'Contingent' Agreement To Sale Cannot Be Enforced Unless Contingency Is Fulfilled: Patna HC

The Patna High Court observed that a sale agreement with a contingency clause cannot be enforced unless that contingency is fulfilled.

The court dismissed an appeal that sought specific performance of a sale agreement. The Court noted that per Section 31 of the Indian Contract Act, 1872 (ICA), the sale agreement cannot attain legal enforceability until the probate case is resolved as it was a contingent contract.

The Bench of Justice Khatim Reza observed, “Unless that contingency was fulfilled, the contract was not capable of enforcement as stated in Section 31 of the Indian Contract Act. The parties entering into an agreement to sale is clearly dependant on appropriate decisions being taken by the civil court in probate case (Title Suit No. 7 of 1990). The agreement to sale was not a conclusive contract. The performance of it was certainly contingent upon such decision being available in favour of the defendants”.

Senior Advocate Kamal Nayan Chaubey appeared for the Appellant and Advocate Jitendra Kumar Pandey appeared for the Respondent.

An appeal was filed challenging the judgment and decree of the Tria Court rejecting a Title Suit under Order 7 Rule 11. The Appellants sought specific performance based on an agreement for sale involving the Respondents, sons of Shambhu Ram.

The Appellants alleged that the property initially belonged to Shambhu Ram, and after his death, a registered Will was executed in favour of the Respondents. During a probate case, the Respondents entered an agreement for sale with conditions tied to the probate case's resolution. The Appellants claimed part performance, asserting possession of a shop and a balance amount of Rs. 14,49,000 for the sale. The Appellants sent a notice for executing the sale deed, leading to the filing of the suit. The Respondents argued an unregistered agreement to sell with conditions linked to the probate case, which was later dismissed.

The Court framed the following issues: “(i) Whether agreement in question is contingent?

(ii) Whether enforcement of contracts contingent on an event not happened?

(iii) Whether the plaintiffs have valid cause of action for the suit?”

The Bench, after the analysis of the sale agreement, noted that it explicitly stated the final sale deed would only be executed after the resolution of the probate case. Both parties acknowledge that the restoration of the probate case was still pending, and the suit was filed before the probate was granted to the Respondents.

As per Section 31 of the ICA, the Bench observed that the contract would not be enforceable until a specified contingency was fulfilled. The sale agreement is contingent on decisions made by the civil court in the probate case, and it is not a conclusive contract.

“Section 32 of the Indian Contract Act clearly provides that contingent contract to do or not to do anything, if an uncertain future happens, can be enforced by law only when that the event has happened”, the Bench noted.

Therefore, the Court held that the Appellant lacked a cause of action for the suit before a judgment in the probate case was rendered in favour of the defendants. Section 32 of the Indian Contract Act was observed, emphasizing that a contingent contract can only be legally enforced when an uncertain future event has occurred.

Accordingly, the Court dismissed the Appeal.

Cause Title: Urmila Devi Jain v Ashok Kumar

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