Contingent Contracts MCQ Quiz - Objective Question with Answer for Contingent Contracts - Download Free PDF

The correct answer is 'contingent contract.'

Key Points

• Contingent Contract:
  • A contingent contract is a type of agreement where the execution of the contract depends on the occurrence or non-occurrence of a specific event which is collateral to the contract.
  • Such contracts are enforceable only when the event mentioned in the contract happens or does not happen.
  • An example of a contingent contract is an insurance policy, where the insurer's obligation to pay depends on the occurrence of an insured event like a fire or accident.

Additional Information

• Collateral Contract:
  • A collateral contract is an agreement that coexists with a primary contract. It is a secondary agreement that supports the main contract, providing additional terms or assurances.
  • This type of contract is distinct from a contingent contract because it does not depend on an event but rather supplements the main contract with additional promises.
• Invalid Contract:
  • An invalid contract is one that lacks legal enforceability. It may be void from the outset due to illegal terms, lack of capacity, or other deficiencies.
  • Invalid contracts do not carry any legal obligations and cannot be enforced by either party.
• None of the above:
  • This option simply indicates that none of the other options is correct, which in this case, is not applicable as the correct answer is a contingent contract.

The correct answer is Option 3 

Key Points Section 35 deals with the rules governing contingent contracts based on the happening or non-happening of a specified uncertain event within a fixed time. It has two main part:

1. When Contingent Contracts Become Void- A contingent contract to do or not to do something if a specified uncertain event happens within a fixed time will become void in the following situations:
   • If the time fixed expires and the specified event has not happened.
   • If, before the expiration of the time fixed, it becomes impossible for the event to happen.

Illustration (a):

• A promises to pay B a sum of money if a certain ship returns within a year.
• If the ship is burnt within the year (impossible for the event to happen), the contract becomes void.
• If the year passes without the ship returning, the contract also becomes void.

2. When Contingent Contracts May Be Enforced A contingent contract to do or not to do something if a specified uncertain event does not happen within a fixed time may be enforced in the following situations:

• If the fixed time has expired, and the event has not happened.
• If, before the expiration of the time fixed, it becomes certain that the event will not happen.

Illustration (b):

• A promises to pay B a sum of money if a certain ship does not return within a year.
• If the year passes and the ship does not return, the contract may be enforced.
• If the ship is burnt within the year (making it certain that it will not return), the contract may also be enforced.

The correct answer is Option 3.

Key Points

•  As per section 31 of the Indian Contract Act, 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.
• In life insurance, the contingency revolves around the event of the insured person's death. The insurance company agrees to pay a sum of money (the benefit) to the designated beneficiaries upon the death of the insured. This payment is contingent upon the occurrence of this specific event – the death of the insured individual.
• The contingent nature of the agreement lies in the uncertainty of when the event (death) will occur. Until the death of the insured, the contract remains in force, and the insurance company's obligation to pay the benefit is contingent upon the event of death happening during the policy's active period.

The correct answer is ​When the happening of the uncertain event becomes impossible.

Key Points Section 33. Enforcement of contracts contingent on an event not happening.
Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before.
Illustration
A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.

The correct answer is Section 36.

Key Points

• Section 36 of the Indian Contract Act, 1872, provides that the Agreement contingent on impossible events void.
• It states that —Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.

The correct answer is Option 3.

Key Points

•  As per section 31 of the Indian Contract Act, 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.
• In life insurance, the contingency revolves around the event of the insured person's death. The insurance company agrees to pay a sum of money (the benefit) to the designated beneficiaries upon the death of the insured. This payment is contingent upon the occurrence of this specific event – the death of the insured individual.
• The contingent nature of the agreement lies in the uncertainty of when the event (death) will occur. Until the death of the insured, the contract remains in force, and the insurance company's obligation to pay the benefit is contingent upon the event of death happening during the policy's active period.

The correct answer is Option 3.

Key Points

•  As per section 31 of the Indian Contract Act, 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.
• In life insurance, the contingency revolves around the event of the insured person's death. The insurance company agrees to pay a sum of money (the benefit) to the designated beneficiaries upon the death of the insured. This payment is contingent upon the occurrence of this specific event – the death of the insured individual.
• The contingent nature of the agreement lies in the uncertainty of when the event (death) will occur. Until the death of the insured, the contract remains in force, and the insurance company's obligation to pay the benefit is contingent upon the event of death happening during the policy's active period.

The correct answer is Option 4.

Key Points

• As per section 36 of the Indian Contract Act, contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.
• This principle applies to contingent agreements where the event upon which the agreement depends is impossible at the time the contract is made, regardless of whether the parties are aware of its impossibility. If the event is impossible, the contract becomes void, as it's based on an impossibility from the start.

Explanation: Collateral event in Pollock and Mulla is defined as “an event which is neither a performance directly promised as part of the contract, nor the whole of the consideration for a promise. Example: A contracts to pay B a sum of 5,000 rupees if B's cricket bat is broken. This can be said to be a contingent contract. 

The correct answer is Option 3.

Key Points

•  As per section 31 of the Indian Contract Act, 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.
• In life insurance, the contingency revolves around the event of the insured person's death. The insurance company agrees to pay a sum of money (the benefit) to the designated beneficiaries upon the death of the insured. This payment is contingent upon the occurrence of this specific event – the death of the insured individual.
• The contingent nature of the agreement lies in the uncertainty of when the event (death) will occur. Until the death of the insured, the contract remains in force, and the insurance company's obligation to pay the benefit is contingent upon the event of death happening during the policy's active period.

The correct answer is Both 2 and 3Key Points
Section 35.   When contracts become void which are contingent on happening of specified event within fixed time . When contracts may be enforced, which are contingent on specified event not happening within fixed time.
Contingent contracts to do or not to do anything if a specified uncertain event happens within a fixed time become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.

The correct answer is Option 1

Key Points

• Section 31 of the Indian Contract Act, 1872, provides for the definition of Contingent Contract.
• It states that: 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.
• Section 32- Enforcement of contracts contingent on an event happening. —Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void.
• Section 33- Enforcement of contracts contingent on an event not happening—Contingent contracts to do or not to do anything if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible, and not before.

The correct option is  All of the above.

Key Points

• The term 'contingent' refers to an act that depends on the happening or non-happening of another event in the future.
• Example:-
  • A agrees to pay Rs. 30,000 to B, only if B tops his final-year exams. Now, this is a contingent contract as B may or may not succeed in his exams.
• As per Section 31 of Indian Contract Act, 1872 (ICA), 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.
  • Illustration:
    • A contract to pay B Rs. 10,000 if B’s house is burnt. This is a contingent contract.
• Case laws:-
  • Nemi Chand and Ors. v. Harak Chand and Ors. (1965):
    • In this case court validates the applicability of Section 32 of the Indian Contract Act, 1872 that states, a contingent contract to do or not do anything depends on the happening of an uncertain future event and till then the contract cannot be enforced.
    • However, the party who claims that the contract shall be void as the event has become impossible should try the matter and file a plea, not only on the question of law but also on the question of fact.
    • If the party does not want to try the matter, then it is not the responsibility of the Courts to consider the case suo moto.
  • Chandulal Harji Van Das v. CIT (1967):
    • In this case, it was held by the Supreme Court that all contracts of insurance and indemnity are contingent.
  • Frost v. Knight (1872):
    • The defendant promised to marry the plaintiff on the death of his father. While the father was still alive, he married another woman.
    • It was held by the English Court that it had become impossible that he should marry the plaintiff and she was entitled to sue him for the breach of contract.

The correct option is  All of the above.

Key Points

• The term contingent means an act that depends on the happening or non-happening of another act in the future.
• Example:-
  • A agrees to pay Rs. 30,000 to B, only if B tops his final-year exams. Now, this is a contingent contract as B may or may not succeed in his exams.
• Concept of Contingent Contract Section 31 of Indian Contract Act, 1872 (ICA): “Contingent contract” defined.
  • 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.
  • Illustration:
    • A contract to pay B Rs. 10,000 if B’s house is burnt. This is a contingent contract.
• Case laws:-
  • Nemi Chand and Ors. v. Harak Chand and Ors. (1965):
    • It was observed by the Rajasthan High Court that Section 32 of the Indian Contract Act, 1872 states that a contingent contract to do or not do anything depends on the happening of an uncertain future event and till then the contract cannot be enforced.
    • This fact is true.
    • However, the party who claims that the contract shall be void as the event has become impossible should try the matter and file a plea, not only on the question of law but also on the question of fact.
    • If the party does not want to try the matter, then it is not the responsibility of the Courts to consider the case suo moto.
  • Chandulal Harji Van Das v. CIT(1967):
    • In this case, it was held by the Supreme Court that all contracts of insurance and indemnity are contingent.
  • Frost v. Knight (1872):
    • The defendant promised to marry the plaintiff on the death of his father. While the father was still alive, he married another woman.
    • It was held by the English Court that it had become impossible that he should marry the plaintiff and she was entitled to sue him for the breach of contract.

The correct answer is the agreement is void as it is an impossible event.

Key Points

• The above question is taken from illustration (a) of Section 36.
• Section 36 provides that Agreement contingent on impossible events void.
• It states that —Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.
• Illustration (a): A agrees to pay B 1,000 rupees if two straight lines should enclose a space. The agreement is void.