Contingent Contracts | 'A' contract to pay Rs. 10,000/- to 'B' if B’s house is burnt. House of 'B' is burnt. Can 'B' recover Rs. 10,000/- from A? Is it a wagering agreement?

Question: Contingent Contracts | ‘A’ contract to pay Rs. 10,000/- to ‘B’ if B’s house is burnt. House of ‘B’ is burnt. Can ‘B’ recover Rs. 10,000/- from A? Is it a wagering agreement? [UPJS 2016]

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Answer

Section 31 of the Indian Contract Act, 1872 defines Contingent Contracts as contracts, which are conditional on some future event happening or not happening and are enforceable when the future event or loss occurs.

In the present case at hand, ‘A’ contract to pay Rs. 10,000/- to ‘B’ if B’s house is burnt. The contract is based on the happening of a contingent or uncertain event that house of ‘B’ is burnt or not. As the facts suggest that later house of B is burnt, the agreement upon happening of the uncertain event becomes enforceable in a court of law. Now, ‘B’ can recover Rs. 10,000/- from ‘A’. It is to note that this is not a wagering agreement.

Another type of contract- wagering contract, which has the resemblance of the contingent contract but is significantly different from the contingent contracts.

The term wagering contract is defined in Section 30 of the Act states “Agreements by way of wager are void, and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain events on which any wager is made.”

The points of distinction between the Contingent Contract and Wagering agreement may be noted as follows

1. 1. A wagering agreement is a promise to give money or money’s worth upon the determination or ascertainment of an uncertain event. A contingent contract, on the other hand, is a contract to do or not to do something if some event, collateral to such contract does or does not happen.
   2. In a wagering agreement, the uncertain event is the sole determining factor, while in a contingent contract the event is only collateral.
   3. A wagering agreement is essential of a contingent nature whereas a contingent contract may not be of a wagering nature.
   4. A wagering agreement is void whereas a contingent contract is valid.
   5. In a wagering agreement, the parties have no other interest in the subject matter of the agreement except the winning or losing of the amount of the wager. In other words, a wagering agreement is a game of chance. This is not so in the case of a contingent contract.

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