• Latest News

    Monday, 14 December 2015

    Novation and Contingent Contract

    1. Introduction
    The beauty of contract law is that it is very flexible. For example, contract law, on the one hand, decides which contracts are void and which contracts are not void, and on the other hand, it provides exceptions to this decision. Such flexibility has been created in contract law to facilitate contracting parties to enjoy their rights and to perform their obligations in convenient manners. Doctrine of novation of contract and concept of contingent contract has been evolved due to such flexibility.

    2. Novation of Contract

    According to contract Act, when parties to a contract agree to substitute a new contract for their old contract or agree to rescind or alter their old contract, the original contract needs not be performed. Such substitution or rescission or alteration is termed as novation of contract. Following are main essentials of novation of contract.

    i. Extinction of old contract and Creation of new valid contract
    For novation of a contract, it is essential that old contract should be wiped out and new valid contract should be created.

    ii. Free Consent of Parties
    Novation of a contract is possible only though free consent of parties.

    iii. Creation of new Right
    For novation of contract, it is necessary that a right under old contract should be extinguished and a new right should be created under new contract.

    iv. Specific Liability Present in old contract
    It is essential for novation of a contract that some specific liability, which is present in the old contract, should be included in the new contract.

    3. Contingent Contract

    According to contract Act, a contingent contract means a contract, which is to do or not to do something, if some event, which is collateral to such contract, does or does not happen.

    Illustration
    “A” makes a contract with “B” to pay B ten lakh rupees in case of demolition of B house with in next three years. Such contract is contingent contract.

    4. Enforcement or Performance of Contingent Contract

    In contract Act, following rules have been settled regarding enforcement or performance of contingent contract.

    i. Happening of a Future uncertain event
    If contingent contract is made to do or not to do something on happening of a future uncertain event, then such contingent contract will only be enforced or performed on happening of such future uncertain event. However, contingent contract cannot be enforced or performed when happening of such future uncertain event becomes impossible.

    ii. Non-happening of an uncertain future even
    If contingent contract is made to do or not to do something on non-happening of a future uncertain event, then such contingent contract will only be enforced or performed when such future uncertain even will become impossible. It means that enforceability or performance of such contingent contract depends upon the impossibility of future uncertain event. However, such contingent contract cannot be enforced or performed when the future uncertain event happens.

    iii. Future conduct of a living person
    If contingent contract is made on the basis of performance of future conduct of a living person, the contingent contract can only be enforced or performed when such future conduct is performed. However, such contingent contract cannot be enforced or performed when performance of conduct of a living person becomes impossible.

    vi. Happening of an event within fixed time
    If contingent contract is made to do or not to do anything on happening of specified uncertain even within a fixed time, then such contingent contract can only be enforced or performed when such uncertain even happens within fixed time. However, such contingent contract cannot be enforced or performed when such uncertain event does not happen within fixed time.

    v. Non-happening of an event within a fixed time
    If contingent contract is made to do or not to do anything on non-happening of specified uncertain event within a fixed time, then such contingent contract can only be enforced or performed on non-happening of such uncertain event within fixed time. However, such contingent contract cannot be enforced or performed when such uncertain event happens within fixed time.

    vi. Impossible Event
    If a contingent contract is made to do or not to do anything on happening of an impossible event, such contingent cannot be enforced or performed whether impossibility of the event is known to the contracting parties or not. The reason is that such contingent contract is void.

    5. Conclusion

    To conclude, it can be stated that doctrine of novation of contract and concept of contingent contract have been evolved so that contracting parties can make better adjustment of their rights and benefits under contract.
    • Blogger Comments
    • Facebook Comments

    0 comments:

    Post a Comment

    Item Reviewed: Novation and Contingent Contract Rating: 5 Reviewed By: Usman Ali
    Scroll to Top