Contingent contracts are those contracts that become enforceable upon the happening or not happening of an event.
Contingent contracts are defined under section 31 of the Indian contract act, 1872 and are defined as “A contingent contract is a contract to do or not to do something, if some event collateral to such contract does or does not happen”. Examples of contingent contracts are contracts of guarantee and contracts of indemnity.
Even a contract of insurance is considered to be a contingent contract. An insurance contract is considered a type of contingent contract because an insurance contract gets enforceable when an event as per the terms of the contract has taken place. Examples of insurance contracts are fire insurance, marine insurance, and life insurance.
Insurance contract becomes enforceable when an event occurs as per the terms of the contract and when that event occurs, there has damage been done to one party of the contract.
For example, under a fire insurance contract, if goods have been damaged due to a fire incident and those goods have been insured, then the contract becomes enforceable under the fire insurance contract as they have been damaged due to a fire incident itself.
One more example is that of life insurance under which the insurer pays a certain amount of money to the insurance company for a certain amount of time and if the insured dies within that time then the beneficiary gets the amount as per the terms of the contract. Thus life insurance is also applicable when someone loses their life only.
So it can be concluded that a contract of insurance is a commercial application of a contingent contract and it is enforced only when events concerning the terms of the contract have occurred.