Wagering Agreement under Indian Contract Act,1872

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Wager, the meaning of this word is “something risked on an uncertain event” and wagering is a type of gambling, which involves betting on the outcome of an external event or fact, such as sporting events. The wagering of money or something of value (referred to as “the stake”) on an event with an uncertain outcome, with the primary intent of winning money or material goods. Wagering thus requires three-element to be present: consideration(an amount wagered), risk (chance), and a prize. The outcome of the wager is often immediate, such as a single roll of dice, a spin of a roulette wheel, or horse crossing the finish line but longer time frames are also common, allowing wagers on the outcome wagers on the outcome of a future are also common, allowing wagers i=on the outcome of a future sports contest or even an entire sports season.

Section 30 of the Indian contact Act talks about wagering agreement, which reads as “agreements by way of wager are void”. The section does not define wager, section 30 states that “Agreements by way of wager are void, and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made”.

The expression “wager” has not been defined in the Indian contract Act. A classic definition is however available in the case of Carlill v carbolic smoke ball co. (1891-94 All ER Rep 127). “A wagering contract is one by which two-person, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependant on a determination of that event one shall win so win or lose, there is no other consideration for making of such contract by either of the parties. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract.”

ESSENTIALS OF WAGERING AGREEMENT

  1. Mutual chances of gain and loss: there must be two parties or two sides, and mutual chances of gain and loss, i.e one party is to win and others to lose upon the determination of the event. It is not a where one party may win but cannot lose, or if may lose but cannot win, or if he can neither win or lose, ‘if one of the parties has the event in his own hands, the transaction lacks an essential ingredients wager. ‘It is of the essence of the wager that each side should stand to win or lose according to the uncertain or unascertained event about which the chance or risk is taken.
  2. Two parties: There must be two persons, either of whom is capable of winning or losing.
  • Uncertain event: Uncertainty in the minds of the parties about the determination of the event in one way or another is necessary. A wager generally contemplates a future event, but it may even relate to an event which has already happened in the past, but it may even relate to an event which already happened in the past, but the parties are not aware of its result or the time of its happening
  1. No interest other than stake: Neither party has any interest in the happening of the event other than the sum of the stake he will win or lose. To constitute a wager, the parties must contemplate the determination of the uncertain event as the sole condition of their contract. The stake must be the only interest which the parties have in the contract.
  2. Neither party to have control over the event: Lastly, neither party should have control over the happening of the even one way or the other. “If one of the parties has the event in his own hands, the transaction lacks an essential ingredient of a wager.”

Effect of Wagering Agreement

A wagering agreement is void ab initio, and Section 65 has no application to it. Money paid directly by a third party to the winner of a bet cannot be recovered from the loser. Even if loser makes a new promise to pay for his losses in consideration of his not being posted, the promise cannot be enforced; but if he gives a cheque in discharge of his liability, the cheque may not be tainted with illegality because of the winner’s promise not to have the name posted. The cheques will not be enforceable by the original payee but may be enforced by a third party holder of the cheque, even he knew of the facts leading up to giving of the cheque.

It has been laid down by the supreme court, in Gherulal Parekh v. Mahadeo Das that though a wager is void and unenforceable it is not forbidden by law. Hence a wagering agreement is not unlawful under section 23 of the Indian contract act and therefore the transaction collateral to the main transaction is enforceable.

EXCEPTIONS TO WAGERING AGREEMENT

As wagering agreement is a void agreement, but there is still certain exemption to it:

Horse race competition- Section 30 of the Indian contract act, provides that the agreement based upon the winning or losing of the horse will not be a void agreement. The section does not render void a subscription or contribution, or an agreement to subscribe or contribute, toward any plate, prize, or sum of money, of the value or amount of five hundred rupees or upwards to the winner or winner of any horse races. The reason horses are exempted from the list is because horse races are not only dependent on chance or luck rather it depends more on prior preparation of the horse that includes practices, food, maintenance. The horse race is based more on the skill of the horse rather than luck.

State of Andhra Pradesh v. Stayanarayan

In this case, the court differentiated horse racing as “a game not based on chance rather game based on skills.” And also said that horse racing substantially and preponderantly depends on skills. And held that rummy is also the game based on skills as its needs memorizing the fall of cards and skills is required in holding and discarding cards.

 Wagering Agreement is Different From other kinds of agreement

  • Insurance Agreement v. Wagering Agreement

The insurance agreement is an agreement between two parties i.e insurer and policyholder, in this insurer promises to pay the benefits to the policyholder if an uncertain future event happens or affects the policyholder. Whereas a wagering agreement is an agreement by which two persons, professing to hold opposite views touching the issue of a future uncertain event mutually agreed dependent upon the determination of the event that one shall win from the other a sum of money, neither of the contracting parties having ant other interest. And also insurance contract is a valid contract and parties have insurable interest whereas wagering agreement is void and also does not have an insurable interest.in the insurance agreement, the risk of loss is natural, whereas the wagering agreement is created by the parties.

  • Contingent agreement v, Wagering Agreement

Section 31 of the Indian contract act defines contingent contact as a contract to do or not to do something, if some event, collateral to such contract, does or does not happen whereas wagering agreement is an agreement which only depends only on the happening of an event in one way other. In the contingent agreement, the promisor may have some interest in the event whereas in wagering agreement the parties only have bet on. The contingent agreement is valid and enforceable whereas wagering agreement is not.

Betting on horses

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