Page 19 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes Contingent Contract Defined (S. 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.

Example: A contracts to pay B ` 10,000 if B’s house is burnt. This is a contingent contract.

Essential Characteristics of a Contingent Contract

The performance of a contingent contract depends upon happening or non-happening of some
future event. The event on which the performance is made to depend, is an event collateral to the
contract, i.e. it does not form part of the reciprocal promises which constitute the contract.

Example: (i) A agrees to deliver 100 bags of wheat and B agrees to pay the price only
afterwards, the contract is a conditional contract and not contingent, because the event on which
B’s obligation is made to depend is a part of the promise itself and not a collateral event. (ii) A
promises to pay B ` 10,000 if he marries C, it is not a contingent contract. The contingent event
should not be the mere will of the promisor.

Example: A promises to pay B ` 1,000, if he so chooses, it is not a contingent contract.

However, where the event is within the promisor’s will but not merely his will, it may be a
contingent contract.

Example: A promises to pay B ` 1,000, if A left Delhi for Mumbai, it is a contingent
contract, because going to Mumbai is an event within A’s will, but is not merely his will.
Table 1.1: Difference between ‘Contingent Contract’ and ‘Wagering Agreement’

Wagering Agreement Contingent Contract
Reciprocal and Mutual Promises Not necessarily
Contingent in nature Not wagering in nature
Void Valid
Game of chance/interest Not a game of chance
No intention to perform Intention to perform

1.7 Summary

Mercantile Law may be defined as that branch of law which prescribes a set of rules for the

governance of certain transactions and relations between: (i) business persons themselves,
(ii) business persons and their customers, dealers, suppliers, etc., and (iii) business persons
and the state.
A business person can resort to various judicial and quasi-judicial authorities against the
government in case his legal rights have been violated.
The basic principle underlying law of contracts is that a stranger to a contract cannot
maintain a suit for a remedy. The law entitles only those who are parties to the contract to
file suits for exercising their rights. This is known as ‘privity of contract’.

There are different modes of formation of a contract. It may be made in writing or by word
of mouth, or be inferred from the conduct of the parties or the circumstances of the case.

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