Enforceability Of Obligations Arising out of Wagering Agreements

All contractual transactions in India are governed by the provisions of the Indian Contract Act,1872. A wager has been defined as a contract by A to pay money to B on the happening of a given event, in consideration of B paying to him on event not happening[1]. Section 30 of the Indian Contract Act stipulates that agreements in the nature of a wager are void. A certain class of agreements, such as bets, come within the expression ‘agreements’ within the definition of wager. This term, ‘Betting’ is used in connection with wagers involving events such as races or matches.

The Public Gambling Act, 1867 prohibits gambling in India. However, it makes an exception for games of skill which do not fall under the ambit of wager. The power to make laws on the subject of gambling falls under the entry 34 in the List II of the Seventh Schedule of the Constitution of India.

Here we shall understand obligations that arise from wagering agreements by taking up an illustration which is as follows- A and B enter into an agreement that if India wins the ICC World Cup, then A will pay 20,000/- rupees to B. If India loses the World Cup then B will pay 20,000 rupees to A. B is a researcher in the Indian Statistical Institute. He looks into the data available and analyses them. He firmly arrives at the conclusion the India has the highest chance of winning the World Cup. Now, B is proven right and wants to claim the money from A.

Analysing the problem, we find that the following issues are involved in the present case-:

  1. Whether cricket comes within the ambit of game of skill or game of chance.
  2. Whether the agreement is void under section 23 of the Indian Contract Act,1872.
  3. Whether A is liable to pay B or not.

ARGUMENTS FOR A

The agreement formed is in nature of game of chance and not game of skill. A game of skill requires a substantial amount of skill of the parties to the agreement[2]. Cricket is a game which comes within the ambit of game of chance. There is a lot dependent on factors such as luck in cricket. Some skill is required in terms of physical strength but chance plays greater role.  Placing a wager on a cricket game clearly does not require a great deal of skill. While some amount of skill may be involved in placing the wager, the outcome is still dependent more on chance rather than on skill of the parties to the wager.

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The agreement here is also void under section 23 of the Indian Contract Act(ICA). The section states that every agreement the object of which is forbidden by law or that which the Court regards as immoral or opposed to public policy, is void. Firstly, this agreement is in nature of wagering on a cricket match, and wagering agreements are void[3]. Secondly, wagering agreements are opposed to public policy. These agreements lead to loss of hard-earned money.  The anti-social effects of gambling have been discussed in the case of Reeja v. State of Kerela.[4]. Courts have held betting on cricket or any other sport is illegal in India[5]. Thus, the agreement is void in accordance with the section of 23 ICA.

A is not liable to pay money to B. A wagering agreement is void under section 30 of the ICA. The present agreement between A and B fulfils all conditions of a wagering agreement and therefore is void in nature. It is an agreement to give money or money’s worth upon the determination of an uncertain event which is the sole condition of their contact.[6] No party in this case has the outcome of the event in their own hands. They have no control over the event. If it were so, the transaction would lack an essential requirement of wager[7]. There is also a condition that requires that each side should stand to win or lose according to the uncertain event.[8] In this particular agreement there is a mutual chance of winning and losing of both A and B depending on the outcome of the uncertain event of which team wins. Lastly, the parties have no interest other than the stake.

Calcutta High Court in Badridas Kothari vs. Meghraj Kothari ruled that a suit for recovery of money on account of wagering contract is not maintainable[9]. Since all conditions of a wagering agreement are met in this case, the agreement between A and B is void and therefore A is not entitled to give any money to B.

ARGUMENTS FOR B

The first argument for B is that the agreement formed is in the nature of a game of skill and not a game of chance. Cricket is predominantly a game of skill and not a game of chance. As established in K.R Lakshman case[10], here also the ‘success in the game depends on the superior knowledge, training, experience and adroitness of the player.’ The SC has held in a number of cases that games of skill do not fall under the ambit of gambling. The Court has specified that any game would require a combination of both skill and chance. The element of chance can’t be completely ignored. However, if a substantial degree of skill is involved, it would not amount to a wager.[11]

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It was also stated in the case of Narendra Kochar v Union of India[12], that if a party has to use his specific knowledge, assessment and skill to analyse the performance, then the case doesn’t fall within game of chance. Only after looking into the data available and analysing it, did B finally arrive at the conclusion that India had the highest chance of winning the World Cup. He used his research skills and knowledge to make an informed decision by analysing the relative strength and weaknesses of the two teams and arrived at the conclusion and therefore this is a game of skill.

Game of skill is outside the ambit of Public Gambling Act (Section 12). Since this is a game of skill, the agreement can’t be categorised as a wager and hence it is not void as per Section 30 of the ICA.

The present agreement is not void under Section 23 of the ICA. In the case of Gherulal Parakh v. Mahadeodas Maiya and Ors[13]. It was stated that contract of wager even though void is not opposed to public policy and as such forbidden by law. Some of these transactions are even a source of income for the state and hence can never be opposed to public policy.

Following the above arguments B is entitled to claim his money from A.

Analysis

After careful evaluation of all the facts, we can conclude that this is a wagering agreement and hence void under section 30 of ICA.

This agreement between A and B is in the nature of betting. It fulfils all the necessary conditions of a wagering agreement. Since a wager is void this agreement between A and B is also void in nature. It is gaming based on chance. The victor will be one whose luck favours.

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The result of a cricket match is highly dependent on luck factor rather than the factor of skills. All cricket players in a world cup match are highly competent ones. The victory of one team in the final match is predominantly based on luck of the players. There is minimal skill involved in predicting the result of a cricket match. The purpose behind section 30 is that the law discourages people to enter into games of chance and make earning by trying their luck instead of spending their time, energy and labour for more fruitful and useful work for themselves, their family and the society[14].

Wagering is opposed to public policy because it helps people earn easy gains without having done much hard work. It generates reckless behaviour and creates lawlessness in the society. Therefore, it is void under section 23 of ICA and A is not liable to pay any money to B.

[1] Hampden v. Walsh, (1867) 1 QBD 189,192.

[2] R. M. D. Chamarbaugwalla v. The Union of India, AIR 1957 SC 628.

[3] Indian Contract Act, 1872, Section 30.

[4] Reeja v. State of Kerela, (2004) (3) KLT 599.

[5] Abhey Dewan v. Manoj Sethi, 202 (2013 )DLT 392.

[6] ANSONS PRINCIPLES OF THE ENGLISH LAW OF CONTRACT, (22nd edn, 1964) at pp. 301-302.

[7] Dayabhai Tribhovandas v. Lakshmichand Panachand, (1885) 9 Bom 358,363.

[8] Sassoon v. Tokersey, (1904) 28 Bom 616, p. 621.

[9] Badridas Kothari vs. Meghraj Kothari, AIR 1967 Cal 25.

[10] K.R Lakshmanan v State of Tamil Nadu, AIR 1996 SC 1153.

[11] Ibid.

[12] Narendra Kochar v. Union of India, (2006) 4 CHN 307.

[13] Gherulal Parakh v. Mahadeodas Maiya and Ors, AIR 1959 SC 781.

[14] Subhash Kumar Mewani vs. State of Madhya Pradesh, AIR 2000 MP 109.

Author: Sakshi Sharma,
NUJS, first year

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