Contingent Contracts: Meaning, Rules, Types, Examples, Clauses & Enforcement

Contingent Contracts

Edited By Ritika Jonwal | Updated on Jul 02, 2025 05:36 PM IST

The meaning of a Contract according to the Indian Contract Law is an agreement between two parties on acceptance of an offer from one party to the other. A contract is enforceable by law. The main ingredient of a contract is the mutual promise between two parties to perform an act as decided in the agreement. In a contract, the promises which are made by both parties in an agreement are bound for the parties to follow. Contracts are divided into different types based on performance and non-performance. So, contracts are divided into two types. The two main types of contracts are Firstly, absolute contracts which means a contract in which both parties perform their part without any requisite conditions and secondly, contingent contracts in which the contract basically depends on the happening and non-happening of an event.

This Story also Contains

Contingent contracts Meaning
What is the Difference between a Contingent contract and a Wagering agreement?
Essential ingredients of a contingent contract
Rules Regarding Enforcement of Contingent Contract
Important features of contingent contract-
What are the advantages and disadvantages of a contingent contract?
Contingent Contract: Case Laws:
Conclusion

Contingent Contracts

Contingent contracts Meaning

Section 31 of the Indian Contracts Act 1872 deals with contingent contracts which means the contingent contracts depend on the happening or not happening of an event. This contract depends on un-conditional events that are to be occurring in the future.

Illustration- X comes into a contract with Y to pay him Rs. 20,000 if he damages his car this can be termed as a contingent contract where the contract is based on a future event.

A contract of insurance is a type of contingent contract where the insurance is made based on an event that is to take place shortly. According to Section 32 of the Indian Contract Act 1872 contingent contract is defined as a contract that depends on an event that is to do or not to do something in the future.

In the case of Nandkishore Lalbagh v. New Era Fabrics Pvt. Ltd. & Ors.

A contract was made between the seller and the buyer to sell land which is attached to a factory on the condition that the labour union permits the sale of land and on the second condition that the government authority allows selling the land.
This was a contingent contract and later on, none of the criteria or conditions were fulfilled as the labour union and the government authority did not allow to sale of the land which was attached to the factory.

What is the Difference between a Contingent contract and a Wagering agreement?

Section 30 of the Indian Contract Act deals with the wagering agreement, according to this section a wagering agreement is void and no suit can be filed in the case of breach of a wagering agreement.

Section 31 of the Indian Contract Act 1872 deals with contingent contracts according to this section contingent contracts which mean contingent contracts depend on the happening or not happening of an event. This contract depends on un-conditional events that are to be occurring in the future.

No.	Contingent Contract	Wagering Agreement
1.	Contingent contracts are termed valid contracts according to Section 31 of the Indian Contract Act 1872	According to section 30, a wagering agreement is an Expressly void agreement.
2.	In a contingent contract reciprocal promises may or may not apply	In a wagering agreement Reciprocal promises apply
3.	The future event is collateral in the case of a contingent contract.	Future events are essential in the case of a wagering agreement.
4.	No contingent contracts are wagering.	Whereas wagering agreements are always termed as a part of contingent contracts
5.	Parties may have other interests in contingent contracts	Parties have no other interest in a wagering agreement.

Essential ingredients of a contingent contract

Contingent contacts are defined under section 31 of the Indian Contract Act 1872 and contingent contracts deal with the happening and non-happening of an event. Here are the essential ingredients to constitute a contingent contract.

1. The contract should be valid for doing or abstaining from doing something-

The enforcement of a contingent contract depends on the happening or not happening of an event as given under Section 32 and Section 33 of The Indian Contract Act 1872. A contingent contract is only valid if it depends on the happening or non-happening of an event. The contract should be collateral to the occurrence or non-occurrence of the event.
Illustration- X promises to pay Y Rs. 1 lacks on the condition that a ship returns to the shore in its original condition the way it left. And later if the ship got sunk in the ocean. In this condition, the contract will only be enforced on the sinking of the ship.

2. To constitute a contingent contract the performance of the contract must be conditional:

Contingent contracts are made on an event which is conditional or in an event which is to be happening in the future. The contract is made between two parties on the occurrence and non-occurrence of an event which is to be happening or not happening in the future. Contingent contracts are always made on an unseen future or an event.

3. To constitute a contingent contract the condition specified in the contract must be collateral:

Contingent contracts depend on the happening or non-happening of an event in the future. The event should be collateral in that of the contract and should exist independently.
Illustration- X enters into a contract with Y to pay him an amount of money depending on the delivery of goods by the end of this month. In such cases, the contract is dependent on the happening or non-happening of an event and the delivery of the goods is collateral to the contract.

4. To constitute a contingent contract the event must not depend on the mere discretion of the promiser:

The Last ingredient to constitute a contingent contract is that the event on which the contract is based should be dependent on the primosor to execute his promise. It should relate to an uncertain event in the future.
Illustration- X promises to pay Y an amount of money if Y leaves for London tonight. This type of promise falls under a contingent contract where the event is going to take place in the future.

Rules Regarding Enforcement of Contingent Contract

Conditions under which a contingent contract can be enforced by the law are given under Sections 32 and 36 of the Indian Contract Act 1872. The conditions under which a contingent contract can be enforced are as follows-

1. Contingent contracts on the happening of an event

Contingent contracts are based on doing something or not doing something and depend on an uncertain event the contingent contracts can only be enforced depending on the happening of an event shortly. And according to the Indian Contract Act 1872 an event which is impossible or unlawful to perform becomes void.
Illustrations- X comes into a contract with Y to buy Y’s house on condition that if X survives Z. This type of contract cannot be enforced by law unless Z dies in the lifetime of X

2. Contingent contracts on the not happening of an event

Contingent contracts depend on the happening or not happening of an event which is an uncertainty. In the case of a contingent contract if an event which is to take place in the future does not happen or that is impossible to perform then it cannot be enforceable by law.
Illustrations-X comes into a contract with Y on the condition of returning a ship and if the ship sinks in the ocean then only the contingent contract can be enforced.

3. Contingent contract depending on the future conduct of a living person

If the contingent contracts depend on the future of an event to be conducted by a living person and the time is unspecified the event will be considered to be impossible when such a person refuses to do the event then it will be a contingent event.
Illustration- X enters into a contract with Y for a sum of money on the condition that Y marries Z. but Y marries A. Now the marriage of Y to A can be considered impossible even if it is possible that A may die and Y may marry Z afterwards.

4. Contingent contracts depending on the happening of an event on specified events within a fixed time

If an event happens in a fixed time becomes void if the time which was fixed expires and such an event has not happened yet or before the time fixed such an event becomes impossible.
Illustration-X promises to pay a certain amount to Y if a ship returns within a year. In such a case, the contract will be enforced if the ship returns within the stipulated time which is one year and will become void if the ship sinks.

5. Contingent contracts depending on the not happening of a specified event within a fixed period-

Contingent contracts that depend on an uncertain future event do not happen within the time fixed then it will be enforced by law and when the fixed period specified in the contract expires and the event did not happen before the time fixed expires it becomes certain that such event will not happen.
Illustration- X promises to Y to pay a certain amount of money if a ship does not return within a year. The contract can be enforced if the ship does not return at the time stipulated which is within a year or it sinks.

6. Contingent Contracts depending on an impossible event-

If an event that is impossible or unlawful to perform happens then it is void, whether the impossibility of the event is known or not known to the parties who agree at the initial stage of the contract being made.
Illustration-X agrees to pay B if two parallel lines meet. This is an impossible event and is void.

Important features of contingent contract-

A contingent contract is made on uncertain future events and is mostly used by insurance companies and insurance is made on an uncertain event which is to occur in the future. The important features of a contingent contract are given below-

Contingent contracts are made on the happening or not-happening of an event which is to occur in the future.
A contingent contract is only enforced depending on the occurrence or non-occurrence of a future event.
When an event that is been mentioned in a contract becomes void a contingent contract also becomes void.
Contingent contracts made solely on the not happening of an event shall only be enforced when the event becomes unlawful or impossible to perform.
If a contingent contract is based on an event conducted by a living person then it will become void if the living person acts in such a way that the event becomes impossible to perform in the future.

What are the advantages and disadvantages of a contingent contract?

Contingent contract has its advantages and disadvantages depending on the use of it. A contingent contract is mostly used by insurance companies to make an insurance contract. The advantages and disadvantages of a contingent contract are given below-

No.	Advantages	Disadvantages
1	Plays a very important role in risk management and saves parties from future obligations and liabilities.	This contracts are a complex contract to draft in compared to normal contracts.
2	Provides flexibility and makes it easy during negotiations.	Contingent contracts disrupt the plans of parties as it is based on uncertainty of events.
3	Helps in aligning the interests of parties to a contract.	This contract makes negotiations more complex and challenging as managing this type of contract is a difficult task.
4	Helps businesses achieve accuracy and efficiency	This contract may lead to an imbalance of power if any party to the contract have certain knowledge about the uncertain event.

Contingent Contract: Case Laws:

In the case of Gian Chand v. Gopala and Ors 1995

In the following case, there was a sale agreement between the two parties for land with the condition that the money paid would be returned if it was notified that the land was out for acquisition. The parties knew that the land was already under notification of acquisition and hence the sale agreement as mentioned in the contract was impossible to perform by the parties and the contract was held void by the court as per section 6 of the Land Acquisition Act.

In the case of Frost v. Knight (1872)

In the following case, the defendant made a promise to marry the plaintiff after the death of the plaintiff’s father and later in the lifetime of the plaintiff’s father the defendant married another woman, thus the promise made by the defendant to the plaintiff was broken. The court held that it becomes impossible for the defendant to marry the plaintiff as the defendant is already married now. And for the non-performance of the promise the plaintiff had all the rights to sue the defendant.

Conclusion

The meaning of Contract according to the Indian Contract Act is an agreement between two parties on acceptance of an offer from one party to the other. A contract is enforceable by law. The main ingredient of a contract is the mutual promise between two parties to perform an act as decided in the agreement. This article talks about the enforcement and the conditions for forming a contingent contract which comes under legal studies.

Frequently Asked Questions (FAQs)

1. What is a contingent Contract?

The meaning of Contract according to the Indian Contract Act is an agreement between two parties on acceptance of an offer from one party to the other. A contract is enforceable by law. The main ingredient of a contract is the mutual promise between two parties to perform an act as decided in the agreement. In a contract, the promises which are made by both parties in an agreement are bound for the parties to follow.

2. What is a contingent Contract?

A contingent contract is an agreement where the obligations of one or both parties depend on the occurrence of a specific future event or condition. Unlike standard contracts, contingent contracts only become enforceable when the specified contingency occurs.

3. What are the types of contracts based on performance and non-performance?

The types of contracts based on performance and non-performance are absolute contracts and contingent contracts.

4. Write one difference between a Contingent Contract and a wagering agreement.

One major difference between a contingent contract and a wagering agreement is that a Contingent contract is a valid contract and can be enforced by law and on the other hand, a wagering agreement is a void agreement and cannot be enforced by law.

5. Is Contingent Contract illegal?

A contingent contract is a legal contract that only occurs if a specific event occurs.

6. Which sections of the Indian Contract Act deal with Contingent contract?

Section 32 to Section 36 of the Indian Contract Act 1872 deals with the enforcement of a contingent contract.

7. What is an example of Contingent contract?

An example of the contingent contract is when John and Peter, a private insurer, sign a contract for John's home's fire protection. Under the conditions, Peter pays John Rs. 5 lakh as insurance against the loss of his house, with an annual premium of Rs. 5,000. This agreement is subject to change.

8. Can a contingent contract be based on an illegal condition?

No, a contingent contract cannot be based on an illegal condition. Like all contracts, contingent contracts must have a lawful object to be valid and enforceable. If the contingency itself is illegal, the entire contract would be void.

9. How specific does the contingency need to be in a contingent contract?

The contingency should be clearly and specifically defined to avoid ambiguity. It should state what event or condition needs to occur, how it will be determined, and any relevant timeframes. Vague or overly broad contingencies can lead to disputes and enforceability issues.

10. How does the statute of frauds apply to contingent contracts?

The statute of frauds applies to contingent contracts just as it does to other contracts. If the subject matter of the contingent contract falls under the statute of frauds (e.g., real estate transactions, contracts that cannot be performed within one year), it must be in writing to be enforceable.

11. What happens if the contingency in a contract never occurs?

If the contingency never occurs, the contract typically becomes void. Neither party is obligated to perform their duties under the contract, as the condition that would trigger those obligations never materialized.

12. What is the role of consideration in contingent contracts?

Consideration, a essential element in all contracts, is still required in contingent contracts. However, the consideration might itself be contingent. For example, in an insurance contract, the insured's consideration (premium payments) is given in exchange for the insurer's contingent promise to pay in case of a loss.

13. Can a contingent contract be unilateral?

Yes, a contingent contract can be unilateral. In this case, only one party makes a promise, and that promise is contingent on a specific event or action by the other party. A reward offer is a classic example of a unilateral contingent contract.

14. Can a contingent contract be unilateral?

Yes, a contingent contract can be unilateral. In this case, only one party makes a promise, and that promise is contingent on a specific event or action by the other party. For example, a reward offer is a unilateral contingent contract – the payment is contingent on someone finding and returning the lost item.

15. What is the role of "condition precedent" in contingent contracts?

A condition precedent is a crucial element in many contingent contracts. It refers to an event or state of affairs that must occur before certain contractual obligations become effective. It essentially defines the contingency upon which the contract depends.

16. Can a contingent contract be part of a larger, non-contingent agreement?

Yes, it's possible for a contingent clause or section to be part of a larger, otherwise non-contingent contract. For example, a employment contract might include a contingent bonus clause based on company performance, while the rest of the contract is not contingent.

17. What is the role of "condition subsequent" in contingent contracts?

A condition subsequent in a contingent contract is an event that, if it occurs, will terminate an already enforceable contract or a party's obligations under it. It differs from a condition precedent in that the contract is already in effect when a condition subsequent comes into play.

18. What is the role of "condition subsequent" in contingent contracts?

A condition subsequent in a contingent contract is an event that, if it occurs, will terminate the contract or a party's obligations under it. It differs from a condition precedent in that the contract is already in effect when a condition subsequent comes into play.

19. How does the concept of "meeting of the minds" apply to contingent contracts?

"Meeting of the minds" is crucial in contingent contracts. Both parties must have a clear understanding of what the contingency is and how it affects the contract. Misunderstandings about the nature or terms of the contingency could potentially void the contract.

20. How do contingent contracts relate to aleatory contracts?

Contingent contracts and aleatory contracts are closely related. Aleatory contracts are a type of contingent contract where the performance depends on an uncertain event. Insurance contracts are a common example of both contingent and aleatory contracts.

21. What is the significance of "condition subsequent" in contingent contracts?

A condition subsequent in a contingent contract is an event that, if it occurs, will terminate an already enforceable contract or a party's obligations under it. It's different from a condition precedent, which must occur for the contract to become enforceable in the first place.

22. Can a contingent contract be implied rather than express?

While most contingent contracts are express (explicitly stated), it's possible for a court to find an implied contingent contract based on the parties' actions, the nature of their relationship, or industry customs. However, implied contingent contracts are less common and can be more challenging to prove.

23. What is the role of "condition concurrent" in contingent contracts?

A condition concurrent in a contingent contract refers to conditions that must be performed at the same time. This is less common in contingent contracts but could apply in complex agreements where multiple contingencies need to be satisfied simultaneously.

24. Are all conditions in a contract considered contingencies?

No, not all conditions in a contract are contingencies. Contingencies specifically refer to future, uncertain events that determine whether the contract becomes enforceable. Other conditions might be prerequisites or terms of performance but don't necessarily make the contract contingent.

25. What is the difference between a condition precedent and a condition subsequent in contingent contracts?

A condition precedent is an event that must occur before the contract becomes enforceable (e.g., passing a medical exam for life insurance). A condition subsequent is an event that, if it occurs, will terminate an already enforceable contract (e.g., violating terms of a non-compete agreement).

26. Can a contingent contract have multiple contingencies?

Yes, a contingent contract can have multiple contingencies. These could be required to occur in a specific order, all together, or in any order. The contract should clearly specify how these multiple contingencies interact and what is required for the contract to become enforceable.

27. What is the difference between a condition and a warranty in a contingent contract?

In a contingent contract, a condition is an essential term that, if not met, can void the entire contract. A warranty, on the other hand, is a less crucial term; its breach might lead to damages but typically doesn't void the entire contract.

28. Can a contingent contract be enforced before the contingency occurs?

No, a contingent contract cannot be enforced before the specified contingency occurs. The contract remains dormant until the condition is met. Only after the contingency happens does the contract become enforceable.

29. What is the significance of "condition precedent" in contingent contracts?

A condition precedent is a key concept in contingent contracts. It refers to an event or state of affairs that must occur before certain contractual obligations become effective. It essentially defines the contingency upon which the contract depends.

30. What happens if one party prevents the contingency from occurring?

If one party deliberately prevents the contingency from occurring, it may be considered a breach of the implied covenant of good faith and fair dealing. The other party might then be able to sue for damages or seek specific performance as if the contingency had occurred.

31. How do contingent contracts interact with the doctrine of impossibility?

The doctrine of impossibility can apply to contingent contracts if the contingency becomes impossible to fulfill due to unforeseen circumstances. In such cases, the contract may be discharged. However, if the impossibility was foreseeable, the doctrine might not apply.

32. How does a contingent contract differ from a standard contract?

The main difference is that a contingent contract's performance is conditional on a future event, while a standard contract's obligations are immediate and unconditional. Contingent contracts have an element of uncertainty, whereas standard contracts are more straightforward in their execution.

33. What are some common examples of contingent contracts?

Common examples include insurance policies (contingent on a loss occurring), real estate contracts (contingent on property inspection or financing), and performance bonuses (contingent on achieving specific goals). These all depend on future events or conditions being met.

34. Can a contingent contract be modified after it's been agreed upon?

Yes, like any contract, a contingent contract can be modified if both parties agree. However, any modifications should be clearly documented and should not fundamentally alter the nature of the contingency unless both parties explicitly agree to such a change.

35. Are force majeure clauses a type of contingency?

While similar, force majeure clauses are not typically considered contingencies. Force majeure clauses deal with unforeseeable circumstances that prevent a party from fulfilling a contract, while contingencies are known possible future events that determine whether the contract becomes enforceable.

36. How does the concept of "time is of the essence" apply to contingent contracts?

"Time is of the essence" can be crucial in contingent contracts, especially if the contingency is time-sensitive. If this phrase is included, it means that the specified timeframes are considered material terms of the contract. Failure to meet these timeframes could result in a breach of contract.

37. Can a contingent contract be void for public policy reasons?

Yes, like any contract, a contingent contract can be void if it violates public policy. This could happen if the contingency itself or the actions required by the contract once the contingency occurs are against public interest, illegal, or fundamentally unfair.

38. How do courts interpret ambiguous contingencies in contracts?

Courts typically interpret ambiguous contingencies against the interests of the party who drafted the contract (contra proferentem rule). This encourages clear and specific drafting of contingencies. Courts may also look at the parties' intentions and the contract's overall context to resolve ambiguities.

39. Can a contingent contract be assigned to another party?

Generally, contingent contracts can be assigned unless the contract explicitly prohibits assignment or the contingency is personal to one of the original parties. However, the assignee would take the contract subject to the same contingencies as the original party.

40. How does the parol evidence rule apply to contingent contracts?

The parol evidence rule applies to contingent contracts as it does to other contracts. If the written contract appears to be a complete agreement, external evidence generally can't be used to add or modify terms. However, evidence might be admissible to clarify ambiguous contingencies.

41. Can a contingent contract be terminated before the contingency occurs?

Yes, parties can mutually agree to terminate a contingent contract before the contingency occurs. Additionally, if one party repudiates the contract (clearly indicates they won't perform), the other party may have grounds to terminate the contract even before the contingency occurs.

42. How do contingent contracts interact with the statute of limitations?

The statute of limitations for a contingent contract typically begins to run when the contingency occurs and the contract becomes enforceable, not from the date the contract was signed. This can effectively extend the time period during which a claim can be brought.

43. Can a contingent contract be unconscionable?

Yes, a contingent contract can be deemed unconscionable if its terms are excessively unfair to one party, often due to unequal bargaining power. The contingency itself or the consequences of its occurrence (or non-occurrence) could potentially be grounds for finding unconscionability.

44. How does the concept of "substantial performance" apply to contingent contracts?

Substantial performance typically applies after a contract becomes enforceable. In contingent contracts, it would generally relate to how well parties fulfill their obligations after the contingency occurs, rather than to the contingency itself.

45. How do contingent contracts interact with the concept of anticipatory repudiation?

Anticipatory repudiation can occur in contingent contracts if one party clearly indicates they won't perform their obligations even if the contingency occurs. This could give the other party the right to treat the contract as breached before the contingency actually happens.

46. How does the doctrine of promissory estoppel apply to contingent contracts?

Promissory estoppel could potentially apply to contingent contracts if one party reasonably relies on the other's promise to their detriment, even before the contingency occurs. However, the contingent nature of the contract might affect how courts apply this doctrine.

47. How do contingent contracts interact with the concept of novation?

Novation, which involves substituting a new contract for an existing one, can apply to contingent contracts. However, all parties must agree, and the novation would typically need to address how the contingency is handled in the new agreement.

48. How does the concept of "mutual mistake" apply to contingent contracts?

Mutual mistake can apply to contingent contracts if both parties are mistaken about a material fact related to the contingency. This could potentially void the contract if the mistake goes to the heart of the agreement and makes performance as intended impossible.

49. What is the significance of "condition concurrent" in contingent contracts?

A condition concurrent in a contingent contract refers to conditions that must be performed at the same time. While less common in contingent contracts, it could apply in complex agreements where multiple contingencies need to be satisfied simultaneously.

50. How do contingent contracts interact with the principle of good faith and fair dealing?

The principle of good faith and fair dealing applies to contingent contracts as it does to all contracts. Parties are expected to act in good faith regarding the contingency, not deliberately preventing its occurrence or unfairly manipulating circumstances related to it.

51. Can a contingent contract be subject to specific performance as a remedy?

Yes, specific performance can be a remedy for breach of a contingent contract, typically after the contingency has occurred and the contract has become enforceable. However, courts may be less likely to order specific performance if the contingency itself is highly uncertain or subjective.

52. How does the concept of "frustration of purpose" apply to contingent contracts?

Frustration of purpose can apply to contingent contracts if, after the contingency occurs, an unforeseen event fundamentally changes the nature of the contract, making it impossible or radically different from what was originally intended.

53. How do contingent contracts interact with the statute of frauds?

The statute of frauds applies to contingent contracts as it does to other contracts. If the subject matter of the contingent contract falls under the statute of frauds (e.g., real estate transactions, contracts that cannot be performed within one year), it must be in writing to be enforceable.

54. How does the doctrine of impossibility apply to contingent contracts?

55. What is the significance of "time is of the essence" in contingent contracts?

56. How do contingent contracts interact with the concept of consideration?

Consideration, an essential element in all contracts, is still required in contingent contracts. However, the consideration might itself be contingent. For example, in an insurance contract, the insured's consideration (premium payments) is given in exchange for the insurer's contingent promise to pay in case of a loss.