Enforcement of contracts contingent on an event happening

Related judgements & precedents

These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.

1. H. P. A. International vs Bhagwandas Fatechand Daswani

   Supreme Court of India 13 Jul 2004 Binding (Supreme Court)

   Court's Decision & Legal Precedent

   A contract for sale of property which is contingent on obtaining court sanction for transfer of interests of non-parties (reversioners) is an integrated, indivisible, and inseparable contract. When the essential contingency (court sanction) fails to materialize despite reasonable efforts by the vendor and despite the vendor's implied obligation to seek it within reasonable time, the contract becomes unenforceable. A buyer cannot invoke Section 12(3) of the Specific Relief Act to enforce partial relief (transfer of life interest alone) when: (a) the contract terms evince clear intention that parties contemplated all-or-nothing transaction; (b) explicit contractual clause (Clause 6) provides for cancellation if sanction not obtained; (c) no stipulation in contract provides for separate transfer of life interest if sanction for reversioners' interests fails; (d) the claim for partial relief is made after unreasonable delay and substantial change of circumstances; (e) reversioners, being non-parties to the contract, cannot be bound by doctrines of estoppel or trusts to give effect to a contract to which they never agreed; and (f) doing so would adversely affect the reversioners' independent interests and create future litigation. Courts cannot grant specific performance on terms not contemplated by the original contract parties, even if buyer attempts to waive the sanctioning clause.

   On this section: Contingent contracts to do something if an uncertain future event happens cannot be enforced unless that event happens. If the event becomes impossible, such contracts become void. Applied to hold that failure of court sanction rendered the contract unenforceable.

   Read the full order on eCourts India

The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.