Contingent And Quasi Contracts – Chapter Notes
CA Foundation Business Laws Indian Contract Act Unit 6 notes on Contingent and Quasi Contracts. Covers Sections 31 to 36 and Sections 68 to 72, contingent contracts, wagering contracts, quasi-contracts and case laws.
Contents
This unit has two separate but connected ideas. First, a contract may depend on a future uncertain event. That is a contingent contract. Second, in some cases law creates obligations even though there is no actual contract. Those are quasi-contracts.
- Basic characteristics of contingent contracts and quasi-contracts.
- Rules relating to enforcement of contingent contracts.
- Difference between contingent and wagering contracts.
- Five statutory quasi-contractual obligations.
- Confusing a conditional contract with a contingent contract.
- Forgetting that the event must be collateral.
- Calling a wagering agreement valid.
- Assuming quasi-contract requires offer and acceptance.
- Forgetting minor’s liability for necessaries is limited to property.
A contract may be absolute or contingent. An absolute contract is one where the promisor undertakes to perform in any event. A contingent contract depends on a future uncertain collateral event.
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.
Contracts of insurance, indemnity and guarantee fall under this broad category because the obligation is triggered by an uncertain event.
A contracts to pay B ₹10,00,000 if B’s house is burnt. This is a contingent contract. A contracts to buy B’s house for ₹50,00,000 if A secures a bank loan for that amount. This is also a contingent contract.
The event must be collateral to the contract. It must not be the direct performance promised under the contract and must not be the whole consideration for the promise.
A collateral event is an event which is neither a performance directly promised as part of the contract, nor the whole of the consideration for a promise.
| Situation | Contingent or not? | Reason |
|---|---|---|
| A pays B if B’s house burns. | Contingent. | Burning of house is collateral event. |
| A delivers wheat and B pays price afterwards. | Not contingent. | Payment is part of performance, not collateral event. |
| A pays B ₹1,00,000 if B marries C. | Not contingent in ICAI discussion. | Marriage is the consideration/promise context, not collateral in the required sense. |
| B pays A only after A constructs swimming pool. | Not contingent. | Construction is directly connected with performance. |
1. Performance depends on event
The condition may be precedent or subsequent. Example: A promises to pay B ₹50,000 if it rains on the first day of next month.
2. Event must be collateral
The event must be outside the contractual performance itself. If the event is directly the promised performance, the contract is conditional, not contingent.
3. Event should not be mere will of promisor
If A promises to pay B ₹1,00,000 if A so chooses, there is no contract. But if A promises to pay B if it rains and A leaves Delhi for Mumbai, it may be contingent because rain is not merely A’s will.
4. Event must be uncertain
If event is certain or practically bound to happen, the contract is not contingent. For example, permission that is generally granted as a matter of course after formalities may not make the contract contingent.
The enforcement rules decide when contingent contracts become enforceable and when they become void.
Section 32 — Event Happening
If a contract is contingent on an uncertain future event happening, it cannot be enforced unless and until that event happens. If the event becomes impossible, the contract becomes void.
A contracts to pay B when B marries C. C dies without marrying B. The contract becomes void.
Section 33 — Event Not Happening
If a contract is contingent on an uncertain future event not happening, it can be enforced only when happening of that event becomes impossible.
P agrees to pay Q if a particular ship does not return. The contract is enforceable only when the ship sinks or otherwise cannot return. If the ship returns, the contract becomes void.
Section 34 — Conduct of Living Person
If a contract is contingent on how a living person will act at an unspecified time, the event is treated as impossible when that person does something that makes the required conduct impossible.
Facts The defendant promised to marry the plaintiff after the death of his father. While the father was still alive, the defendant married another woman.
Issue Had the promised event become impossible even though the father was still alive?
Held Yes. By marrying another woman, the defendant made it impossible to marry the plaintiff as promised. The plaintiff could sue for breach.
Section 35 — Event Happening within Fixed Time
If a contract is contingent on an uncertain event happening within a fixed time, it becomes void if the time expires without the event happening, or if the event becomes impossible before expiry.
A promises to pay B if a certain ship returns within one year. It is enforceable if the ship returns within the year, and becomes void if the ship is burnt within the year or does not return within the year.
Section 35 — Event Not Happening within Fixed Time
If a contract is contingent on an event not happening within fixed time, it can be enforced when the time expires and the event has not happened, or earlier if it becomes certain that the event will not happen.
A promises to pay B if a certain ship does not return within one year. It is enforceable if the ship does not return within the year, or if it is burnt within the year.
Section 36 — Impossible Event
Contingent agreements to do or not to do anything if an impossible event happens are void, whether parties knew of impossibility or not at the time of agreement.
A agrees to pay B ₹1,00,000 if the sun rises in the west next morning. Void. X agrees to pay Y ₹1,00,000 if two straight lines enclose a space. Void.
| Contingent upon | When enforceable | When void |
|---|---|---|
| Happening of event | When event happens. | When event becomes impossible. |
| Non-happening of event | When happening becomes impossible. | When event happens. |
| Behaviour of person | When person acts in specified manner. | When person makes such conduct impossible. |
| Happening within fixed time | When event happens within time. | When time expires without event, or event becomes impossible before expiry. |
| Non-happening within fixed time | When time expires without event, or event becomes impossible before expiry. | When event happens within time. |
| Impossible event | Never enforceable. | Void from beginning. |
| Basis | Contingent Contract | Wagering Contract |
|---|---|---|
| Meaning | Contract to do or not do something based on collateral event happening/not happening. | Promise to give money or money’s worth based on uncertain event happening/not happening. |
| Reciprocal promises | May not contain reciprocal promises. | Consists of reciprocal promises. |
| Uncertain event | Event is collateral. | Uncertain event is the core factor. |
| Nature | May not be wagering. | Essentially contingent in nature. |
| Interest in subject matter | Parties have real interest in subject matter. | Parties have no real interest except winning or losing. |
| Mutuality of gain/loss | Not based only on gain and loss. | Game of winning and losing alone. |
| Legal effect | Valid. | Void. |
In a true contract, there is offer, acceptance, consent and agreement. In a quasi-contract, these are absent. Still, law imposes obligation because it would be unfair to let one person benefit at another person’s expense.
A quasi-contract is a relation resembling a contract where law creates obligations even though parties have not entered into a contract in the real sense.
Quasi-contracts are based on equity, justice and good conscience. The core idea is: No person should unjustly enrich himself out of another person’s loss.
A tradesman leaves goods at C’s house by mistake. C treats the goods as his own. C must pay. A pays money to B by mistake though it was due to C. B must refund. A fruit parcel is wrongly delivered to R, who consumes it thinking it is a birthday present. R must pay or restore.
Section 68 — Necessaries Supplied to Incapable Person
If a person incapable of contracting, or anyone whom he is legally bound to support, is supplied necessaries suited to his condition in life, the supplier is entitled to be reimbursed from the property of such incapable person.
A supplies B, a minor or lunatic, with necessaries suitable to B’s condition in life. A is entitled to be reimbursed from B’s property.
Facts X, a minor studying M.Com., took ₹1,00,000 from B for college fees and books. X owned assets worth ₹9 lakh but failed to repay.
Issue Can B recover from X despite X being a minor?
Held Yes, but only from X’s property. Education-related fees and books may be necessaries suited to X’s condition in life.
Section 69 — Payment by Interested Person
A person interested in payment of money which another is bound by law to pay, and who pays it, is entitled to be reimbursed by the other.
B holds land on lease from A, the zamindar. A’s government revenue is in arrears and land is advertised for sale. Sale would cancel B’s lease. B pays the revenue to protect his lease. A must reimburse B.
Facts P left his carriage on D’s premises. D’s landlord seized the carriage for rent due from D. P paid the rent to get his carriage released.
Issue Can P recover the rent amount from D?
Held Yes. D was legally bound to pay rent, and P was interested in making payment to protect his carriage.
Section 70 — Benefit of Non-Gratuitous Act
Where a person lawfully does something for another, or delivers something to him, not intending to act gratuitously, and the other person enjoys the benefit, he must compensate or restore.
A tradesman leaves goods at B’s house by mistake. B treats them as his own. B must pay. A food delivery is wrongly delivered to Ishaan; he eats it. He must pay because he enjoyed a non-gratuitous benefit.
Facts A government servant was compulsorily retired. He obtained an injunction, was reinstated and paid salary, but was given no work. Later the appeal was decided in favour of the government.
Issue Could the salary paid during reinstatement be recovered?
Held He was directed to return the salary paid during that period because the benefit/payment could not be retained in the circumstances.
Section 71 — Responsibility of Finder of Goods
A person who finds goods belonging to another and takes them into custody is subject to the same responsibility as a bailee.
- Finder must take proper care as a person of ordinary prudence.
- Finder has no right to appropriate the goods.
- Finder must restore goods if the true owner is found.
- Finder may retain goods against everyone except the true owner.
Facts H found a diamond on the floor of F’s shop and handed it to F to keep till the owner was found. The true owner could not be traced. H later offered lawful expenses and asked for the diamond back. F refused.
Issue Who had the better right to the diamond: H the finder or F the shopkeeper?
Held F had to return the diamond to H. The finder has a right to retain goods against everyone except the true owner.
A customer leaves a brooch in a shop. The shop assistant keeps it in a drawer. It is later missing. Shopkeeper is liable if ordinary care was not taken.
Section 72 — Money Paid by Mistake or Under Coercion
A person to whom money has been paid, or anything delivered, by mistake or under coercion must repay or return it.
Facts Money or goods were transferred under mistake. The question was whether such payment or delivery could be recovered.
Issue Are payments made under mistake recoverable?
Held Yes. Every kind of payment of money or delivery of goods under mistake is recoverable.
Facts Money was paid as tax under a mistaken belief or misunderstanding of legal liability.
Issue Can mistaken tax payment be recovered?
Held Yes. The Supreme Court affirmed that such mistaken payment is recoverable under Section 72.
Facts Money was paid under pressure, oppression or compulsion.
Issue Is coercion under Section 72 limited only to coercion under Section 15?
Held No. For Section 72, coercion is interpreted broadly to include oppression, extortion and similar pressure.
Facts T travelled without ticket in a tram car. On checking, he was asked to pay ₹5 as penalty to compound the transaction. He later sued for recovery, claiming it was extorted from him.
Issue Was the amount recoverable?
Held The suit was decreed in T’s favour.
| Basis | Quasi-Contract | Contract |
|---|---|---|
| Essentials of valid contract | Absent. | Present. |
| Source of obligation | Imposed by law. | Created by consent of parties. |
| Basis | Unjust enrichment and legal duty. | Agreement and promise. |
| Consent | No real consent required. | Free consent is required. |
| Nature of right | Generally right to money against specific person. | Contractual rights as agreed by parties. |
| Case / Illustration | Topic | Principle |
|---|---|---|
| Frost v. Knight | Section 34 | Conduct of living person can make contingent event impossible. |
| Shyam Lal v. State of U.P. | Section 70 | Benefit/payment retained without final legal basis may require restoration. |
| Hollins v. Howler | Section 71 | Finder has right against everyone except true owner. |
| Shivprasad v. Sirish Chandra | Section 72 | Money paid or goods delivered under mistake are recoverable. |
| Sales Tax Officer v. Kanhaiyalal | Section 72 | Mistaken tax payment is recoverable. |
| Seth Khanjelek v. National Bank of India | Section 72 | Coercion under Section 72 includes oppression/extortion-like pressure. |
| Trikamdas v. Bombay Municipal Corporation | Section 72 | Money paid under coercive pressure may be recovered. |
| Minor college fees example | Section 68 | Necessaries supplied to minor recoverable from minor’s property. |
| Carriage seized for rent | Section 69 | Interested person paying another’s legal liability can recover. |
One-Line Revision
- Section 31: Contingent contract depends on collateral uncertain event.
- Collateral Event: Not part of performance and not consideration.
- Section 32: Event happening — enforce only when event happens.
- Section 33: Event not happening — enforce when happening becomes impossible.
- Section 34: Conduct of living person may make event impossible.
- Section 35: Fixed-time rules for happening and non-happening.
- Section 36: Impossible-event agreements are void.
- Wagering Agreement: Void; parties have no interest except win/loss.
- Quasi-Contract: Obligation imposed by law without real contract.
- Section 68: Necessaries supplied to incapable person recoverable from property.
- Section 69: Interested payment of another’s legal liability is reimbursable.
- Section 70: Non-gratuitous benefit must be compensated.
- Section 71: Finder of goods has responsibility of bailee.
- Section 72: Money paid or goods delivered by mistake/coercion must be returned.
High-Frequency ICAI Traps
- Contingent event must be uncertain and collateral.
- Mere will of promisor is not enough.
- Insurance is contingent, not wagering, because insured has interest.
- Wagering agreements are void.
- Quasi-contract is not based on consent.
- Necessaries supplied to minor do not create personal liability.
- Finder of goods is like bailee, not owner.
- Section 72 covers both mistake and coercion.
Contingent and Quasi Contracts — One Page Recall
- Section 31.
- Contract to do or not to do something.
- Depends on event happening or not happening.
- Event must be collateral.
- Examples: insurance, indemnity, guarantee.
- Future event or condition.
- Happening or non-happening.
- Collateral to contract.
- Not mere will of promisor.
- Event must be uncertain.
- Event happening → enforce when event happens; void if impossible.
- Event not happening → enforce when happening becomes impossible; void if event happens.
- Conduct of living person → impossible when person prevents required conduct.
- Happening within fixed time → enforce if happens within time; void if not or if impossible.
- Non-happening within fixed time → enforce if time expires without event or event becomes impossible.
- Impossible event → void from beginning.
- Contingent contract is valid.
- Wagering agreement is void.
- Contingent has real interest.
- Wager has only win/loss interest.
- In contingent contract event is collateral.
- Relations resembling contracts.
- No offer or acceptance.
- No real agreement.
- Obligation imposed by law.
- Based on unjust enrichment.
- Section 68 — necessaries supplied to incapable person.
- Section 69 — payment by interested person.
- Section 70 — benefit of non-gratuitous act.
- Section 71 — finder of goods.
- Section 72 — money paid or goods delivered by mistake/coercion.
- Frost v. Knight — conduct can make event impossible.
- Shyam Lal v. State of U.P. — Section 70 benefit/restoration.
- Hollins v. Howler — finder’s right against all except true owner.
- Shivprasad v. Sirish Chandra — mistaken payment recoverable.
- Sales Tax Officer v. Kanhaiyalal — mistaken tax payment recoverable.
- Seth Khanjelek v. National Bank of India — wider meaning of coercion under Section 72.
- Trikamdas v. Bombay Municipal Corporation — coercive payment recovery.