Dying declaration

Definition: – Dying Declaration is defined in Section 32 (1) of the Indian Evidence Act

When the statement is made by the person as the cause of his death, or as any of the circumstances of the transaction which resulted in his loss of life, in cases in which the cause of that person’s death comes into question. Such statements made by the person are relevant whether the person who made them was alive or was not, at the time when they were made, under the expectation of death, and whatever may be the nature of the proceeding in which the cause of his death comes into question.

Thus, it is the statement made by the person who is going to die, and that statement will be considered as evidence in court, how his death caused and who is the mugger. There are many conditions that relied upon the dying declaration that it should be in an adequate manner as dying declaration is the weapon who convicted the accused and stood as strong evidence.

The statement made by the deceased person will be treated as Evidence and Admissible in a Court of law. The reason behind this can be followed by Latin maxim Nemo Mariturus Presumuntur Mentri which means that “Man Will Not Meet His Maker With Lying On His Mouth.” More precisely in our Indian law, it is the fact that the dying man can never lie or Truth sits on the lips of dying man. Hence, the Dying Declaration is Admissible and considered as Evidence in Court, and can be used as a weapon to punish the culprit.

  • It can be Oral, Written, Gestures & Signs, Thumb impression, Incomplete and can also be in the form of Question Answer.
  • The Supreme Court has found this to be true in law, at least in cases where the person dies of burn injuries. Court hold the opinion that “The law on the issue can be summarized to the effect that law does not give any direction that who can record a dying declaration but just provided that magistrate is above all the person in subject for recording the statement, nor is there any definite form, format or procedure for the same,” said a bench of Justices B S Chauhan and Dipak Misra while quashing the high court order in the case of dowry death acquittal case.
  • As far as the language of the statement is concerned, it should be recorded in the language of the deceased in which he is fluent or may possible than in Court language.
  • Dying person speaks the truth because, if he does not die than still declaration can be used as evidence against the accused. Moreover, dying declaration can be considered as relevant evidence in both criminal and civil proceedings.

In the recent “Nirbhaya’s Rape Case,” Dying Declaration was made by her in the form of sign and gesture. Thus, Dying declaration made through signs, gestures or by nods are also admissible as evidence.

In Khulshal Rao Vs. State of Bombay – Apex Court laid down the following principles related to dying declaration : –

  • There is no absolute rule of law that a dying declaration cannot be the sole basis of conviction unless corroborated. A true & voluntary declaration needs no corroboration.
  •  A dying declaration is not a weaker kind of evidence than any other piece of evidence;
  • Each case must be determined on its own facts keeping in view the circumstances in which the dying declaration was made.
  • A dying declaration stands on the same footing as other pieces of evidence & has to be judged in the light of surrounding circumstances & with reference to the principle governing the weight of evidence.
  • A dying declaration which has been recorded by a competent Magistrate in the proper manner, that is to say, in the form of questions and answers, &, as far as practicable in the words of the maker of the declaration stands on a much higher footing than a dying declaration which depends upon oral testimony which may suffer from all the infirmities of human memory & human character.

Case Laws:-

  1. Lakhan Vs. State of M.P.:- The supreme court provides that, when the condition is satisfied that the dying declaration made by the deceased is true and can be relied upon, as the declarant is found to be conscious and mentally fit while making the statement, and the statement made by him proven to be voluntarily and no compulsion was there while making the statement and can be put for the sole basis of conviction. In that situation there is no need for corroboration is necessary.
  2. Surajdeo Oza v. State of Bihar :- It does not give an affirmative answer to the question and held that merely because the dying declaration is a brief statement it is not to be discarded. On the contrary, the length of the statement itself guarantees the truth.
  3. State of Punjab Vs. Parveen Kumar:- the Supreme Court set forth some measure to test the veracity in the case when there is more than one dying statement. The court provides that there must be a series of examinations in order to determine the truth. If the statements provide different versions and do not couple with given facts, then the court must opt for other evidence in their record to clarify the things so that truth can be inferred. 
  4. Sudhakar Vs. State:- the Supreme Court while deciding the issue of multiple dying declarations, which varying from other statements and have no series related to each other, this will raise a doubt in the eyes of court to whether the statement should be believed or not, in order to clear the issue the Court has given some directions which help to guide while exercise the judgment by court in such matters, examined.
  5. Natha Shankar Mahajan Vs. State of Maharshtra:- the Supreme court ruled that if there is a doubt about the statement made by the deceased, in that case, the gain will transfer to the accused. As this is the correct Law preposition. Moreover on the other was round if the statement found to be true and reliable ten it can be used solely as the purpose of the convection.

Conclusion:-

Dying declaration is the statement made when a person is at death bed, as the word “dying declaration” itself signifies its meaning. A person having a serious apprehension of death and there shall be no chances for his survival. At this point, the court assumed that whatever the statement made by the declarant is purely true as the man will never meet his maker with a lie on his lips and person will speak only truth.

Probate is the court-supervised process of authenticating a last will and testament if the deceased made one. It includes locating and determining the value of the person’s assets, paying their final bills and taxes, and distributing the remainder of the estate to their rightful beneficiaries. 

Application for Probate

The application for probate shall be made by Petition. There shall be annexed to the petition a copy of the last will and testament of the deceased. If the will be not in the English language, an official translation thereof shall be annexed.

The original will shall be filed separately and kept by the Prothonotary and Senior Master in the strong room of his office in Bombay High Court.

There shall also be annexed to the petition:-

  • A schedule of the property and credits which the deceased died  possessed of or entitled to at the time of his death which have or are likely to come to the petitioner’s hands,
  • A schedule showing the debts of the deceased and all other items which by law the petitioners is allowed to deduct for the purpose of ascertaining the net estate of the deceased, and
  • A schedule of property ,if any, held by the deceased is trust for another and not beneficially or with general power to confer a beneficial interest. The petition shall be in such variations as the circumstances of each case may require and shall be accompanied by-
  • The vakaltnama signed by the petitioner, unless the petitioner appears in person;
  • The executor’s oath;
  • The affidavit of one of the attesting witnesses, if available; and
  • A copy of the estate duty return, if filed with the Controller of Estate Duty.

Verification of petition. – The petition for probate shall be subscribed by the Petitioner and his Advocate on record (if any), and shall be verified by the petitioner in the manner prescribed for verification of plaints.

Payment of Court fess

The Court-fees of the notice issued by the Prothonotary and Senior Master shall be paid within three days after receipt of such notice.

Delay in application

In any case where an application for probate is made for the first time after the lapse of three years from the death of the deceased, the reason for the delay shall be explained in the Petition. Should the explanation be unsatisfactory, the Prothonotary and Senior Master may require such further proof of the alleged caused of delay as he may deem fit.

Unsigned or unattested will

 In cases in which it is not necessary that a will should be signed by the testator or attested by witnesses to constitute a valid testamentary disposition of the testator’s property, the testator’s intention that it should operate as his testamentary disposition shall be clearly proved by affidavit or otherwise.

Notice of next-of-kin

  1.  In all applications for Probate notice of the application shall be given to all the heirs and next-of-kin of the deceased mentioned in the Petition except to those whose consent has been filed in the proceedings.
  2. In all applications for probate the citation shall be affixed on some conspicuous part of the Court house and also in the office of the Collector of Bombay.
  3. No grant of probate shall be made until after the expiry of fourteen clear days from the date of the service of the citation or notice, and from the publication there of in newspapers, if any, and from the affixing thereof on the court house and in the Collector’s Office as the case may be, unless the Judge in Chambers otherwise directs.

Issue and return of processes

All processes and citations shall issue from and be returnable to the office of the Prothonotary and Senior Master and shall be prepared, signed and dated by him or one of his assistants and sealed executed and returned, in the same manner as processes in suits on the Original Side of the Court.

Service of citations

Citations shall be served personally when possible. Personal service shall be affected by leaving a true copy of the citation with the party cited and taking his acknowledgement on the original.

Caveat

Any person intending to oppose the grant of probate shall file a caveat in within fourteen days from the service of the citation upon him or within such shorter time as the Judge in Chambers may direct. Notice of the filing of the caveat shall be given by the Prothonotary and Senior Master to the petitioner or his Advocate on record.

Affidavit in support of Caveat

An affidavit in support of aCaveat shall be filed within eight days from the date of the filing of theCaveat, notwithstanding the Court vacations. Such affidavit shall state theright and interest of the caveator, and the grounds of the objections to theapplication.

A copy of the said affidavit shall be served by the caveator onthe petitioner or his advocate on record. If such affidavit be not filed withinthe prescribed time, the caveat shall not prevent the grant of probate. No such affidavit shall be filed after the expiry ofthe said eight days without an order of the Judge in Chambers.

Procedure on affidavit in support of caveat being filed

  • Upon the affidavit in support of the Caveat being filed, the Petition shall be numbered as suit in which the Petitioner shall be the Plaintiff and the Caveator shall be Defendant. Notice of the fact that the Petition has been renumbered as a suit shall be given by the Prothonotary and Senior Master to the petitioner or his Advocate on record. The Petition shall be treated as the plaint and the affidavit in support of the Caveat shall be treated as the written statement of the caveator. The procedure in such suit shall, as nearly as may be, be according to the procedure applicable to civil suits on the Original Side of the Court.
  • Where there are two or more caveators and each of them has filed an affidavit in support of his caveat, separate suit numbers shall not be given to the petition, but all the caveators shall become party defendants in one suit.

Certified copies

Certified copies of wills and other documents furnished by the office shall be signed by the Prothonotary and Senior Master or one of his assistants and shall be sealed with the seal of the Court.

Registers of grants

Grants of probate issued during a calendar year along with the wills and their translations, if any, shall be copied out in registers to be maintained by the Prothonotary and Senior Master.

The Hon’ble Supreme Court on 6th May, 2020 passed the following orders in Suo Moto Writ (Civil) No. 3 of 2020:

  • All periods of limitation prescribed under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and under section 138 of the Negotiable Instruments Act 1881 (“Negotiable Instruments Act”) shall be extended with effect from 15th March, 2020 till further orders to be passed by the Supreme Court.
  • In case the limitation has expired after 15th March, 2020, then the period from 15th March, 2020 till the date on which the lockdown is lifted in that jurisdictional area where the dispute lies or where the cause of action arises, shall be extended for a period of 15 days after the lifting of lockdown.

The above order has been passed:

  1. taking into consideration the effect of the COVID 19;
  2. to obviate the resultant difficulties being faced by lawyers and litigants; and
  3. to ensure that lawyers/litigants do not have to come physically to file such proceedings in respective Courts/Tribunal across the country including this Court.

Origin of RDDBFI Act – An Introduction

Banks and financial institutions duly registered with Reserve Bank of India (RBI) provide loan facility to legal entities and individuals (borrowers). In the event where the borrower fails to repay loan amount or any part thereof which also includes unpaid interests and other charges and/or debt becomes Non-Performing Asset (NPA), banks and financial institutions can recover the debt by approaching appropriate judicial forums.

Before, the enactment of the RDDBFI Act, banks and financial institutions were facing huge challenges in recovering debts from the borrowers as the courts were overburdened with large numbers of regular cases due to which courts could not accord priority to recovery matters of the banks and financial institutions. The Government of India in 1981 constituted a committee headed by Mr T. Tiwari, this committee suggested a quasi-judicial setup exclusively for banks and financial institutions which by adopting a summary procedure can quickly dispose-off the recovery cases filed by the banks and financial institutions against the borrowers.

Again in 1991, a committee was set up under Mr Narashmam, which endorsed the view of the Mr T. Tiwari Committee and recommended the establishment of quasi-judicial for the speedy recovery of debts. Pursuant to which Government of India enacted the RDDBFI Act. Through, the RDDBFI Act quasi-judicial authorities were constituted, and the procedure was specified for the speedy recovery of debt.

AUTHORITIES UNDER RDDBFI ACT

Debt Recovery Tribunal

Section 4 provides that, DRT consists of sole member only, known as Presiding Officer.

Section 5, provides that a person who has been or is qualified to become District Judge can be appointed as Presiding Office of DRT.

Section 6 provides that the terms of the Presiding Office shall end after the expiry of the period of 5 years from the date he enters the office and he will be eligible for reappointment provided he has not attained the age of 65 years.

Debt Recovery Appellate Tribunal

Sections 8 to Section 11 deals with the establishment, qualification, and term of the Chair Person of the Debt Recovery Appellate Tribunal (DRAT). DRAT is established to exercise control and powers conferred under the RDDBFI Act. DRAT consist of sole member to be known as Chair Person.

A person is eligible to become a Chair Person, if he has been an or qualified to become a High Court Judge, or has been a member of the Indian Legal Services and held a Grade 1 post as such member for the minimum period of three years or has held office of Presiding Officer of Tribunal for period of at least three years.

The Chair Person of DRAT can hold his office for the period of five years and is also eligible for reappointment, provided, that he has not attained the age of seventy years. DRAT has appellate and supervisory jurisdiction over DRTs.

Who can recover money from DRT under RDDBFI Act?

As per section 1(4), the provisions of RDDBFI Act does not apply where the amount of debt due to the bank or financial institution or the consortium of banks and financial institutions is less than Rupees Twenty Lakhs.

In the case of SARFESAI Act, if the asset has been declared as Non-Preforming Asset (NPA), eligible banks and financial institutions after enforcing security can recover remaining amount under RDDBFI Act which is in excess, of Rupees One Lakh.

What type of debt can be recovered under the RDDBFI Act

As per section 2 (g) debt is any liability inclusive of interest, which is claimed to due from any person by any bank or financial institution or consortium thereof.

Such liability may be secured or unsecured or assigned, whether payable under the order of court or arbitration award or under the mortgage. Such a liability shall be subsisting and validly recoverable on the date of application.

The debt also includes liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrowers by the debenture trustees or any authority in whose favour a security interest is created for the benefit of the holder of the debt security.

Jurisdiction, Powers, and Authority of DRT and DRAT

As per section 17 of RDDBFI Act, vests jurisdiction, power and authority on DRT to entertain and decide application from banks and financial institutions to recover a debt due to such banks and financial institutions.

Further, section 17A confers on DRAT power of general superintendence and control and confers appellate jurisdiction on DRAT. DRAT is also empowered to transfer a case from one DRT to another DRT. DRAT is also empowered to call for information from DRT, about cases pending and disposed of them. DRAT is also empowered to convene the meeting of Presiding Officers. It also empowered to conduct an inquiry of Presiding Officer and recommend suitable action to the Central Government.

Section 18 bars the jurisdiction of any civil court or authority for recovery of debt, except High Court and Supreme Court in the exercise of their writ jurisdiction under Article 226 and 227 of the Constitution of India. Thus in essence order of DRAT can be challenged in writ jurisdiction of High Court or Supreme Court

Application to be filed in local jurisdiction of DRT

An Application has to be filed within the local jurisdiction of relevant DRT, as per section 19(1) of the Act, Application can be filed within the local limit of DRT in whose jurisdiction where:

  • the branch or any other office of the bank or financial institution is maintaining an account in which debt claimed is outstanding;
  • the defendant voluntarily resides or carries on his business or works for gain;
  • in case there are more than one defendant, at the place where any one of the defendants voluntarily resides or carries on his business or works for gain;
  • where the cause of action wholly or partly arose.

Further, where a bank or a financial institution, which has to recover its debt from any person, has filed an O.A and against the same person another bank or financial institution also has claim to recover its debt, then, the later bank or financial institution may join the applicant bank or financial institution at any stage of the proceedings, before the final order is passed, by making an application to that DRT.

The process of due recovery

In terms of DRT act bank and financial institutes may follow the process outlined below to recover dues:

  • An application for recovery of debt shall be submitted to the debt recovery tribunal by Bank or Financial Institution for recovery of debts. (Section 19).
  • The Tribunal shall conduct expeditious trial while at the same time the tribunal shall not be bound by the Code of Civil Procedure, 1908 and shall be guided by the principles of natural justice. (Section 19 & 22)
  • The Tribunal shall dispose of the application expeditiously and effort shall be made to finally dispose of the application within six months from  the receipt of the application. (Section  19(8)).
  • The Presiding Officer of the Tribunal shall issue a certificate for recovery of the amount of debt and any other relevant dues to the Recovery Officer. (Section 19(7))
  • A borrower shall be able for an appeal against the order of the Tribunal within forty days from the receipt of the order of DRT subject to the borrower depositing seventy five per cent of the debt as determined by the Tribunal. (Section 20 & 21)

Recovery Officer  shall use the following Modes for  recovery of debts , namely:-

(1) Attachment and subsequent sale of the movable /immovable property of the debtor;

(2) Arrest the debtor for detention in prison;

(3) Appoint a receiver for managing the movable or immovable properties of the debtor.(Section 25)

However Procedure followed by Bank and Financial institution after promulgation of Securitization act read harmoniously with DRT act.

  • As a starting point, bank’s/FI’s representatives generally visit to the borrower’s place While telephonic reminders were also made by the bank. When reminders / personal visits fail to yield fruitful result Bank/FI authorize an official   to take required steps under the Acts through Power of Attorney/ authorization Letter.This is the starting point of legal procedures.
  • Banks or financial institutions ordinarily shall not initiate any legal proceeding without giving due notice in writing. Such notice is sent when default in payment is made by a borrower . Notice may be sent through Registered Post /Speed Post /Courier /Fax or E-mail .The notice usually give 10 clear days time to clear or regularize the loan.
  • The authorized  representative sends Demand Notice for enforcement of Security Interest. This notice shall contain details of the amount due , security interest, Power and authority to repossess the security with the relevant reference of contract/ loan agreement.
  • The notice shall be acknowledged by the Borrower . In the event of the failure in the part of the  borrower to acknowledge the notice and to respond by way of payment of dues within the time period, it will be considered that the customer/ borrower/ noticee is deliberately avoiding acknowledgement. Accordingly, the Bank will be free to initiate recovery measures for repossession of security under the loan agreement /contract as required.
  • If the Borrower avoids demand notice, notice shall be served by affixing the notice in some noticeable place of his residence or business and by publishing the notice in two leading newspapers, among which one shall be in a vernacular language having wide  circulation.In case of  more than one Borrower , individual notice shall be served to each of them.
  • If any reply/representation is received, then the Bank  has to properly adjudicate upon and decide.The next step is to take symbolic possession of Secured Assets  and Filing an application to the Chief Metropolitan Magistrate or District Magistrate for taking over actual  possession of the asset.
  • The objective of repossession of security shall be recovery of dues and not to merely deprive the borrower of the property.
  • Compliance to the directions/orders of  Chief Metropolitan Magistrate /District Magistrate shall be made.
  • The recovery process includes repossession of the property, valuation of the property and realizing/unlocking the property value through appropriate means. All these activities need to be carried out in a fair and transparent manner.
  • Due process as per law which may include  Liaisoning with the Court Receiver, Police authorities, etc shall be required to be followed while taking repossession of the property. The bank will take  requisite measures to ensure safety and security of the property after taking custody at the expense in the head of borrower. Accordingly, Insurance cover for the property to be arranged  and Security Guards shall be deputed at the Property Site.
  • Fees of Police authorities, if any, in case of police force made available for repossession of property by police station to be paid.
  • It is desirable to take photograph of the property and then serve a notice in terms of Appendix IV to the Borrower, which also shall be affixed on the Asset. The Bank or financial institutions Name shall be displayed on the Property.
  • The aforesaid notice is also required to be published in two leading newspapers including one in vernacular language within seven days. 
  • The next step is to arrange for sale of the property after valuation by an approved valuer. The valuation done by the the valuer shall be communicated to the debtor before proceeding for sale of property. At the same time,  30 days notice shall be served to the Borrower .
  • If sale is planned by way of soliciting tenders from public and public auction, a public notice providing  the detail sail terms is required to be published in two widely circulated news papers among which one will be in vernacular language. The borrower/ mortgager shall also be served notice setting out the detail time, date and venue of the auction.
  • The Sale of property to be made to the highest bidder. No sale shall be confirmed at price less than reserve price. However, the sale at price  less than Reserve price can be made with the consent of Borrower.
  • The purchaser is required to submit 25% of the sale price forthwith and balance to be deposited within 15 days. If balance is not paid, the deposit would be forfeited and the property shall be eligible to be resold. Sale  of  Property will be effective from execution of Sale Deed.
  • If the terms of payment as set out have been complied with, the Bank or financial institutions shall issue a certificate of sale to the purchaser. The certificate of sale will specify that the property is free from encumbrances.
  • It is advisable for banks /FIs to obtain acknowledgement from buyer that he has taken over the physical possession of property .
  • Bank/FIs  will return the Excess amount, if any, after recovering the outstanding dues and related expenditure made by bank from the money obtained by sale of property.
  • If the dues of the Bank/FI are not fully recovered with the sale proceeds, Bank/FIs shall file an application to Debt Recovery Tribunal  or Court having jurisdiction, for recovering the balance amount.
  • Any person, aggrieved by any of the measures taken by the secured creditor shall make an application under section 17 of the securities Act to the Debts Recovery Tribunal, within forty-five days from the date on which such measures had been taken.
  • Procedure as was prescribed under the DRT Act is to be adopted by the recovery tribunal for disposal of these applications  as per section 17 of the Act. Further, any person, aggrieved by an order passed by DRT may file an appeal before DRAT.
  • The DRAT will not admit the appeal unless the Aggrieved party deposits with the Appellate tribunal, 50% of the amount or lesser amount as directed by DRAT.

Timelines in DRT/DRAT

As per the DRT act, any application made by the Banks and Financial Institutions is to be dealt by the Tribunal expeditiously. The stipulated time period for Tribunal to dispose off the application is 180 days from the date of receipt of application.

The appeal filed before the Appellate Tribunal shall be disposed off expeditiously .All efforts are required to be made by Tribunal to finally adjudicate on the matter finally within a period of six months from the date of receipt of appeal.

Practically the proceedings before DRT/DRAT may take one to three years or longer depending upon the facts and circumstances of the case.

Introduction

An absolute contract is a one where the promisor performs the contract without any condition. Contingent contracts, on the other hand, are the ones where the promisor performs his obligation only when certain conditions are met.

A contract is an agreement enforceable by law. [Section 2(h) of The Indian Contract Act, 1872]. For every contract, there should be an agreement that is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object. The agreement should not be declared void hereby to form a contract. This definition of contracts as per Indian Contract Act, 1872 is based on Sir Pollock’s definition which states that every agreement and promise enforceable at law is a contract. Thus for the formation of a contract, there must be an agreement and something in addition to that, i.e., an agreement, and its enforceability at law.


Section 31 of the Indian Contract Act, 1872 defines the term ‘Contingent Contract’ as follows:

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’.

In simple words, contingent contracts are the ones where the promisor performs his obligation only when certain conditions are met. The contracts of insurance, indemnity, and guarantee are some examples of contingent contracts.

Illustration:- A contracts to pay to B Rs. 20,000 if B’s house is burnt. This is a contingent.

Chandulal Harjivandas v. CIT – In this case, it was held that all contracts of insurance and indemnity are contingent.

How is it different from wagering agreement?

  • A wagering agreement is absolutely void (Section 30) while on the other and contingent contract is a valid contract.
  • In a contingent contract, the future uncertain event is merely collateral whereas in a wagering agreement the uncertain event is a sole determining factor of the agreement.
  • In a wager, the parties are not interested in the occurrence of the event except for winning or losing the best amount while in a contingent contract the parties have a real interest in occurrence or non-occurrence of the event.
  • All wager contracts are contingent contracts, but all contingent contracts are not by way of the wager.

Essential elements of the contingent contract

After examining the definition of the contingent contract given under section 31 of the Act, the essentials of the term contingent contract are as follows:

There must be a valid contract to do or abstain from doing something

Section 32 and 33 of the Act talks about enforcement of the contingent contract on the happening or not happening of the events respectively. The contract will be valid only if it is about performing or not performing an obligation.

Performance of the contract must be conditional

The condition for which the contract has been entered into must be a future event, and it should be uncertain. If the performance of the contract is dependent on an event, which is although a future event, but certain and sure to happen, then it’ll not be considered as a contingent contract.

The said event must be collateral to such contract

The event on whose happening or non-happening of the event on which the performance of the contract is dependent should not be a part of the consideration of the contract. The happening or non-happening of the event should be collateral to the contract and should exist independently.

Illustration: X enters into a contract with Y and promises to deliver 10 books to him. Y promises to pay Rs. 2000 upon delivery. This is not a contingent contract since Y’s obligation depends on the event which is a part of the contract (delivery of 10 Books) and not a collateral event.

The event should not be at the discretion of the promisor

The event so considered as for contingency should not at all to be dependent on the promisor. It should be totally a futuristic and uncertain event.

Illustration: X promises to pay Y, Rs. 10,000 if Y leaves Delhi for London on 31st March 2019. This is a contingent contract. Going to London can be within Y’s will but is not merely his will.    

Enforcement of contingent contract:

Provisions related to the enforcement of the contingent contract are given under section 32 to 36 as follows:

Condition #1- enforcement of contract contingent on the happening of an event

The contingent contracts to do or abstain from doing something if an uncertain future event happens. However, the contract cannot be enforced by law unless the event takes place. If the event becomes impossible, such contracts become void.[Section 32]

Illustration: X promises to pay Y, Rs. 100,000 if he marries Z, the prettiest girl in the neighborhood. This is a contingent contract. Unfortunately, Z dies in a car accident. Since the happening of the event no longer possible, the contract is void.

Condition #2 – enforcement of contract contingent on an event not happening

The contingent contracts to do or abstain from doing something if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible. If the event takes place, then the contingent contract is void.[Section 33]

Illustration: X promises to pay Y a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks. On the other hand, if the ship returns, then the contract is void.

Condition #3 – when an event on which contract is contingent to be deemed impossible if it is the future conduct of a living person

If a contract contingent upon how a person will act at a future time, the event shall be considered impossible when such person does anything which makes it impossible for the event to happen. (Section 34)

Illustration: X agrees to pay Y, Rs. 100,000 if Y marries Z. However, Z marries A. The marriage of Y to Z must now be considered impossible, although it is possible that A may die and that Z afterward marry Y.

Condition #4 – contracts contingent on an event happening within the fixed time

Contingent contracts to do or not to do anything if a future uncertain event happens within a fixed time. Such a contract is void if the event does not happen and the time lapses. It is also void if before the time fixed, the happening of the event becomes impossible. (Section 35)

Illustration: X promises to pay Y a sum of money if a certain ship returns before 1st April 2019. The contracts may be enforced if the ship returns within the fixed time. On the other hand, becomes void if the ship sinks.

Condition #5 – contracts contingent on an event not happening within the fixed time

Contingent contract to do or not to do anything if an uncertain event does not happen within a fixed time may be enforced by law when the fixed time 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.[Section 35]

Illustration: X promises to pay Y a sum of money if a certain ship does not return before 31st March 2019. The contract may be enforced if the ship does not return before 31st March 2019. Also, if the ship burnt before the given time, the contract is enforced by law since the return is impossible.

Condition #6- contract contingent of impossible event void

If an agreement to do or not to do is based on the impossible event, then such agreement is void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.[Section 36]

Illustration: X promises to pay Y, Rs 500 if two straight lines should enclose a space. The agreement is void.

Conditions when a contingent contract becomes void

  • Section 32- if the event on the happening of which the contract is contingent becomes impossible, the contract becomes void.

Illustration: Mohan contracts to pay Ram a sum of Money when Ram marries Geeta. Geeta dies without being married to Ram. The contract becomes void.

  • Section 35- contingent contract to do or not to do something, if a specified uncertain event happens within a fixed time, becomes void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.

Illustration: Saurbh promises to pay Servesh if a certain ship returns within the year. The contract becomes void if the ship is burnt within the year.

  • Section 34 – if the future event on which a contract is a 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 impossible that he should so act within any definite time, or otherwise than under further contingencies.
  • Section 36– 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 the parties to the agreement at the time when it is made.

Illustration: X agrees to pay Y, Rs. 10,000 if Y will marry X’s daughter P. P was dead at the time of the agreement. The agreement is void.

Commercial applications of contingent contracts

  • Insurance is a contract to do something if the future event occurs that will be contracted by the parties and liability will be taken by the offeror. In all Insurance like Life Insurance, Marine Insurance, Fire Insurance, and other Insurances, the offeror promises to take the risk of the offeree against the incident to do or not to do something and for that the offeree agrees to pay a certain amount of money.
  • The contingent contract can be used in the contract of guarantee as well as the contract of warranty. Contingent guarantees generally are used when a supplier does not have a relationship with counterparty.
  • We can use a contingent contract in negotiation. Contingent contracts normally occur when negotiating parties fail to reach an agreement.
  • We can use the contingent contract in mergers and acquisitions (M&A) as well. Depending on the M&A deal, contingent payments such as earn-outs, Seller notes, and Buyer stock may be part of the Seller’s proceeds. After the deal is finalized, these contingent payments will need continuous contact between Buyer and Seller.
  • It can also be used in the contract of indemnity.

Conclusion

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent. There must be a valid contract to do or not to do something. The performance of the contract must be conditional. The said event must be collateral to such contracts and the event should not be at the discretion of the promisor. These are some rules that have to be followed for a contingent contract to be enforceable. For instance, on the happening of an event, on the event not happening and on the event not happening within a specified time. There are some situations when a contingent contract becomes void. Some of them are: the event being impossible, not happening of event within fixed time, agreements contingent on impossible events and on the conduct of a living person.

Indian Contract Act, 1872

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by the law.

This definition has two major elements in it viz – “agreement” and “enforceable by law”. So in order to understand a contract in the light of The Indian Contract Act, 1872 we need to define and explain these two pivots in the definition of a contract.

Agreement

The Indian Contract Act, 1872 defines what we mean by “Agreement”. In its section 2 (e), the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”.

Promise

Section 2(b) which defines the term “promise” here as: “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted, becomes a promise”.

In other words, an agreement is an accepted promise, accepted by all the parties involved in the agreement or affected by it. This definition thus introduces a flow chart or a sequence of steps that need to be triggered in order to establish or draft a contract. The steps may be described as under:

  • The definition requires a person to whom a certain proposal is made.
  • The person (parties) in step one have to be in a position to fully understand all the aspects of a proposal.
  • “signifies his assent thereto” – means that the person in point one accepts or agrees with the proposal after having fully understood it.
  • Once the “person” accepts the proposal, the status of the proposal changes to “accepted proposal”.
  • “accepted proposal” becomes a promise. Note that the proposal is not a promise. For the proposal to become a promise, it has to be accepted first.

Thus, in other words, an agreement is obtained from a proposal once the proposal, made by one or more of the participants affected by the proposal, is accepted by all the parties addressed by the agreement. To sum up, we can represent the above information below:

Agreement = Offer + Acceptance.

Enforceable By Law

Agreement to change into a Contract as per the Act, it must give rise to or lead to legal obligations or in other words must be within the scope of the law. Thus we can summarize it as Contract = Accepted Proposal (Agreement) + Enforceable by law (defined within the law)

Communication when complete

Section 4 provides that, the communication of a proposal is complete when it becomes to the knowledge of the person to whom it is made. 

The communication of an acceptance is complete – as against the proposer, when it is put in a course of transmission to him so at to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. 

The communication of a revocation is complete – as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge.

Difference Between Agreement And Contract

AgreementContract
A promise or a number of promises that are not contradicting and are accepted by the parties involved is an agreement.A contract is an agreement that is enforceable by law.
An agreement must be socially acceptable. It may or may not be enforceable by the law.A contract is only legally enforceable.
An agreement doesn’t create any legal obligations.A contract has to create some legal obligation.
An agreement may or may not be a contract.All contracts are also agreements.

The content of this document do not necessarily reflect the views / position of RKS Associate, but remains a probable view. For any further queries or follow up please contact RKS Associate at [email protected]