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Contingent and Qusai Contracts

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    “CONTINGENT & QUASI CONTRACTS” [pic] Contents 1. Contract. 2. Types of contract. 3. Contingent contract. • Definition. • Illustration. 4. Essentials/characteristics of contingent contract. 5. Rules regarding contingent contract. 1. Uncertain event. 2. Impossible event. 3. Performance dependent on non-happening of event. 4. Performance depending on particular individual. 5. Events within fixed time. 6. Dependence on impossible event. 6. Examples of contingent contract. 7. Quasi contract. • Definition. • Condition or contractual obligation. 1. Supply of necessaries. . Payment by an interested person. 3. Condition of liability under the section. 4. Liability to pay for non-gratuitous. 5. Finder of goods. 6. Right of a finder of goods. 7. Liabilities of a finder of goods. 8. Mistake or coercion. 8. Examples of quasi contract. Contract: ‘A contract is an agreement between two or more person to do or not to do some particular thing, such agreement being enforceable at law’. CONTRACT Formation basis Performance basis Validity basis Special basis

    Express contract Executed contract Valid contract Bailment contract Implied contract Executory contract Void contract Indemnity contract Quasi contract Unilateral contract Voidable contract Guarantee contract Bilateral contract Unenforceable contract Agency contract

    Illegal contract Contingent contract Wagering contract Contingent contract: • Definition: ‘A contingent contract is a contract to do or not to do something, if some event, collateral to such a contract does or does not happen’. It means that the promisor in a contract binds himself to perform the contract at the time when an uncertain future event will happen or will not happen. An ordinary contract can become contingent contract, if its performance is made dependent upon the happening or non happening of uncertain event collateral to such contract.

    The collateral event means connected event. The collateral event is not part of the consideration but in fact, an integral part of the contract. According to the majority the contingent contract are void when they belong to the class of commutative contracts such as sale and leasing. The reason is that the contracting parties do not know whether the event will occur or not, and whether the contract will be subsequently enforced or not. It is also possible that one of the contracting parties may change his mind when the event occurs.

    According to Hanafi jurists even the gratuitous contracts are not permissible if made to take effect on the happening of contingency. • Essential / characteristics of contingent contracts: 1. The performance of the contract depends upon the happening or non happening of an event in future. 2. The event must be uncertain. 3. The uncertain event must be collateral or incidental to the contract. Thus all contracts of insurance, indemnity or guarantee are contingent contracts. • Rules regarding contingent contract: Section 32 to36 Act contain rules regarding contingent contract.

    They are summarized as: 1. Uncertain event: ‘Contingent contract is to do or not to do anything, if an uncertain future event happens, it cannot be enforced by law unless and until that event has happened. ’ Illustration: 1. ‘A’ makes a contract with ‘B’ to buy B’s car if A survives. Thus contract can’t be enforced until and unless ‘B’ dies in ‘A’ life time. 2. A agrees to his car to B at a price of 2 lac. The car meet with an accident and completely damage before the execution of contract the contract is void. ———————– 2. Impossible event:

    Sec, 33 says “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”. In simple words if the event becomes impossible the contract becomes void. Illustration: ‘A’ contract to pay ‘B’ a sum of money when ‘B’ marries ‘C’. ‘C’ dies without being married to ‘B’. The contract becomes void. 3. Performance dependent on non happening of event: Sec. 34 says “when performance depends on non happening of an event the contract shall not be performed unless the happening of that event becomes impossible”.

    In other words if the future event on which a contract is contingent is the way in which a person will act at an unspecified time , the event, shall be considered to become impossible when such person does anything which renders it’s impossible that he should act within any definite time, or otherwise than under further contingencies. 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. 4. Performance dependent on particular individual: Sec. 5 (1) says “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 events become impossible”. In other words where performance depends on particular individual acting in a particular manner or on unspecified time. The event shall be considered to become impossible when such person does anything which renders it impossible that he should act so within any definite time or otherwise than under future contingencies.

    Illustration: X promise to sell his car to Y at instalment basis if his new business earn profit. The contract may enforce only when the business of X earns profit otherwise the contract become void. 5. Event within fixed time : Sec. 35 (2) says “ contingent contract to do or not to do anything, if a specified uncertain event does not happen with a fixed time, may be enforced by law when the time fixed has expired and such event has not happened, or before the time fixed has expired , if it becomes certain that such event will not happen”.

    In other words where the contract contemplates the happening of an event within affixed time, the contract becomes void: a. If the event does not happen or it’s happening becomes impossible before the expiry of the date. b. When performance of the contract depends on non-happening of an event within a specified time, its performance cannot be demanded if the event does not happen or its happening becomes impossible before the expiry of that date. Illustration: ‘X’ promise to pay ‘Y’ an amount of loan Rs. 50000, if his house is sale within one week.

    The contract may enforce if the house is sale out within one week otherwise the contract becomes void. ————– 6. Dependence on impossible event: Sec. 36 says “contingent agreement 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 be parties to the agreement at the time when the contract is made”. In other words whether the performance of contract is depending on event which is already impossible, the contract is void whether or not the fact is known to the parties. Illustration: 1. “A” agrees to pay “B” Rs. 1000 if he constructs a bridge in the air. 2. A” agrees to pay “B” Rs. 1000 if “B” will marry “A’s” daughter if daughter was dead at the time of the agreement. The agreement is void. Examples: Contracts of insurance and contracts of indemnity and guarantee are the examples of contingent contracts. Illustration: 1. ‘A’ agree to pay ‘Y’ Rs. 5000 if Y’s car is burnt. This is contingent contract. 2. ‘X’ borrows 2 lac from ‘Y’ and ‘X’ gives the guarantee that in case of default he will repay the loan to ‘X’. 3. ‘A’ agreed to take shares in the company, if the company would appoint him its sole agent at a certain place the company went into liquidation before appointing him (A) agent. A’ was entered on the list of contributories. Held ‘A’ was not liable as the contract to take shares was contingent to his appointment as agent which event never took place. 4. Ali Contracts with Imran that he will give 1 crore rupees if rains fall on 31st December… held it is based on future whether it happens or may not happen. Quasi contracts or implied contract: • Definition: Quasi-contracts are defined to be “the lawful and purely voluntary acts of a man, from which there results any obligation whatever to a third person, and sometime a reciprocal obligation between the parties.

    It is not legitimately done, but the terms are accepted and followed as if there is a legitimate contract. A quasi contract is an exceptional kind of contract because there is no offer and acceptance, either expresses or implied by which one party is bound by law to perform the obligation for something done or suffer by the other party even though he was not entered into the contract with his own consent. Mutual consent of contracting parties does not exist in quasi contract even then it is considered as a complete contract.

    In certain circumstances obligations resembling those created by a contract these are imposed by law although the parties have never entered into a contract. Such obligations imposed by law are known as quasi contract. In simple words if there is no proposal, no acceptance and no intention on the parts of the parties to enter into a contract and still the law, from the conduct and relationship of the parties implies a promise imposing obligation on the one party and conferring a right in favour of the other is known as quasi contract.

    Quasi contract are based on the principle of equity and justice. In these contracts there is no face to face contract. However, the law at its own implies the obligations of a contract. ———— • Conditions or contractual obligations: According to sec. 68 to 72 there are five types of quasi contractual obligation. 1. Supply of necessaries: Where necessaries are supplied to a person who is incompetent to contract or to someone whom he is legally bound to support, the supplier is entitled to recover the price from the property of the incompetent person.

    Sec. 68 says “if person . incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from property of such incapable person”. The following points must be noted: a) Only the property of incompetent person is liable, personally he is free from every liability. b) There must be necessaries, not luxuries. ) Necessaries should be supplied only that the to incompetent person or to someone whom he is legally bound to support, such as his wife and children. d) Property of incompetent person is liable to pay a reasonable price and not the contract price. Illustration: Ali offers Shahid (a minor) to supplies necessaries suitable to his condition in life. Shahid accept the offer. Ali is entitled to be reimbursed from Shahid property. There is quasi contract between Ali and Shahid by which Ali is entitled to recover the price of necessaries from the property of Shahid. . Payment by an interested person:(sec. 69) Sec. 69 says “ a person who is interested in the payment of money which another is bound by law to pay and who therefore pays, is entitled to be reimbursed by the other” where one person pays the debts of another person and is interested to recover the amount so paid. The other person on whose behalf the debt is paid is lawfully bound to pay the amount to is benefactor. Illustration: ‘A’ agrees to purchase car from ‘B’ at a price of 5 lac. ‘B’ have lease this car from MCB which two instalments still unpaid. A’ receive final notice from MCB for the payment unpaid instalments to avoid the complications of repossession by the bank, ‘A’ pays the unpaid instalment on the behalf of ‘B’. ‘B’ is bound to pay this instalment money to ‘A’. 3. Conditions of liability under the section: The conditions of liability under the sections are as follows: • It is necessary that the person himself should not bind to pay. • The person should be interested in making the payment, the interest which person seeks to protect must however be legally recognizable. • The dependent should have been bound by law to pay the money e. . where a person is only morally bound and is not legally compel able to pay he will not be bound to pay to discharge his moral obligation. 4. Liability to pay for non gratuitous(sec. 70): In simple words when a person renders any service or provides goods to another person, not free of cost, he has a right to receive his remuneration or cost from other person. Sec. 70 says ‘where a person does anything lawfully for another person, on delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof.

    The later is bound to make compensation to the former in respect of or to restore the thing so done or delivered’. Conditions of liabilities under the section are as under: 1. The person doing the act should not have intended to do it gratuitously. 2. The service should have been rendered lawfully. 3. The person for whom the act is done must have enjoyed the benefit of it. Illustration: 1. X sends certain goods to Y ‘sale or return bases. Y uses the goods personally. X claim the price of goods from. Y uses the goods personally. X claim the price of goods from Y. 2. X save Y’s goods from theft.

    X is not entitled to compensation from Y. If circumstances shoes that he intended to act gratuitously. —————— 5. Finder of goods (sec11): According to sec. 71 ‘a person who finds belonging to another and takes them into his custody is subject to the same responsibility as a bailee. The duties and the liabilities of the finder are same as bailee. 6. Rights of a finder of goods: Following are the rights of finder of goods: • He can sue the actual owner for the specific award announces return of goods and recover the award. • He has right to recover the expenses which he spent for finding out the actual owner. If the goods are perishable in nature, he can sell the goods. • He has entitled to recover charges which he spent in preserving the goods. • He can sell the goods if his lawful charges exceed two third of the value of goods. The actual owner is entitled to get the balance of sale proceeds, if there is surplus after meeting the lawful charges. • He can sell the goods if after due search, the true owner are not be found. 7. Liabilities of finder of goods: Liabilities of the finder of goods are as follows: • He must try to search the real owner of the goods. He should avoid suing the gods personally. • On finding of real owner, he should deliver the goods to him without any delay. • He must take proper care of goods. 8. Mistake or coercion: According to sec. 72 ‘ A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return to the person who paid it by mistake or under coercion’. Illustration: A birthday cake is delivered under a mistake to B who used the cake thinking them as present. B must return the parcel or pay for the cake. Examples: • A car owner brings his car in for brake repairs.

    The mechanic fixes the brakes and in doing so he also fixes a separate part of the axle that has a direct relationship to the car’s ability to brakes correctly. Although the axle repair was not specifically contracted for, a quasi contract is implied for which the owner must pay the mechanic. • A painter, who mistakenly paints a house with the owner’s knowledge, can sue in court to get paid. • A homebuilder who signs a contract with a purported agent, who actually has no authority, can recover the cost of the services and materials from the homeowner. _______________________________________________ ———————– 1

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