CLAT PG Exam > CLAT PG Notes > Law of Contracts > Cheat Sheet: Contingent Contracts
Cheat Sheet: Contingent Contracts
1. Definition and Essential Elements
1.1 Definition
| Provision | Details |
|---|---|
| Section 31 | 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 |
| Nature | Performance depends upon happening or non-happening of a future uncertain event |
1.2 Essential Elements
- There must be a valid contract to do or not to do something
- Performance must be conditional upon happening or non-happening of an event
- The event must be collateral to the contract (not the performance itself)
- The event must be uncertain
- The event must be future (except as per Section 32)
1.3 Collateral Event
| Characteristic | Explanation |
|---|---|
| Meaning | Event is incidental or subsidiary to the contract, not the very act agreed to be performed |
| Test | Event must be independent of the parties' will and distinct from the contractual obligation itself |
2. Types of Contingent Contracts
2.1 Based on Happening of Event
| Type | Description |
|---|---|
| Section 31 - Contingent on happening | Contract dependent upon happening of uncertain future event; becomes void if event becomes impossible |
| Section 32 - Contingent on non-happening | Contract dependent upon non-happening of uncertain future event; becomes void if event happens or becomes certain to happen |
2.2 Based on Time Element
| Section | Description |
|---|---|
| Section 33 | Contingent on happening of specified event within fixed time; becomes void if event does not happen before expiry of time or becomes impossible before time expires |
| Section 34 | Contingent on non-happening of specified event within fixed time; enforced when time expires if event has not happened, or when event becomes impossible before time expires |
2.3 Special Cases
| Section | Provision |
|---|---|
| Section 35 | Contingent contract to do or not to do anything if impossible event happens - void ab initio, whether or not fact of impossibility known to parties |
| Section 36 | Contracts contingent on impossible events (non-happening) become enforceable when event becomes impossible |
3. Enforcement and Voidability Rules
3.1 When Contingent Contracts Become Enforceable
| Situation | Result |
|---|---|
| Event dependent upon happens (Section 31) | Contract becomes enforceable |
| Event dependent upon does not happen (Section 32) | Contract becomes enforceable when event becomes impossible |
| Event does not happen within fixed time (Section 34) | Contract enforced when time expires if event has not happened |
| Event becomes impossible within fixed time (Section 34) | Contract enforced when event becomes impossible before time expires |
3.2 When Contingent Contracts Become Void
| Situation | Result |
|---|---|
| Event becomes impossible (Section 31) | Contract becomes void |
| Event happens or becomes certain (Section 32) | Contract becomes void |
| Event does not happen before expiry (Section 33) | Contract becomes void |
| Event becomes impossible before time expires (Section 33) | Contract becomes void |
| Event itself impossible (Section 35) | Void ab initio |
4. Distinction from Other Concepts
4.1 Wagering Agreements vs Contingent Contracts
| Contingent Contract | Wagering Agreement |
|---|---|
| Valid and enforceable (if conditions met) | Void under Section 30 |
| Real interest exists in subject matter | No real interest; mere bet on event outcome |
| Event is collateral to contract | Event is the essence of agreement |
| Not necessarily mutual chance of gain/loss | Mutual chance of gain and loss essential |
4.2 Voidable Contracts vs Contingent Contracts
| Basis | Distinction |
|---|---|
| Enforceability | Contingent contracts become enforceable on happening/non-happening of event; voidable contracts are enforceable unless rescinded by aggrieved party |
| Condition | Contingent contracts have external uncertain event; voidable contracts involve consent issues (coercion, undue influence, fraud, misrepresentation) |
| Nature | Contingency is about future performance; voidability relates to formation defect |
4.3 Conditional Contracts vs Contingent Contracts
- All contingent contracts are conditional, but not all conditional contracts are contingent
- Contingent contract: condition relates to collateral event outside the contract
- Conditional contract (non-contingent): condition may relate to performance itself or an act that is part of the contractual obligation
5. Special Provisions and Applications
5.1 Section 32 - Contracts Dependent on Non-Happening
| Aspect | Details |
|---|---|
| Condition | Performance conditional upon non-happening of uncertain future event |
| Becomes void when | Event happens OR event becomes certain that it will happen |
| Becomes enforceable when | Event becomes impossible |
5.2 Impossibility of Event
| Type | Effect |
|---|---|
| Subsequent impossibility (Section 31) | Contract becomes void when event becomes impossible after formation |
| Initial impossibility (Section 35) | Contract void ab initio if dependent on impossible event happening |
| Within fixed time (Section 33) | Contract void if event becomes impossible before time expires |
5.3 Relationship with Section 56 (Frustration)
- Sections 31-36 deal with agreed contingencies incorporated in contract
- Section 56 deals with supervening impossibility or frustration not contemplated by parties
- Both render contract void/unenforceable but operate on different grounds
- Contingent contracts: parties have expressly agreed performance depends on event
- Frustration: unforeseen supervening event makes performance impossible or radically different
6. Key Case Law Principles
6.1 Important Judicial Interpretations
| Principle | Application |
|---|---|
| Collateral event test | Event must be independent and not the very act of performance agreed upon |
| Certainty requirement | For Section 32, event must become certain to happen, not merely probable |
| Knowledge irrelevant | Under Section 35, contract void even if parties unaware of impossibility at formation |
| Future conduct of living person | Contingency based on future conduct of living person not impossible until person dies or time expires |
6.2 Practical Applications
- Insurance contracts: payment contingent on happening of insured event
- Indemnity contracts: performance contingent on loss occurring
- Contracts for sale of property: completion contingent on obtaining permits/clearances
- Employment contracts: bonus payment contingent on achieving targets
- Real estate: sale contingent on obtaining loan approval or satisfactory inspection
7. Examination Points
7.1 Critical Distinctions to Remember
| Compare | Key Difference |
|---|---|
| Sections 31 and 32 | Section 31: dependent on happening; Section 32: dependent on non-happening |
| Sections 33 and 34 | Section 33: happening within fixed time; Section 34: non-happening within fixed time |
| Sections 35 and 36 | Section 35: impossible event happening (void ab initio); Section 36: impossible event non-happening (enforceable when impossible) |
| Contingent vs Wagering | Contingent has real interest and is valid; wagering has no interest and is void |
7.2 Common Exam Scenarios
- Identify whether contract is contingent and which section applies
- Determine when contingent contract becomes enforceable or void
- Distinguish contingent contracts from wagering agreements
- Apply time-bound contingencies (Sections 33-34)
- Analyze impossibility scenarios (Sections 35-36)
- Determine collateral nature of event
7.3 Section-Wise Summary
| Section | Quick Reference |
|---|---|
| 31 | Happening of event → enforceable; impossible → void |
| 32 | Non-happening of event → enforceable when impossible; if happens → void |
| 33 | Happening within time → enforceable; not happen/impossible before time → void |
| 34 | Non-happening within time → enforceable when time expires; impossible before time → enforceable |
| 35 | Impossible event happening → void ab initio |
| 36 | Impossible event non-happening → enforceable when impossible |
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