Name: Zubair Ahmed

SAP ID: 70121485

Course: Law and taxation, Business Contract

Section: B

Assignment: 1

Topic: Research Paper

Submitted to: Mam Aali Malik

A contingent contract is an agreement that specifies which activities will result in specified
consequences if certain conditions are met. When negotiating parties are unable to achieve an
agreement, contingent contracts are formed.

Explanation

“If two or more parties enter into a contract to do or not do something if an event which is collateral
to the contract does or does not happen, then it is a contingent contract.”

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

Insurance contracts, indemnity contracts, and guarantee contracts are some examples of contingent
contracts.

Essentials Elements of Contingent Contract:

 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.

Contingent Contract Example:

1. A promises to pay B a sum of 20 thousand rupees if there is damage to his house from fire.
The payment of the amount is contingent on the house being destroyed by fire. If there is no
fire, B cannot claim the amount from A, who is not liable to pay since the fire that was the
collateral condition, did not happen.
2. Peter is a private insurer and enters into a contract with John for fire insurance of John’s house.
According to the terms, Peter agrees to pay John an amount of Rs 5 lakh if his house is burnt against
an annual premium of Rs 5,000. This is a contingent contract.

Contract of Bailment:

“The transfer of the possession of goods by the owner (the bailor) to another (the Bailee) for a
specific purpose.”

The definition of bailment is, “A bailment is a delivery of goods/products by one person to another
for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned
or otherwise disposed of according to the directions of the person delivering them.”

Essential Elements of Bailment Contract:

1). Contract:

There must be a valid contract between the bailor and the Bailee. The delivery of goods should be
made under a contract. If the goods are delivered without any contract e.g. by mistake, there is no
bailment. The contract may be expressed or implied.

2). Delivery of Goods (possession):

Delivery of possession is of two kinds:

Actual Delivery:

When the bailor hands over to Bailee the physical possession of goods, it is called actual delivery.

Constructive Delivery:

When there is no change of physical possession, goods remain where they are, but something is
done which has the effect of putting them in Bailee’s possession, it is called constructive delivery.

3). Delivery must be for specific purpose:

The bailment of goods is always made for some purpose and is subject to the condition according
to the directions of the bailor.

4). Return disposal of deposited:

Example of Bailment Contract:

1. The most common example is availing locker services from banks, i.e., banks are the Bailee,
and the person keeping his belongings in such lockers are bailor. They both agreed upon for
some consideration, i.e., bailor uses the locker, and in turn, Bailee charges the consideration
for providing such services.

2. Where one person is handing over the keys of his/her car to the car valet service provider.

Contract of Indemnity:

A contract by which one party promises to save the other from loss caused to him by the conduct
of the promisor himself, or by the conduct of any other person, is called a "contract of indemnity".

Explanation:

In law, Contract of indemnity can be defined as a legal contract between two persons whereby one
party commits to indemnify, i.e. to compensate or reimburse, the loss incurred to the other party,
by the conduct of the party, who is making the promise or by the conduct of the third party.

Contract of Indemnity Examples

The examples of the contract of indemnity are given hereunder:

1. Suppose John sold a house to Paul on the instruction of Peter. Afterwards, it is disclosed that Alex
is the registered owner of the house. Alex recovered the amount from John for selling his house.
Now, John can recover the compensation from Peter. This is an implied form of a contract of
indemnity.

2. Beta Insurance Company entered into a contract with Alpha Ltd., to compensate for loss caused
by accidental fire to the company’s stock of goods up to Rs.50k for a premium of Rs.100k. This is
an express form of a contract of indemnity.

ESSENTIALS OF CONTRACT OF INDEMNITY:

PROTECTION OF LOSS: A contract of indemnity is entered into for the purpose of protecting
the promise from the loss. The loss may be caused due to the conduct of the promisor or any other
person.

EXPRESS OR IMPLIED: The contract of indemnity may be express (i.e. made by words spoken
or written) or implied (i.e. inferred from the conduct of the parties or circumstances of the
particular case).

CONTRACT OF AGENCY:

Contract of the agency is a legal relationship, where one person appoints another to perform on
the transactions on his behalf. The person who appoints the other to take care of his transactions
is the principal.

EXPLANATION

Agency can be defined as the relationship between two persons, wherein a person has the authority
to act on behalf of another, bind him/her into a legal relationship with the third party. There are
two parties in a contract of agency – principal and agent.

Contract of Agency is based on the fact that one person cannot perform all the transactions and so
he can appoint another perform or act on his behalf.

Who is a Principal?

Any person who employs another person to perform an act and who is being represented by another
person in dealing with the third party is the Principal.

Who is an Agent?

A person employed by the Principal, to act on his behalf, represent him in the dealings with the
third party and also to bring him into a contractual relationship with the third party, is called an
Agent.

Essential Element of Contract of Agency

 Consent by the principal and the agent

 action by the agent on behalf of the principal

Example of a written contract of agency:

1. Power of Attorney that gives a right to an agency to act on behalf of his principal in accordance
with the terms and conditions therein.

2. Mature to delegate an agent since principal is answerable for each work of the agent.