Contingent contracts for CLAT - Practice Questions & MCQ

Passage 5

Read the passage and answer the questions that follow.

The expression "contingent contracts" is defined in Section 31 of the Indian Contract Act as a contract to do or not to do something if some event, collateral to such contract, does or does not happen. It is a sort of conditional contract. A contract, for example, to pay a sum of money on the expiry of a time or on the death of a person is not a contingent contract because these events are of a certain nature. The time or the person in question will definitely expire and the money will become payable. For example, a contract to pay a sum of money on the destruction of premises by fire is a contingent contract, for that contingency may or may not happen. From this point of view, all contracts of insurance are contingent contracts. A contract to buy land which is under dispute made with a party to the dispute and to become operative if he wins a case is a contingent contract, its performance being wholly dependent upon the result of the litigation. A contingent contract failed because permission was required (environmental permission) from the authority concerned but was not granted. The necessity of such clearance was clearly anticipated in the contract as a prerequisite to its performance. The Supreme Court held that consequent restoration of the parties to the position in which they were before the contract was proper.

A, whose property was attached, contracted to sell the same to B and undertook to apply to the court for the approval of the sale. A did apply to the court in the performance of his undertaking, but the court rejected his application. Thereupon A sold the land to C. B sued him for the land. It was held that the contract of sale to B was a contingent contract, being subject to the approval of the court, and that approval having not been given, the contingency did not happen and hence its performance could not be demanded. A contract to sell a piece of agricultural land which was the subject matter of the ongoing consolidation proceedings was held to be of contingent nature because nobody could tell beforehand to whom the land might become allotted. It was not enforceable until and unless the consolidation would leave the land in the hands of the seller.

Question:

X is an insurance agent. Y is an individual who is around 45 years of age and wants to get his house insured. Y contacts X, and X tells Y that the insurance can be claimed if Y’s house is damaged due to a fire from an electric short circuit. One night a few children enter Y’s house to pluck flowers, and accidentally leave a tap in Y’s garden open, which leads to the flooding of a part of Y’s house. Y now wants to claim the insurance. Decide.

Passage 5

Read the passage and answer the questions that follow.

The expression "contingent contracts" is defined in Section 31 of the Indian Contract Act as a contract to do or not to do something if some event, collateral to such contract, does or does not happen. It is a sort of conditional contract. A contract, for example, to pay a sum of money on the expiry of a time or on the death of a person is not a contingent contract because these events are of a certain nature. The time or the person in question will definitely expire and the money will become payable. For example, a contract to pay a sum of money on the destruction of premises by fire is a contingent contract, for that contingency may or may not happen. From this point of view, all contracts of insurance are contingent contracts. A contract to buy land which is under dispute made with a party to the dispute and to become operative if he wins a case is a contingent contract, its performance being wholly dependent upon the result of the litigation. A contingent contract failed because permission was required (environmental permission) from the authority concerned but was not granted. The necessity of such clearance was clearly anticipated in the contract as a prerequisite to its performance. The Supreme Court held that consequent restoration of the parties to the position in which they were before the contract was proper.

A, whose property was attached, contracted to sell the same to B and undertook to apply to the court for the approval of the sale. A did apply to the court in the performance of his undertaking, but the court rejected his application. Thereupon A sold the land to C. B sued him for the land. It was held that the contract of sale to B was a contingent contract, being subject to the approval of the court, and that approval having not been given, the contingency did not happen and hence its performance could not be demanded. A contract to sell a piece of agricultural land which was the subject matter of the ongoing consolidation proceedings was held to be of contingent nature because nobody could tell beforehand to whom the land might become allotted. It was not enforceable until and unless the consolidation would leave the land in the hands of the seller.

Question:

From the following, identify the contracts which are classified to be of the nature of being a contingent contracts under the Indian Contract Act, 1872.