What does the term collateral event stand for, in contingent contract? What happens to the contract if the event mentioned in the contract, which was supposed to take place, doesn't take place? Is there any condition mentioned in the Indian Contract Act based on which the contingent contract can be considered effective?


Basically, a Contingent Contract means a contract the credibility of which is directly depended upon happening or not happening of an event.

According to Section 31 of Indian Contract Act 1872, Contingent Contract refers to a contract which binds the parties to either perform certain task(s) or Not to perform certain task(s), if some event collateral to such a contract does or does not happen'. In simple words, contingent contracts, are the ones where the promisor perform his obligation only when certain conditions are met.

For instance - Hitesh promised to pay an amount of 50,000 (INR) to Raman if his car meets an accident. Later on, Raman's car meets an accident, then the contract can be enforced when the car met with accident.

However, Section 35(1) of the Indian Contract Act 1872 states that performing or non-performing activities in a contingent contract is not only connected to uncertain future event but also within a fixed period of time.
Therefore, a contract is said to be void if the event does not happen within the time specified.

NOTE - It is also void if before the time fixed, the happening of the event becomes impossible.



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