Contingent Contracts - Contract of Law Video Lecture - CLAT

how is a contingent contract defined as
per Indian contract act 1872 let's see a
contract to do or not to do something in
a contract you either do or you do not
do you abstain from doing it the same
length if some event if some event cool
lateral to such contract does or does
not happen we come to that but let us
understand what do we mean by event
collateral here in match you would have
done you would have come across this
word many a times collateral what do you
mean by collateral collateral actually
means like if there is a line so there's
another line we call this line as main
line and this line as collateral line
lateral actually means horizontal and co
means which is along with the main line
so when one person does something we
call it an operation when many people do
it it becomes Co operation so here also
collateral means something which is
running along with the mean or the
primary thing so this main thing becomes
the primary thing and this becomes
subsidiary or secondary it becomes
secondary so now what is this main thing
this main thing is the actual contract
and this collateral thing is the event
now this contract is dependent upon this
event this contract will happen or not
who will decide this this event is the
deciding factor this contract is based
on the event if the event happens the
contract might come into force if the
event does not happen the contract might
not come into force so this is how a
contingent contract is defined there is
a main contract and that main contract
is dependent or based on some event
which is collateral collateral means
something which is secondary which is
subordinate which is subsidiary so if
this event happens the contract might
come into force the event does not
happen the contract might not come into
force I also know you that upon this
point the happening of the contract
might also be based on the non happening
of the event the example of V playing
cricket that I gave you so the contract
depends on happening or non happening of
the event it can be either with the
contract is based on the happening or
non happening of the event if there is
such a condition such a contract will be
called as a contingent contract so let's
get back to definition again a contract
to do or not to do something if some
event collateral to such contract does
or does not happen contract to do or not
to do something if the event which is
colla turn to the main contract that is
which is secondary which is subordinate
to the main contract happens or does not
happen
let's see some examples first example is
fire insurance have you heard about the
contract of fire insurance in this kind
of a contract what you do is let's say
let's say you own a property it may be a
house or it may be a shop or you know a
factory anything of that sort and you
fear that it might be ruined or
destroyed by fire so what you do is you
get it in short in short against fire
now the insurance company tells you if
your house is burnt or your property is
burned by fire I will pay you the amount
the I'll pay you the amount of loss
whatever knows you incur I'll reimburse
it I'll cover it
I'll pay it so this is a normal kind of
insurance fire insurance contract such a
contract is also a contingent contract
now why is this contractor contingent
contract because you see there is a main
contract here between you and the
insurance company but this contract is
dependent upon the happening or non
happening of T event what event is that
it is the happening or not happening of
the fire so fire is the event here if
the fire happens the contract will
happen the insurance company will pay
you whatever your loss would be but if
the fire does not happen that is there
is no fire at your property then the
insurance company will not pay you
anything because you do not incur any
loss in that case but in both the cases
you will pay a premium to the company
even if there is no fire even if the
your house or your property does not get
destroyed you still have to pay premium
so such a contract is
a classic example of contingent contract
because it is based on the happening odd
non happening of fire at your premises
next example is sale or return
transaction we've already discussed this
in the introduction I give you the
example of buying Jean's from you so the
main contractors of buying Jean's it is
based on the event of my mother liking
it or not
if my mother likes it the contract is on
but if my mother does not like it the
contract becomes void it does not become
impossible the next example is sale
dependent on the carrier this example
also we've discussed
I said goods are to come by a carrier
that is by a ship so if the goods reach
safely the port of Bombay the contract
is on if the goods do not reach the port
of Bombay there is no way that I can
sell them so the contract is not
enforceable then it becomes void the
next example is contract of guarantee I
don't think you must have heard this
among the contract you would have heard
the normal word of guarantee what is the
guarantee guarantee when I asked the
students they normally say you get the
goods replaced that does guarantee okay
that is guarantee that is guarantee as
we normally use it in the normal sense
that we know use it in law what is
guarantee guarantee is giving assurance
that if the product is defective I will
give you a new product so giving the new
product does not become the guarantee it
is the assurance the assurance that you
get it is the guarantee many cases you
know or when you
take loans from banks the banks asked
for guarantee and they asked for for the
guarantee of some credit worthy person
some well-known or a wealthy person so
let's say you go to the bank you ask for
a loan off when lakh rupees the bank
gives you the loan on the condition that
you bring the guarantee of some account
holder of the bank who the bank knows or
some well-known person in the city or
some some bigshot businessman so you
bring the guarantee of Big Shot
businessman now what is the use of that
guarantee that guarantee means that
businessman is saying to the bank
stating to the bank that if there is a
default from your side that is wrong the
person who is taking the loan if he
defaults in repaying the loan that
guarantor will repay the loan that is he
is giving assurance to the bank that you
please give the loan to this person if
he does not pay I will repeat it on his
finger so this is a contract of
guarantee
between you between the bank and that
third party whose guarantee you've taken
now do you think this contract of
guarantee is effective right from the
day when it is signed when it is made no
why because this contract is based on
some event what is that event it is the
event of default if you divert that
guarantor would have to pay till the
time you do not default the
the guarantor is not liable he is not
required to pay it is only when you
default the guarantor is liable to pay
so the contract of guarantee becomes
Performa bill becomes impossible only
when the original loan taker reports so
you can see the main contract is
impossible on happening or not happening
of an event thus it becomes a contingent
contract contingent contract is also
known as conditional contract why is it
known as conditional contract because
this always condition attached to the
main contract in this case we saw that
the condition was if your house gets
under fire it's the condition attached
here we saw the condition was if my
mother like the jeans here the condition
is that the goods reach the port of
Bombay safely here the condition is that
you default so in every case the event
becomes the condition the happening of
the event becomes the condition and thus
this contract is also called as
conditional counter because in every
case you will have this event a
contingent contract is always based on
some event and that event is nothing but
a condition so this contingent contract
is also called as a conditional contract
because all contingent contract have
some conditions attached to them