Indian Contract Act, 1872: Sections 31–45 Explained with Examples

SECTION 31 - “CONTINGENT CONTRACT” DEFINED

A contingent contract is a contract to do or not to do something if some event, collateral to the contract, does or does not happen.

For a contract to be contingent:

• there must be a valid contract;
• its performance must depend upon the happening or non-happening of an uncertain event; and
• that event must be collateral to the contract.

Illustration

A contracts to pay B ₹10,000 if B's house is burnt.

The burning of the house is an uncertain event upon which A's obligation to pay depends. It is collateral to the promise to pay.

The contract is therefore a contingent contract.

MEANING OF “COLLATERAL EVENT”

The uncertain event must be separate from the actual performance promised by the parties.

For example, if A promises to pay B ₹5 lakh if B's factory is destroyed by fire, the fire is a collateral event.

But if A promises to pay B ₹5 lakh in return for B constructing a house, construction of the house is not a collateral event. It is the very performance which B has promised to render.

Therefore, every contract containing a condition is not necessarily a contingent contract under Section 31.

EVENT MAY HAPPEN OR MAY NOT HAPPEN

A contingent contract may depend upon:

• the happening of an uncertain event; or
• the non-happening of an uncertain event.

Sections 32-35 determine when such contracts become enforceable or void.

CONTINGENT CONTRACT AND WAGER

A contingent contract should be distinguished from a wagering agreement under Section 30.

In a wager, the parties ordinarily have opposite interests in the uncertain event. One party gains and the other loses according to the result, and neither has any genuine interest in the event apart from the stake.

A contingent contract, on the other hand, forms part of a genuine transaction in which the uncertain event is merely collateral to the contractual obligation.

For example, an insurer's promise to compensate the owner of a warehouse if it is destroyed by fire is a contingent contract because the owner has a genuine interest in the warehouse.

But if A and B merely bet ₹10,000 on whether C's warehouse will burn, without either having any interest in the warehouse, the agreement may amount to a wager.

SECTION 32 - CONTRACT CONTINGENT ON AN EVENT HAPPENING

Where a contract depends upon the happening of an uncertain future event, it cannot be enforced unless and until that event happens.

If the event becomes impossible, the contract becomes void.

Thus, where the contract depends upon an event happening:

• if the event happens, the contract becomes enforceable;
• if the event becomes impossible, the contract becomes void.

ILLUSTRATION

A contracts with B to buy B's horse if A survives C. The contract cannot be enforced unless C dies during A's lifetime.

If A dies before C, the event of A surviving C becomes impossible and the contract becomes void.

ILLUSTRATION

A agrees to sell his horse to B if C, to whom the horse has already been offered, refuses to buy it.

The contract with B becomes enforceable when C refuses the offer.

Until then, the required contingency has not occurred.

ILLUSTRATION

A agrees to pay B a sum of money when B marries C. C dies before the marriage takes place.

Since B's marriage with C has become impossible, the contingent contract becomes void.

SECTION 33 - CONTRACT CONTINGENT ON AN EVENT NOT HAPPENING

Section 33 deals with a contract which depends upon an uncertain future event not happening.

Such a contract 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 particular ship does not return.

The ship sinks.

Once the ship sinks, its return becomes impossible. The condition that the ship should not return is therefore satisfied, and the contract becomes enforceable.

This is different from Section 32.

Under Section 32, where the contract depends upon an event happening, impossibility of that event makes the contract void.

Under Section 33, where the contract depends upon an event not happening, impossibility of the event may itself make the contract enforceable.

SECTION 34 - FUTURE CONDUCT OF A LIVING PERSON

A contingent contract may depend upon the future conduct of a living person.

Section 34 explains when such conduct is treated as having become impossible.

Where the future event depends upon how a person will act at an unspecified time, the event is treated as impossible when that person does something which makes the contemplated conduct impossible:

• within any definite time; or
• otherwise than upon the happening of further contingencies.

Illustration

A agrees to pay B a sum of money if B marries C.

C marries D.

B's marriage with C is treated as having become impossible.

The law does not require the parties to wait merely because D may later die and C may thereafter become free to marry B. Such a possibility depends upon further contingencies.

Therefore, once C marries D, the event contemplated by the contract is treated as impossible for the purpose of Section 34.

SECTION 35 - CONTINGENT EVENT WITHIN A FIXED TIME

Section 35 deals with two different situations:

1. an uncertain event must happen within a fixed time; and
2. an uncertain event must not happen within a fixed time.

EVENT MUST HAPPEN WITHIN A FIXED TIME

Where a contract depends upon an uncertain event happening within a fixed period, the contract becomes void:

• when the fixed period expires without the event happening; or
• before the period expires, if the event becomes impossible.

Illustration

A promises to pay B if a particular ship returns within one year.

If the ship returns within the year, the contract becomes enforceable.

If one year expires without the ship returning, the contract becomes void.

If the ship is destroyed before the year expires, its return has already become impossible and the contract becomes void immediately. There is no need to wait until the end of the year.

EVENT MUST NOT HAPPEN WITHIN A FIXED TIME

Where a contract depends upon an uncertain event not happening within a fixed period, the contract becomes enforceable:

• when the specified period expires without the event happening; or
• before the period expires, if it becomes certain that the event will not happen.

Illustration

A promises to pay B if a particular ship does not return within one year.

If one year expires and the ship has not returned, the contract becomes enforceable.

If the ship sinks before the year expires, it becomes certain that it will not return. The contract therefore becomes enforceable immediately, without waiting for the full year to expire.

Thus, where the condition is that an event must happen within a fixed time, its failure or impossibility makes the contract void. Where the condition is that the event must not happen within that time, expiry of the time without the event, or earlier certainty that it cannot happen, makes the contract enforceable.

SECTION 36 - AGREEMENTS CONTINGENT ON IMPOSSIBLE EVENTS

An agreement to do or not to do something if an impossible event happens is void.

It does not matter whether the parties:

• knew that the event was impossible; or
• believed that the event was possible.

If the event was already impossible when the agreement was made, the agreement is void.

ILLUSTRATION

A agrees to pay B ₹1,000 if two straight lines enclose a space.

The agreement is void because the event is inherently impossible.

ILLUSTRATION

A agrees to pay B ₹1,000 if B marries A's daughter C. Unknown to both A and B, C was already dead when the agreement was made.

The agreement is void because the event upon which it depended was already impossible.

CHAPTER IV - OF THE PERFORMANCE OF CONTRACTS

SECTION 37 - OBLIGATION OF PARTIES TO PERFORM

Section 37 lays down the basic rule relating to performance of contracts.

The parties to a contract must:

• perform; or
• offer to perform

their respective promises, unless such performance is dispensed with or excused under the Contract Act or any other applicable law.

PROMISES ORDINARILY BIND REPRESENTATIVES

Unless a contrary intention appears from the contract, a promise made by a person ordinarily binds his legal representatives after his death.

Illustration

A promises to deliver goods to B on a particular day in return for ₹1,000. A dies before the day fixed for delivery.

A's representatives are bound to deliver the goods, and B must pay the agreed price to A's representatives. The obligation survives because it does not depend upon A's personal skill or ability.

PERSONAL PROMISE DOES NOT DEVOLVE

Where the nature of the contract shows that the parties intended the promise to be performed personally by the promisor, the obligation does not pass to his representatives.

Illustration

A promises to paint a picture for B by a particular day. A dies before that day.

The promise cannot be performed by A's representatives because B had contracted for A's personal skill as an artist.

The contract therefore comes to an end so far as such personal performance is concerned.

SECTION 38 - EFFECT OF REFUSAL TO ACCEPT OFFER OF PERFORMANCE

An offer by the promisor to perform his promise is commonly called a tender or offer of performance.

Where the promisor makes a valid offer of performance and the promisee refuses to accept it:

• the promisor is not responsible for the resulting non-performance; and
• he does not lose his rights under the contract.

However, the offer of performance must satisfy the conditions stated in Section 38.

TENDER MUST BE UNCONDITIONAL

The offer of performance must be unconditional.

For example, A owes B ₹1 lakh without any condition.

A cannot make a valid tender by saying that he will pay only if B first gives up some unrelated claim which B was never bound to surrender.

The promisor cannot attach a new condition to the performance which is not part of the original contract.

TENDER MUST BE MADE AT A PROPER TIME AND PLACE

The offer must be made:

• at a proper time;
• at a proper place; and
• under circumstances which give the promisee a reasonable opportunity to ascertain that the promisor is able and willing there and then to perform the whole promise.

A mere statement that the promisor is willing to perform at some future time is not enough. He must be ready and able to perform the obligation which has become due.

PROMISEE MUST HAVE OPPORTUNITY TO INSPECT THE THING OFFERED

Where the promise consists of delivering something, the promisee must be given a reasonable opportunity to satisfy himself that the thing offered is the very thing which the promisor was bound to deliver.

Illustration

A contracts to deliver to B at B's warehouse on 1 March:

• 100 bales of cotton;
• of a specified quality.

For a valid tender, A must bring the contracted cotton to B's warehouse on the appointed day and give B a reasonable opportunity to check its quantity and quality.

OFFER TO ONE OF SEVERAL JOINT PROMISEES

Section 38 expressly provides that an offer of performance made to one of several joint promisees has the same legal consequences as an offer made to all of them.

SECTION 39 - REFUSAL OF PARTY TO PERFORM PROMISE WHOLLY

Section 39 applies where a party to a contract:

• refuses to perform his promise in its entirety; or
• disables himself from performing it in its entirety.

In such a case, the promisee may put an end to the contract, unless he has shown, by words or conduct, that he agrees to its continuance.

The refusal or self-disablement must be sufficiently serious to affect the promise as a whole. Every minor breach does not automatically give a right to terminate the entire contract.

ILLUSTRATION

A, a singer, agrees with B, a theatre manager, to sing at B's theatre:

• two nights every week;
• for the next two months.

B agrees to pay her for each performance.

A wilfully fails to appear on the sixth night.

B is entitled to put an end to the contract.

However, if B allows A to perform on the seventh night and continues to treat the contract as subsisting, B has accepted the continuation of the contract.

He cannot afterwards terminate it merely on the basis of the earlier default, though he may still claim compensation for the loss caused by that default.

ANTICIPATORY BREACH

Section 39 also embodies the principle of anticipatory breach.

An anticipatory breach occurs where, before the time for performance arrives, one party:

• clearly refuses to perform the contract; or
• by his own conduct makes performance impossible.

The innocent party then ordinarily has two choices:

ACCEPT THE REPUDIATION

The promisee may accept the refusal as bringing the contract to an end and claim the appropriate remedy for breach without waiting for the actual date of performance.

KEEP THE CONTRACT ALIVE

The innocent party may instead refuse to accept the repudiation and treat the contract as continuing.

If he chooses this course, the contract remains alive for both parties, and later events affecting its performance may have legal consequences.

A party cannot both accept the repudiation as terminating the contract and at the same time insist that the same contract continues for the purpose of specific performance.

SECTION 40 - PERSON BY WHOM PROMISE IS TO BE PERFORMED

Section 40 determines whether the promisor must perform the promise personally or whether performance may be carried out through another person.

Where the nature of the contract shows that the parties intended the promise to be performed by the promisor himself, personal performance is necessary.

In other cases, the promisor or his representative may employ a competent person to perform the promise.

PERSONAL PERFORMANCE

Personal performance is required where the identity, skill, qualification or confidence of the promisor forms an essential part of the agreement.

Illustration

A promises to paint a picture for B.

A must perform the promise personally because B contracted for A's own artistic skill.

The same principle may apply where a person is engaged because of his particular:

• artistic skill;
• professional ability;
• personal confidence; or
• special qualification.

PERFORMANCE THROUGH ANOTHER PERSON

Where the promise does not depend upon the promisor's personal qualities, it may ordinarily be performed through a competent person.

Illustration

A promises to pay money to B.

A may:

• pay B personally; or
• arrange for another competent person to make the payment on his behalf.

Sections 37 and 40 therefore operate together. Section 37 provides that promises ordinarily bind the promisor's representatives, while Section 40 recognises that a promise requiring personal performance cannot simply be performed through a substitute.

SECTION 41 - EFFECT OF ACCEPTING PERFORMANCE FROM THIRD PERSON

Section 41 provides that where a promisee accepts performance of the promise from a third person, he cannot afterwards enforce the same promise against the original promisor.

Example

A owes B ₹1 lakh.

C pays the entire amount to B on A's behalf, and B accepts the payment in satisfaction of A's obligation.

B cannot afterwards demand the same ₹1 lakh from A.

The important requirement is that the promisee must actually accept the performance from the third person. A mere offer by a third person which the promisee refuses does not discharge the original promisor under Section 41.

Sections 40 and 41 deal with different matters. Section 40 asks whether performance through another person is permissible. Section 41 deals with the consequence where the promisee has actually accepted performance from a third person.

SECTION 42 - DEVOLUTION OF JOINT LIABILITIES

Section 42 applies where two or more persons have made a joint promise.

Unless a contrary intention appears from the contract, the liability devolves in the following manner:

DURING THE LIVES OF ALL JOINT PROMISORS

All the joint promisors must fulfil the promise jointly.

AFTER THE DEATH OF ONE JOINT PROMISOR

The legal representative of the deceased promisor becomes liable jointly with the surviving promisor or promisors.

AFTER THE DEATH OF THE LAST SURVIVING PROMISOR

The representatives of all the original joint promisors must fulfil the promise jointly.

Example

A, B and C jointly promise to pay D ₹3 lakh.

If A dies, the obligation devolves upon:

• A's legal representative;
• B; and
• C.

If B and C later also die, the obligation devolves upon the representatives of A, B and C.

A legal representative's liability is, of course, subject to the ordinary rule that he is liable only to the extent permitted by law in respect of the deceased's estate.

Section 42 mainly deals with devolution of joint liability after death. The promisee's right to recover the whole amount from one or more joint promisors is dealt with separately in Section 43.

SECTION 43 - ANY ONE OF JOINT PROMISORS MAY BE COMPELLED TO PERFORM

Where two or more persons make a joint promise, the promisee may, in the absence of an express agreement to the contrary, compel any one or more of the joint promisors to perform the whole promise.

Illustration

A, B and C jointly promise to pay D ₹3,000.

D may require:

• A alone;
• B alone;
• C alone; or
• any combination of them

to pay the whole ₹3,000.

D is not required to divide his claim and recover only ₹1,000 from each.

RIGHT OF CONTRIBUTION BETWEEN JOINT PROMISORS

Although the promisee may recover the whole obligation from any one joint promisor, the position between the promisors themselves is different.

A joint promisor who performs more than his proper share may require the other joint promisors to make equal contribution, unless a contrary intention appears from the contract.

Example

A, B and C jointly owe D ₹3,000.

D compels C to pay the entire amount.

In the ordinary case, C may recover:

• ₹1,000 from A; and
• ₹1,000 from B.

C ultimately bears his own ₹1,000 share.

DEFAULT BY ONE JOINT PROMISOR IN CONTRIBUTION

Where one joint promisor fails to contribute his proper share, the loss caused by that failure is borne equally by the remaining joint promisors.

Illustration

A, B and C jointly promise to pay D ₹3,000.

C is compelled to pay the entire amount.

A is insolvent and his estate can pay only ₹500 towards his proper share.

The remaining ₹500 deficiency in A's share must be divided equally between B and C.

C may therefore recover:

• ₹500 from A's estate; and
• ₹1,250 from B.

C ultimately bears ₹1,250 himself.

Where One Promisor Can Contribute Nothing

If A, B and C jointly owe D ₹3,000 and C is unable to contribute anything, and A is compelled to pay the whole amount, the loss caused by C's inability is shared equally between A and B.

A may therefore recover ₹1,500 from B.

SURETY AND PRINCIPAL DEBTOR

The Explanation to Section 43 protects the special relationship between a surety and principal debtor.

The ordinary rule of equal contribution does not mean that:

• a surety loses his right to recover from the principal debtor amounts properly paid on his behalf; or
• the principal debtor gains a right to recover contribution from the surety merely because the principal himself paid the debt.

Statutory Illustration

A and B are sureties for C. All three are jointly liable to D.

C defaults and A and B are compelled to pay the debt.

A and B may recover from C, because C is the principal debtor.

The detailed rights of sureties are dealt with later in the Act.

SECTION 44 - EFFECT OF RELEASE OF ONE JOINT PROMISOR

Where two or more persons have made a joint promise, the promisee may release one of them.

The release of one joint promisor:

• does not discharge the other joint promisors; and
• does not free the released promisor from his responsibility to the other joint promisors.

Example

A, B and C jointly owe D ₹3 lakh.

D releases A from liability towards him.

B and C are not discharged merely because A has been released. D may still enforce the joint obligation against them according to Section 43.

Further, A's release by D does not necessarily free A from his internal duty to contribute to B and C if they are later required to discharge the joint debt.

Section 44 therefore distinguishes between:

• the released promisor's liability towards the promisee; and
• his responsibility towards his co-promisors.

SECTION 44 AND THE ENGLISH COMMON-LAW RULE

Section 44 represents a deliberate departure from the older English common-law rule under which release of one joint debtor could discharge the others.

Under Indian law, the rule is clear: release of one joint promisor does not discharge the others.

SECTION 45 - DEVOLUTION OF JOINT RIGHTS

Section 45 applies where a promise has been made to two or more persons jointly.

Unless a contrary intention appears from the contract, the right to claim performance devolves as follows:

DURING THE LIVES OF ALL JOINT PROMISEES

The joint promisees must claim performance jointly.

AFTER THE DEATH OF ONE JOINT PROMISEE

The right to claim performance belongs jointly to:

• the legal representative of the deceased promisee; and
• the surviving promisee or promisees.

AFTER THE DEATH OF THE LAST SURVIVING PROMISEE

The right belongs jointly to the representatives of all the original joint promisees.

Statutory Illustration

A receives ₹5,000 jointly from B and C and promises to repay the amount with interest to B and C jointly.

B dies.

During C's lifetime, the right to claim repayment belongs jointly to:

• B's legal representative; and
• C.

After C also dies, the right belongs jointly to the representatives of B and C.

JOINT LIABILITIES AND JOINT RIGHTS

Sections 42–44 principally deal with joint promisors, while Section 45 deals with joint promisees.

Where several persons jointly make a promise, Section 43 permits the promisee to compel any one or more of them to perform the whole promise.

Where a promise is made jointly to several persons, Section 45 ordinarily requires the right to claim performance to be exercised jointly, subject to any contrary intention appearing from the contract.

Judex Tutorials

Judex Tutorials is a premier Judiciary coaching institute in Patna, Bihar, dedicated to prepare law students for judicial services exams. Whether you prefer online judicial classes, offline sessions, or need access to recorded lectures, we offer flexible preparation options. If you like our blog as class notes, follow and subscribe our social media platforms on Facebook, Instagram and YouTube as well.