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Contingent Contract

Method of Research
The investigator employed both an empirical research technique and an analytical rescarch method. The researcher has analysed the interaction between different multinational corporations when a contract has been concluded between the seller and the buyer. In the case where a product standard was stated in the contract and in the absence of such a provision, the researcher wishes to examine the difference.

Furthermore, through performance and application of such clauses, the researcher wishes, in the contract, to analyse the numerous rules of contract discharge. A number of clauses as well as precedents on the job and the regulations for the performance of a contingent contract are utilised in addition of analytical research methods. Different data collecting tools are used by primary and secondary sources for the current investigation. Case laws, contracts, laws and statutes are the primary sources. A number of author, journal articles, journals, newspapers and sites are secondary sources for this research.

Sources of Data
In the project:
  1. cases
  2. books
  3. Internet - Research Questions were utilised the following secondary sources of data
    1. How can you quantify the "performance standard" that must be met in the execution of the contract?
    2. Does the discharge of a contingent contract have any difficulties given its uncertain status?
    3. How is the execution of a contract under a contingent contract distinguished by performance?

Hypothesis
The quality standard may be measured according to a quality standards that have to be complied with as specified in the contract, according to the first research question. This facilitates parties' compliance with such standards, but the performance standard is not one of the main features of an agreement, namely that the needed standards to be met may not be specified in certain contracts. In other words, the measurement of a standard is not one of the main components of the contract to enforce it.

So sometimes, the parties cannot agree on the standards that are necessary or anticipated by the parties, but the quality of the product may become a major issue at the time of the execution and execution of the contract. These standards can be measured in accordance with the consideration amount and the 'fair' buyer expectation. The second topic of research concerns compliance with the contingent contract since the occurrence is unpredictable.

The difficulty comes in the uncertainty of the fact that the agreement is not binding until and without the uncertain occurrence, the parties are also likely to opt out of the contract before the event takes place, because it has not been implemented. It is therefore a particularly interesting contract area where implementation is conditional. The topic of research highlights the fact that such contingent contracts are implemented and executed.

The insurance businesses, where a question arises if the unknown event does not happen, then what will bind the contract between the insurance companies and their clients, among the main areas covered by the contingent contract? An insurance contract is usually part of a compensation contract, although life insurance, personal accidents and illness or contingency insurance contracts are part of a contingent contract.[1]

The third research issue concerns the performance of a contingent contract and how far is the difference between any other contract and a contingent contract only when the unknown event happens.

Limitation Of Research
This article deals solely with the execution of a contract through a performance that is real and tried both by two separate ways. The later portion of the article discusses the contingent agreement, a contract that is based on the uncertainty of the event and the distinction between a performance discharge in the contract and a delivery of a contingent contract.

United India Insurance Company Ltd. v. Kantika Colour Lab & Ors. 2010 (4) AWC 3265 (SC) (2010).

Introduction
In the Indian Contract Act, 1872, pursuant to Section 31. "A contract to do something or not, if some event, happens or does not occur, collateral such a contract." It may therefore be characterised as a conditional contract in simple language. A very large percentage of the trade is a contingent contract; thus, special handling for these contracts is necessary. They are also referred to as 'conditional agreements.'

The obligation under certain contracts is not absolute, but is based on whether an event takes place or not, such as arrival of the ship, manufacture by a given factory, etc. Some insurance contracts, as well as contracts of guarantee and compensation, are also a contingent contract. In this context it is crucial to emphasise that it is not each contract whose responsibility depends on a contingent which may be referred to as a contingent contract. A is therefore promising to give Rs. 500 to B when B marries C.[2]

In other words, there is no rationale for contingent contracts if the contingency is of the essence or basis of the contract. The contract can be referred to as a "contingent contract" only if the contingency applies to "collateral" topic, i.e. incidentally to the core objective of the agreement. Thus a contract between the builder and a stipulated that payments are against a completing certificate of the architects and that the contract payment of the insurance company "if the claim is correctly filed and verified to the satisfaction of managers" is a contingent contract.

In this respect, note that an urgent matter depends on one of the contract parties' simple will and pleasure is not sufficient. Therefore, an agreement to pay what the employer wants is no contract at all. Even if the contingency is optional or discretionary, it must depend on the act of a party. Therefore, an agreement "as A decides" to pay is a valid agreement. A treaty that must honestly, not capriciously, exercise its discretion.[3]

Meaning of Contingent Contract:
A contract may, on the one hand, be unconditional or absolute and, on the other, conditional or conditional. The contract is absolute or unconditional and should be performed in all cases without any reservations or limitations. Conditional contracts, on the other hand, are subject to a promise and the contract must be executed only when a future uncertain event occurs or does not. Collateral for the contract must be the occurrence.

The condition may be previous or later. A collateral event is defined as a collateral event that is either a contractual performance or the entire compensation for a commitment. Therefore, the incident is independent of the agreement and is not considered. It depends on contingency and this contingency is uncertain to execute such a deal. It is uncertainty to decide whether or not the contract is dependent. It is not a contingent contract if contingency is certain.
  1. Contingent Contract Virtues:
    Here is no agreement between two parties with common interests, including selling, merging or transferring technology since they have differing future expectations.[4]

    They both have such confidence in their forecast that they reject the compromise and are so suspected of the other hand's motivations. It is difficult to break past such impasses.

    Fortunately, a basic but sometimes ignored form of deal called a contingent contract may often be avoided completely. Until such time as the unknown occurrence the contingency takes place the conditions of the contingent agreement are settled.

    Contingent contracts are widespread in some business fields, including compensation:
    CEO salary is linked to, for example, the firm stock price. But contingent contracts are either disregarded or dismissed in many commercial transactions. According to the writers, this is a mistake. Flexible contingent contracts can, indeed, be more logical and less dangerous than standard contracts in an increasingly unpredictable environment.[5]

    Contingent contracts in particular provide six advantages:
    • They make it possible for a difference of opinion to be the foundation of the deal, not a barrier to it.
    • Equalization by reduce the impact of asymmetrical data
    • They give a method of exposing discouraging transactions
    •  Reduce risk by sharing between parties and
    • encourage parties to deliver on their commitments Whilst contingent contracts in all cases are not suitable, they are far broader than managers would imagine.

     
  2. Essential Contingent Contract Characteristics:
    • A contingency must be established; events occurring or not occurring in future should occur.
    • Contingency must be uncertain, The event must be side-by-side, e.g. by contact.
       
  3. Wagering and Contingent Agreements: distinguishing features between the two are mentioned as follows:
    1. An agreement on betting is a pledge of giving money or money to establish or assess an uncertain occurrence. On the other hand, a contingent contract is a commitment to perform something or not if something happens, or does not happen.
    2. The unknown event is the single component that determines the wagering agreement, whereas the event is simply a collateral in a dependent contract.
    3. A contract of wagering should basically be contingent whereas a contract of contingency may not be of a nature of wagering.
    4. A wagering agreement shall be invalid and a contingent agreement shall be legal.
    5. Nothing other than the gain or loss of the amount of wager in a wagering agreement shall be Held:
      by the parties in the subject matter of the agreement. In other terms, a betting deal is an opportunity game. This is not the case with a contingent agreement.[6]

Statutory Analysis
Rules Regarding Contingent Contracts:
  1. Contract enforcement depending on the occurrence in the future:
    I. (Sec.32) Unless and until such time as an unpredictable future event occurs, contingent agreements to do or do nothing can not be enforced by law. If the event is not possible, do these contracts go unnoticed?

    Illustrations:
    A. Contracts with B if A survives C to acquire the homes of B. b) A contracts with B to sell a house to B at a specific price when C, which is offered to the house, refuses to buy, until and until C dies within A's lifetime. Unless and until C declines to purchase the residence, the contract cannot be enforced by law. C. The Ba money contracts when B marries C. C. Unless B is married, c dies. The touch is unfailing. If the occurrence becomes unachievable, contracts are void thus dependent. It becomes difficult to fulfil this contract as it is impossible to impose government limitations, for example, in the occurrence on which the contract was contingent.[7]

    Applicability
    Satyabrata Ghose versus Mugneeram Bangur, AIR 1954 SS 44. II. The implementation of contracts on the failure to execute a future unknown event: The main principle upon which the theory of frustrusion is founded is that of the inability of fulfilment of contract; (Sec 33). If an uncertain future event does not occur, contingent contracts may be executed if an event cannot occur and will not be executed in advance.
     
  2. Contracts based on the non-occurrence of a future uncertain event: (Sec 33). Contingent contracts to perform or not do anything if an uncertain future event does not occur can be enforced only when it becomes impossible for the event to occur, not before.

    Illustration:
    Agrees to pay the amount Ba if there is no return of a specific boat. Sunken, the boat. When the ship sinks, the contract can be executed. III. Future Conduct of a live person Contingent: (Article 34) If a future contractual event is reliant on the way a person acts at a defined time the event is seen as impossible if that person does something that prevents him or her from acting on it within a set time limit or other than in future circumstances.
     
  3. Contracts Conditioned on Future Conduct of a Living Person:
    (Section 34) If the future event on which a contract is based is the manner in which a person will act at an unspecified time, the event will be deemed impossible when such person does anything that makes it impossible for him to act in that manner within any definite time, or under any other circumstances.[8]

    Illustration:
    If B is married to C, C is married to D, the payment is accepted by B. The marriage between B and C is now impossible, even if D can be killed and C can marry B afterwards. IV. Contracts which depend on the occurrence that takes place within a certain time: (Nr. 22 (32)). If the specific uncertain event occurred within a set period, contingent contracts to do or not to do anything become void where such event did not occur at the expiry of the fixed time or where such an event becomes impossible before the fixed time limit.
     
  4. Contracts that are based on a specific event occurring within a specific time frame: (Sec 33(1)). Contingent contracts to do or not do anything if a specified uncertain event occurs within a certain time become void if the event does not occur by the end of the time fixed or if the event becomes impossible before the end of the time fixed."[9]

    Illustrations:

    • A commitment to pay Ba money if within one year there is a return of a specific ship. If the ship returns S during the year and becomes invalid if the ship is burned in the year, the contracts may be implemented.
       
Judiciary Analysis
Case Laws:
  • HPA International v. Bhagwandas Fateh Chand Daswani and Ors. (Supreme Court of India)[10]
    Facts:

    Due to Coercive possibility of collection of public dues by public auction and the sale of property, sale of property (as revealed in agreement) and the defendants concluded a deal with the plaintiff on specific terms to sell the above-mentioned property:
    First, the vendor had to give up all interest in the property to be sold, including its own life interest and that of reversers free of any hardship, for the purposes of sale;

    Secondly. The seller had to be sanctioned by the Court at the expense of selling the interest of the sellers of the property;

    Thirdly, in Court rejection of the sanction, the seller had to restore the income paid by the seller because of the cancelled contract.

    Although a seller brought an application before court for this sanction but two reversion workers objected to that same procedure (almost two years) and urged the tax authorities to pay dues, the seller revoked the agreement and instructed his lawyer to withdraw the proceedings. The seller requested that the sale of the agreement be paid for.

    Even in reply to the supposed "contract violation" by the vendor, the vendor had no wish to acquire the vendor' s lifetime interest alone without arguing that the whole duty had been fulfilled as per contract. The suit, however, was not withdrawn but was co-claimed by the seller.

    This litigation was only determined to be unsuccessful after the sales officer asked that the court award him a lifelong interest of the sells man and also left out his prior interest claim for reversionists. The Seller requested a particular performance decree on suppliers and reversers,

    Issues:

    The present appeal:
    1. Whether the action taken by the vendor during the pendency of a lawyer to withdraw the complaint was a violation of contract, e.g. by terminating a contract by notice?
    2. Whether, upon sanction from the Court and not otherwise, the vendor's responsibility to transfer his lonely title also came about?
    Held:
    :
    1. As the public authorities have made strong demands that the seller discharge public debts and the sale of the property was an urgent necessity long before the authorities initiated an impending coerceous recovery (as also recited in the agreement), the seller could therefore not, in view of the lengthy proceeding before that Court of Justice for sanction (by opposition of reversionists), be allowed.

      The parties were considered as implied terms "this was the request for the Court's penalty in due time and in any event, well before the debt recovery procedure began." Because even after a reasonable time was awaited, the court had not obtained the sanctions, therefore, repudiation was not violated.
       
    2. In cases when the agreement is ratified by other parties not contracting parties, no concluded contract is reached which is considered a prior requirement for the entry into force of the contract concluded." The contract specified that the whole interest of the vendor and the reversor's property should be transferred, and therefore that one contract was indivisible subject to the Court's approval.

      The reversions were not contract parties and parties were aware that the seller had only a life interest in real estate and that he could only transmit his own interests. Thus, while contemplating that full interest transfer was subject to the Court's approval, the vendor's responsibility to transfer his own title was thus equally subject to Court sanction, unless agreed upon. Because this change never occurred or was requested by the seller even during the start of court proceedings, it will thus be unfair for the seller to have to fulfil in particular.
       
  • Bashir Ahmed v. Govt of Andhra Pradesh" (Supreme Court of India)[11]
    Facts:

    In this case, the Government has decided to buy the book of Unnani medicinal prescriptions from the complainant, Tohfa-e-osmania' with regard to the creation and marketing of unnani medication by a limited business. He was found to have to be paid Rs. 2.00 000 for total compensation. He received a payment of Rs. 50,000 in advance and was deduced from his book. The firm was not formed by a proposal. The complainant sued for recovery of the stipulated remainder of sum, i.e. Rs. 1,50,000. The accused refused to pay the sum. It wished rather to repay the book and requested a refund of rs. 50,000, because the contract depended on the business being floated.

    Held:

    The contract was not Held:
    by Held:
    and the complainant has the right to enforce the contract,- C.L. Katilal v. Mrs. Madden (Supreme Court of India)[12]

    Facts:

    There was a selling agreement This included a stipulation that the vendor should be given the Chief Commissioner permission in two months' time for transferring the plot on which the building was built. Because of the condition of ground leasing, such a penalty was necessary.

    Held:
    :

    It has been found that such a contract is not inchoate unless when nothing suggests that the application for a sanction is probably refused until such sanction has been received. The agreement is a full agreement as far as the parties to the agreements are concerned. The simple fact that the chief commissioner's sunction must be sought prior to selling does not render the agreement defective and does not prevent the award of a particular performance order. In the event that the Chief Commissioner eventually rejects the sales penalty, then the complainants shall be unable to implement their order, although there are no grounds for denying the decree with regard to the court.

Conclusion
A contract is a legally binding arrangement. For each contract an agreement shall take place, for legal consideration and for a legal purpose, with the free assent of the Parties to the competent contract. It should not be hereby deemed null and void to create a deal. Each deal is primarily a contract.

It's also a contract to do or not do anything, like any other contract. However, it is not total and unconditional, but it is not to be carried out with any reservations or restrictions. Their performance depends on whether or not the contingency of some occurrence occurs. Certain fundamental factors must be there to make a contract a dependent contract.These parts create a contingent contract, and a contract is not contingent without them.

To do or not do anything, there must be a legal contract. The contract must be conditional on its fulfilment. The mentioned event must be guaranteed to such agreements and the event should not be at the Promoter's discretion. These are some requirements that need to be complied with in order to enforce a contingent contract. For example, when an event takes place, the event is not taking place and the event is not taking place in a given period. There are some instances in which a dependent contract is invalid.

Some of these are: the event was impossible, the event was not Held:
within a certain period, agreements which depend on impossible occurrences and a live person's behaviour.[13]

Bibliography
Books Referred:


1. Pathak H.S. (2006) (Mulla) The Indian Contract Act Eleventh Edition Chapter 3. p.112. Lexis Nexis Butterworths New Delhi, India
2. Bangia, R.K. (2018) Contracts I Chapter 7, p. 266

Website Referred:
  1. https://www.netlawman.co.in/ia/ indian-contract-act?pageContentID198
  2. http://www.nice.org/cases/78-88/case81-1.htm
  3. https:/indiankanoon.org
  4. https://www.wikipedia.org/
  5. Raju patel, contingent contract, scribd, pg no 1, (1-17),
    https://www.scribd.com/document/400921066/Contingent-Contracts
End-Notes:
  1. United india insurance company ltd. Vs kantika colour lab and ors. 2010 (4) AWC 3265 (SC) (2010).
  2. Raju patel, contingent contract, scribd, pg no 1, (1-17), https://www.scribd.com/document/400921066/Contingent-Contracts
  3. Ibid.
  4. Raju patel, contingent contract, scribd, pg no 1, (1-17), https://www.scribd.com/document/400921066/Contingent-Contracts
  5. Ibid.
  6. Raju patel, contingent contract, scribd, pg no 1, (1-17), https://www.scribd.com/document/400921066/Contingent-Contracts
  7. Illustration (b) to section 35
  8. Section 34
  9. Illustration (a) to Section 35
  10. Appeal (civil) 6006 of 2001
  11. AIR 1970 SC 1089
  12. AIR 1963 Punj- 136
  13. Raju patel, contingent contract, scribd, pg no 1, (1-17), https://www.scribd.com/document/400921066/Contingent-Contracts

Written By: Mohit Mandloi,
BA-LLB (Hons.) Semester II, NMIMS Indore

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