforcement
(a) Contract Contingent on “happening of an event”
Event Happens – Contract is enforced
Happening of Event becomes impossible – Contract becomes void.
(b) Contract Contingent non-happening of an event
Where a contingent contract is made contingent on a non-happening of an event, it can be enforced only when its happening becomes impossible.
For example, 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.
(c) Contract Contingent on 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.
For example, 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.
(d) Agreement Contingent on an impossible event
A contingent agreement to do or not to do a thing if an impossible event happens is void. Such an agreement cannot be enforced. For example, A agrees to pay B a certain sum of money if Sun rises in the west next morning. This is an impossible event and hence void.
Contingent Contract and Wager
Although a contingent contract may appear similar to a wager, but there is a marked difference between the two. A wager is in form of a bet and parties have no other interest in the agreement. Whereas in a contingent contract parties have interest in the subject matter. The uncertain event must be collateral to the contract. A wagering agreement is void where as a contingent contract is valid.