Chapter 5: Contingent Contracts-Theory

Question 1

What is the meaning of a contingent contract? (5 Points)

Answer 1

1. A “contingent contract” is a contract
2. to do (or not to do) something
3. if some event, collateral to such contract,
4. does or does not happen.
5. Examples include Insurance Contracts and Indemnity and Guarantee Contracts.

Question 2

What are essential features/Characteristics of a Contingent contract? (3 points)

Answer 2

1. Contract depends on future event.
2. Event should be Collateral.
3. Event should be Uncertain.

Question 3

Under essential features/Characteristics of a Contingent contract, describe “Contract depends on future event”.

Answer 3

The performance of a contingent contract depends upon the happening or non-happening of some future event.

Question 4

Under essential features/Characteristics of a Contingent contract,
describe “collateral event”.

Answer 4

The event must be collateral/incidental (i.e. related or connected) to the contract.

Question 4

Under essential features/Characteristics of a Contingent contract, describe “uncertain event.”.

Answer 4

The event must be uncertain.

Question 5

What are the differences between Wagering agreement and Contingent contract? (Headings)

Answer 5

1. Validity.
2. Future/Uncertain event.
3. Interest of parties.
4. Reciprocal promises.

Question 6

Difference between Wagering agreement and Contingent contract.
1. Validity.

Answer 6

1. Validity.
   -Wagering agreement:
   It is void and illegal.
   -Contingent contract:
   It is valid (unless dependent on illegal/impossible limit).

Question 7

Difference between Wagering agreement and Contingent contract.
2. Future/Uncertain event.

Answer 7

2. Future/Uncertain event.
   -Wagering agreement:
   Future event is the sole determining factor of the agreement. (only one event in the contract).
   -Contingent contract:
   Future event is only collateral. (Two events in the contract)

Question 8

Difference between Wagering agreement and Contingent contract.
3. Interest of parties.

Answer 8

3. Interest of parties.
   -Wagering agreement:
   Its parties have no other interest in happening or non-happening of event except winning or losing of wagering amount.
   -Contingent contract:
   Its parties have real interest in happening or non-happening of event.

Question 9

Difference between Wagering agreement and Contingent contract.
4. Reciprocal promises.

Answer 9

4. Reciprocal promises.
   -Wagering agreement:
   It may or may not consist of reciprocal promises.
   -Contingent contract:
   It consists of reciprocal promises.

Question 10

Under rules regarding performance of contingent contracts, state four kinds of contingent contact.

Answer 10

1. Contracts contingent upon the happening of an event.
   (i) If time is fixed (ii) If time is not fixed
2. Contracts contingent upon non-happening of an event.
   (i) If time is fixed (ii) If time is not fixed
3. Agreements contingent upon impossible events.
4. Contracts contingent upon the future conduct of a person.

Question 11

Under rules regarding performance of contingent contracts, state rule for:
1. Contracts contingent upon the happening of an event.
(i) If time is fixed

Answer 11

• Contract can be enforced only when event happens within time specified.
• Contract cannot be enforced if event becomes impossible or time passes.

Question 12

Under rules regarding performance of contingent contracts, state rule for:
1. Contracts contingent upon the happening of an event.
(ii) If time is not fixed

Answer 12

• Contract can be enforced only when event passes.
• Contract cannot be enforced if event becomes impossible.

Question 13

Under rules regarding performance of contingent contracts, state rule for:
2. Contracts contingent upon the non-happening of an event.
(i) When time is fixed

Answer 13

• Contract can be enforced only when event becomes impossible or does not happen within time specified.
• Contract cannot be enforced if event happens within time specified.

Question 14

Under rules regarding performance of contingent contracts, state rule for:
2. Contracts contingent upon the non-happening of an event.
(ii) When time is not fixed

Answer 14

• Contract can be enforced only when event becomes impossible.
• Contract cannot be enforced if event happens.

Question 15

Under rules regarding performance of contingent contracts, state rule for:
3. Agreements contingent upon impossible events.

Answer 15

Such agreements are void ab-initio.

Question 16

Under rules regarding performance of contingent contracts, state rule for:
4. Contracts contingent upon the future conduct of a person.

Answer 16

Such event shall be considered impossible if that person does anything by which it becomes impossible to perform the contract within any definite time.