The Supreme Court of India ("Court" or "Supreme Court") in National Agricultural Cooperative Marketing Federation of India (NAFED) v. Alimenta SA (2020) discussed the issue of impossibility of performance of a contract in light of Section 32 (enforcement of contracts contingent on an event happening) and Section 56 (agreement to do an impossible act) of the Indian Contract Act, 1872 ("ICA"). In this note, I will discuss the relevant provisions of the ICA, the facts surrounding this case and the Court's observations leading to this decision.
What are contingent contracts?
Section 31 of the ICA defines a contingent contract as "a contract to do or not to do something, if some event, collateral to such contract, does or does not happen". The use of the word 'collateral' to describe the event indicates that the contract is deemed to be valid when executed, however, its performance remains conditional upon the occurrence of such specified event.
Illustration A:
A and B entered into a contract, which stated that A would transfer a disputed land to B, if A won the case in the court. This transfer was conditional upon A winning the litigation. Therefore, this is a contingent contract where performance of the contractual obligations is dependent upon a specified event.
Download >> Contingent Contracts vs Frustrated Contracts: What does the SC have to say?
Originally published 29 May 2020
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